Rise of the Machines?

 

It requires a very unusual mind to undertake the analysis of the obvious. – Alfred North Whitehead (1861-1947)

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My doctor told me that I need to reduce the amount of salt, fat and sugar in my diet. So I immediately increased the frequency of oil changes for my car.

Confused?

I don’t blame you. That’s how I felt after I read a recent survey about the adoption of artificial intelligence (AI) in retail.

Note that I’m not criticizing the survey itself. It’s a summary of collected thoughts and opinions of retail C-level executives (pretty evenly split among hardlines/softlines/grocery on the format dimension and large/medium/small on the size dimension), so by definition it can’t be “wrong”. I just found some of the responses to be revealing – and bewildering.

On the “makes sense” side of the ledger, the retail executives surveyed intend to significantly expand customer delivery options for purchases made online over the next 24 months, specifically:

  • 79% plan to offer ship from store
  • 80% plan to offer pick up in store
  • 75% plan to offer delivery using third party services

This supports my (not particularly original) view that the physical store affords traditional brick and mortar retailers a competitive advantage over online retailers like Amazon, at least in the short to medium term.

However, the next part of the survey is where we start to see trouble (the title of this section is “Retailers Everywhere Aren’t Ready for the Anywhere Shelf”):

  • 55% of retailers surveyed don’t have a single view of inventory across channels
  • 78% of retailers surveyed don’t have a real-time view of inventory across channels

What’s worse is that there is no mention at all about inventory accuracy. I submit that the other 45% and 22% respectively may have inventory visibility capabilities, but are they certain that their store level inventory records are accurate? Do they actually measure store on hand accuracy (by item by location in units, which is what a customer sees) as a KPI?

The title of the next slide is “Customer Experience and Supply Chain Maturity Demands Edge Technologies”. Okay… Sure… I guess.

The slide after that concludes that retail C-suite executives believe that the top technologies “having the broadest business impact on productivity, operational efficiency and customer experience” are as follows:

  • #1 – Artificial Intelligence/Machine Learning
  • #2 – Connected Devices
  • #3 – Voice Recognition

Towards the end, it was revealed that “The C-suite is planning a 5X increase in artificial intelligence adoption over the next 2 years”. And that 50% of those executives see AI as an emerging technology that will have a significant impact on “sharpening inventory levels” (whatever that actually means).

So just to recap:

  • Over the next 2 years, retailers will be aggressively pursuing customer delivery options that place ever increasing importance on visibility and accuracy of store inventory.
  • A majority of retailers haven’t even met the visibility criteria and it’s highly unlikely that the ones who have are meeting the accuracy criteria (the second part is my assumption and I welcome being proved wrong on that).
  • Over the next 2 years, retailers intend to increase their investment in artificial intelligence technologies fivefold.

I’m reminded of the scene in Die Hard 2 (careful before you click – the language is not suitable for a work environment or if small children are nearby) where terrorists take over Dulles International Airport during a zero visibility snowstorm and crash a passenger jet simply by transmitting a false altitude reading to the cockpit of the plane.

Even in 1990, passenger aircraft were quite technologically advanced and loaded with systems that could meet the definition of “artificial intelligence“. What happens when one piece of critical data fed into the system is wrong? Catastrophe.

I need some help understanding the thought process here. How exactly will AI solve the inventory visibility/accuracy problem? Are we talking about every retailer having shelf scanning robots running around in every store 2 years from now? What does “sharpen inventory levels” mean and how is AI expected to achieve that (very nebulous sounding) goal?

I’m seriously asking.