Companies may be underestimating the potential of artificial intelligence (AI) in tackling consumer demand volatility, judging by their delay in committing serious investment funding to the technology, according to a study by Relex Solutions, a Finnish supply chain software provider.
The study showed that 57% of retailers and consumer packaged goods (CPG) companies plan to invest in predictive and generative AI in the next 3-5 years. But they may not invest very much; a result from the same study also found that AI and machine learning (ML) ranked just fifth in importance for overall technology spend, coming in behind: enhancing e-commerce capabilities, improving inventory management, demand forecasting, and leveraging data analytics.
Despite their hesitancy to commit to AI as the solution, respondents were clear about their need to improve demand forecasting accuracy, Relex Solutions said. Companies ranked the biggest threats to improving supply chain efficiency and accuracy over the next three years as: rapidly shifting consumer demand volatility (55%), global events & disruptions (50%), and inaccurate sense of customer-specific demand (43%). And a whopping 94% of respondents also said they have been impacted by social media influencing or "de-influencing" over the last 12-24 months – another sign that anticipating and sensing demand surges across all channels will be especially critical to success, Relex Solutions said.
The statistics come from the company’s “State of Supply Chain 2024: Retail and CPG Dynamics” report, conducted by Researchscape, which surveyed 285 retail, CPG, and wholesale leaders globally in February 2024.
"The retail and CPG industries continue to face complex, global challenges that require actionable insights to accurately predict, anticipate, and manage consumer demand,” Laurence Brenig-Jones, VP of Strategy & Marketing at Relex Solutions, said in a release. “To thrive in this new reality, companies must fundamentally transform their approach to supply chain management by breaking down silos, embracing new technologies like AI and ML, and fostering a culture of collaboration and agility.”
In other results, the survey showed that:
- The top three most essential capabilities for retailers to manage consumer demand and inventory levels are real-time inventory visibility (45%), customer demand sensing (45%), and inventory optimization tools (43%)
- More than half (53%) are expanding supplier base / sourcing options to add sourcing redundancy to diversify and mitigate risks associated with disruptions
- To navigate macro-economic factors like inflation, CPGs are focused on adjusting inventory and production strategies via monitoring demand signals (48%), building in safety stock or keeping higher inventory levels (22%), and inventory turnover as part of their inventory and production strategies
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