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The Rise of Machines and AI in Retail and Logistics

Advances in artificial intelligence are destined to make our lives even better—but will machines eventually out-do humans?
By Uwe Hennig

One of the biggest growth areas in which AI can make a significant difference to the bottom line is in intelligent forecasting systems. Previously, logistics teams were only able to predict roughly the quantities of products to order to keep shelves fully stocked using (often out-of-date) inventory levels and historical sales data (usually going back a few years, at best). These days, AI can develop a much more accurate picture of exactly what types of products, sizes and colors are likely to sell, by looking at multiple scenarios in real time (fashion trends, consumer behavior, the weather and so forth), and by drawing on data from the internet. This means forecasting is no longer so much stab-in-the-dark guess work.

Using AI, German online retailer Otto predicts, with 90 percent accuracy, what will be sold within the next thirty days and has reduced the amount of surplus stock it holds by a fifth, according to an article published at The Economist (see How Germany's Otto uses artificial intelligence). It has also reduced the number of returns by more than two million products a year. It claims to be so reliable, in fact, that it now uses an automated AI system to purchase 200,000 items a month from third-party suppliers with no human intervention. Humans simply wouldn't be able to keep up with the volume of color and style choices to be made.

Artificial Intelligence offers the potential for a considerable reduction in labor costs. For consumers, it means getting more reliable information and personalized offers, not to mention considerable time-savings for everyone.

Human Machines
A new report by PwC says that around 44 percent of jobs in the retail sector are at risk of automation by 2030. Some of the mid-level employee positions will disappear—particularly warehouse staff and employees in the back-office. AI technology is extremely good at repeated tasks and number-crunching, so a lot of manual processes will undoubtedly be performed by machines in the future. For instance, we're already seeing some retailers wanting to close off stock rooms and using robots to make automatic decisions about what needs to be replaced on the shelves, or managing the flow of goods for deliveries and onto the shop floor.

In the not-too-distant future, it will be common practice to pull out your phone and ask it a question as you enter a store, rather than seeking out a sales assistant or searching through the rails yourself. For instance, your smartphone can immediately respond that a desired article is available in your size, and that sales personnel can bring it to you. Voice-recognition systems and speaking to a computer or smartphone (like Apple's Siri) for answers are clearly the way forward. Talking interactive screens and self-checkouts in fitting rooms are something we're already engaged with.

It's still only the early stages of artificial intelligence. But with the promise of AI making forecasting and product selections even more accurate, it's sure to become a reality.

Uwe Hennig is the chief executive of retail tech company Detego. He has more than 20 years' leadership experience in the supply chain and mobility software market.

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