The Supply Side: Machine learning via artificial intelligence gaining ground

Machine learning falls under the realm of artificial intelligence (AI), and though the technology has been around for a long time, it’s becoming more relevant when married with big data, according to Amjad Hussain, CEO of Detroit-based Algomus, who provides AI assistance to retail and suppliers.

During a recent workshop in Bentonville, Hussain demonstrated how AI is used by some retail suppliers such as Sony. He said AI, when used as a business assistant, can enhance productivity in an office. Hussain said machine learning combined with human creativity creates collaborative intelligence. Mathematically, he said it’s something like 1 + 1 = 11.

Hussain said AI via machine learning can help suppliers develop a deeper understanding of their data. He said machines are much more adept at crunching numbers and spotting patterns in the data, which can then be analyzed by category managers and other supplier employees to do a better job of forecasting demand, modeling for seasonal sales and assessing in-stocks or unit sales down to the store level.

John Daly, senior vice president of worldwide production services at Sony Pictures, said his team uses machine learning to help manage inventory sold in roughly 40,000 U.S. retail locations, including Wal-Mart Stores Inc. He said shortly after he began the job he wanted to make sure all retail locations had the right amount of inventory based on sales demand.

“I wanted to know at any time what movies were selling and those that were not because of our strategy that’s aligned with Wal-Mart is to win in every store every day,” Daly said at the recent Algomus workshop. “We take a balanced scorecard approach and knew we needed the help of big data, which to most of us is still a mystery. The AI business assistant powered by machine learning helped take the mystery of big data and put it in front of me so I can use it to better manage my business.”

Daly said the Algomus business assistant — aka Algo — makes it easy to target his underperforming stores and devise a plan to raise them. He said the company at times will offer a promotional item to boost DVD movie sales, like in the case with the new release of Ghostbusters. He said they put in a pair of socks and then checked sales with Algo to see if the added promotion boosted sales compared to stores that didn’t.

He said two-thirds of the promotional inventory was sold through in the first 10 days. Also, there could be 500 stores completely out of stock. It’s much easier for his team to find inventory problems and work toward fixing them using the Algo business assistant. Daly said suppliers have to fight for shelf space and products that turn quickly are what retailers want to carry. Without quick turns it’s hard for suppliers to survive in retail. He said using the business assistant powered by AI gives Sony the tools it needs to best compete.

AI doesn’t come cheap, but Daly said it’s important for suppliers to seek out partnerships that help them use big data easily, because the return on investment will be there in better sales results.

AI GROWTH
The tech industry estimates AI investment will increase labor productivity by 40% in the next few years. Wal-Mart CEO Doug McMillon said recently the retailer uses machine learning to assist merchants with pricing. Wal-Mart’s Store No. 8 tech incubator also recently launched a competition to glean more insights for AI innovation.

Wal-Mart is also using machine learning to make more services available, according to Laurent Desegur, vice president of customer experience engineering at WalmartLabs. Desegur said the role of data science has made possible the pick-up towers within stores, which allow customers to order and pay online for items and then retrieve them, skipping the checkout lines. He also said the Scan and Go pilot underway in about two dozen stores is possible because of computer science and machine learning.

Nikki Hallgrimsdottir, vice president at Algomus’ office in Berkeley, Calif., said a recent report from Accenture indicates 70% of executives in retail and supply chain fields plan to “significantly increase” AI investment in the next five years. Manish Chandra of Accenture said the use of AI in supply chains is helping businesses innovate rapidly by reducing the time to market and creating a more agile supply chain capable of foreseeing and dealing with uncertainties.

“AI armed with predictive analytics can analyze massive amounts of data generated by the supply chains and help organizations move to a more proactive form of supply chain management,” Chandra said.

Hallgrimsdottir explained supply chain processes generate giga-tons of data, and AI can deploy predictive analytics to make sense of it all in a matter of seconds.

“AI is no longer an ‘ain’t-it-cool’ innovation in the industry but rather a necessity. With the erosion of the brick-and-mortar model and rise of real-time consumer expectations, supply chain/inventory management practices must embrace machine learning that far outpaces the speed of human thought and action,” Hallgrimsdottir said.

Amazon is reportedly using machine learning to become its own fashion designer that uses algorithms to determine what styles look good for certain customers.

A research team at Amazon’s Sunnyvale-based Lab126 developed algorithms that learn fashion from images and create their own styles from scratch, according to Technology Review.
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Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Propak Logistics.