Proper inventory management is a top concern for retailers. Out-of-stock items and inefficient replacement strategies can result in lost sales, reduced customer satisfaction, and lower loyalty levels.
In response to these challenges, companies like Walmart and Kellogg’s are harnessing the power of artificial intelligence to improve real-time product substitutions and predict shortages weeks in advance.
Industry Pivoting Towards AI
Artificial intelligence in the food and beverage market is expected to reach $29.94 billion by 2026, growing at a CAGR of over 45.77% during the forecast period, reported Research and Markets.
This growth is largely attributed to consumer’s increasing demand for fast, affordable, and easily accessible food options. In response, market leaders are leveraging advanced technologies like artificial intelligence and machine learning to scale operations and stay relevant in the dynamic environment.
Walmart is utilizing AI to help shoppers identify the best next available product substitutions in real-time. The technology uses deep learning algorithms to consider hundreds of variables — including size, type, brand, price, customer preference, and current inventory — that were previously left up to personal shoppers.
“The decision on how to substitute is complex and highly personal to each customer.” Srini Venkatesan, Executive Vice President of Walmart Global Tech said in a company blog post. “If the wrong choice is made, it can negatively impact customer satisfaction and increase costs.”
Customer acceptance of substitutions has increased to over 95% following the deployment of this technology, according to the blog. “Our goal is never to be out of stock and never to have substitutions. But, when it happens, the technology we’ve built helps ensure customers get the next best thing,” Venkatesan said.
Personalization at Scale
Kellogg’s is also tapping into machine learning in the U.S., India, and other markets to predict online out-of-stocks up to 15 days in advance. The company utilizes the insights to prompt reorders and shift promotional dollars away from certain foods that require additional time to restock, reported VentureBeat. (June 25)
“We’re using AI across our entire business — from creating supply chain efficiencies to identifying the best flavor combinations for new foods,” Monica McGurk, Kellogg’s chief global growth officer, told VentureBeat. “The benefit of AI is that it will help us create the personalization people crave — at scale.”