AI for Retail

CHAPTER 16AI for Inventory, Ordering, and Supply Chain Management

Current Roles, Processes, and Inefficiencies

Now that we have demand forecasts per SKU and shelf allocations from merchandising, retailers have another group that is responsible for ordering those SKUs to get product flowing through the supply chain. The goal of supply chain is to maximize availability, measured typically as OSA (on‐shelf availability). This is the percentage of SKUs that are on the shelf, ready for purchase right now over all SKUs in the store's item file. Some only measure “store availability” meaning if its in the store or not, ignoring if it is on the shelf or not.

While the merchants (buyers and planners) will commit to overall units to buy, the supply chain team will schedule and track the orders from week to week into the DC (distribution center). From there, the ordering into the store will happen at the store level, either automatically via an ordering system or via an inventory clerk manually creating and submitting the order.

The SCM (supply chain management) team sets the supply chain strategy, which determines when each product should be delivered to the DCs and made available to the stores for ordering. There are two types of supply chain strategies retailers can employ, demand‐pull and supply‐push. Ordering under a demand‐pull supply chain starts from forecasted customer demand and walks backward, based on lead times at each step in the process. This allows for just‐in‐time (JIT) ...