Order Management

Does my fulfillment operation really need AI?

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The answer to this question? It depends! How many stores and distribution centers (DCs) do you have? If you only have a handful, then you may not get a large return on your AI investment. However, if you have more than 20 stores and DCs, AI can provide your company with many great benefits. AI can look at each order that’s placed and compare every piece of inventory to see which option is the best (and cheapest and fastest) to fulfill that order.

If we put on our supply chain hat, you will look for the lowest cost delivery – you can’t do that and optimizer helps you to actually unpack a conversation that thinks through the inventory and the customer experience while also the cost at the same time,”– Rick Bingle, REI, SVP of Supply Chain

Other variables that AI-powered fulfillment tools can help analyze:

  • Should the order ship from a nearby location to reduce shipping costs?
  • What happens if the closest location is at capacity and paying overtime to get products out the door?
  • What if the closest store only has one or two items left on the shelf – you risk running out of inventory with the potential to lose sales with walk-in customers.
  • Should I ship it from far away and sell it at full price instead of marking it down locally?

As you can see, there are many factors to consider when matching an order to inventory. The more orders and locations you have, the more choices arise, which is where AI comes into play — to help bring together all the various data sets across your inventory. AI can help analyze all these options for you and present the data in a way that assists in your decision-making process based on your current priorities.

Let’s take a look at a real-life example where one retailer is utilizing a trusted order management platform to drive more-informed decisions. REI admits they previously used to say ‘no’ roughly 800,000 times a year to shoppers because they were unable to see real-time inventory data. This challenge is what drove the retailer to implement a sophisticated order management system that allows online shoppers real-time views into local store inventory, in addition to distribution center inventory, based upon their personal buying preferences. This transformation helped REI see an increase of $100 million in sales the first year, in addition to a 27% lift in buy online, pickup in store orders.

But the journey didn’t stop there. REI wanted to take it to the next level. That’s when the team decided to deploy an AI-based order fulfillment solution to help look at total cost-to-serve and ultimately optimize each order based on current weighted business needs.

An AI-powered solution allows organizations to drive business objectives such as:

  • Capacity
  • Shipping costs
  • Markdown avoidance
  • Stockout avoidance
  • Processing costs

 

Get AI capabilities to optimize fulfillment plans at the lowest cost-to-serve

 

 

Hear more about the REI journey from Rick Bingle by listening to his recent presentation at IBM’s annual Think conference.

 

Product Marketing Manager, IBM Supply Chain Solutions

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