AI has proven an invaluable asset in supply chain and inventory management across every industry. Grocery is no exception.
Leading grocery retailers are deploying AI solutions for everything from demand forecasting to customer service. According to a recent report by Grocery Doppio, 75% of grocery technology executives anticipate that AI will be incorporated into most of their software by 2025. The question is: to what end?
The executives surveyed identified three main areas where they predict AI will have the greatest impact. They believe that AI will eliminate:
- 18% of store associate positions,
- 73% of store tasks,
- And 53% of shopper queries.
While many C-suite executives view AI as a means to reduce labor costs, the real power of this technology lies in enhancing – not replacing – on-the-ground knowledge.
Though labor may seem like the easiest line item to cut as these technological innovations advance, doing so often comes at the expense of accuracy. Since fresh is an inherently dynamic category, deprioritizing real-time insights and relying entirely on AI insights runs the risk of inaccurate orders.
What these executives don’t realize is that by focusing on automating away the human element, they are missing a larger opportunity. Years of firsthand research and customer success stories have shown that labor savings are minor compared to the transformative impact of shrink reduction.
The power of AI lies in reducing shrink – not replacing store teams
According to the National Retail Federation, shrink costs major grocery chains an average of $2.3 billion annually – or about 2% of total sales. Fresh produce spoilage in particular is responsible for about 36% of this shrink.
Placing accurate orders is the number one way to increase profits in fresh and save on labor downstream in tasks like downstacking and culling. Not only that, but freshness and fully stocked shelves are the best tactics to maintain a competitive edge and solidify customer loyalty in this competitive industry.
AI-powered inventory management systems can help drive accurate data inputs by automating tedious, error-prone tasks, thereby enabling store associates to focus on value-added tasks. But that’s just the tip of the iceberg. AI can also empower grocery retailers to order more efficiently, streamline supply chains, optimize their display sizes, and – of course – reduce shrink.
How to improve operational efficiency in fresh
AI has the power to crunch billions of data points on sales, shipments, promotions, cannibalizations, and perishability to identify patterns that are challenging to discern with a human eye. This allows grocery retailers to maintain appropriate stock levels and meet customer demand efficiently.
While Afresh’s focus lies on intelligent inventory management, store ordering, and operations, there are countless AI use cases within the grocery industry.
Here are four areas where AI can have the greatest impact on improving operational efficiency:
1. Intelligent Ordering
Afresh’s intelligent, end-to-end ordering and inventory management solution is purpose-built to predict inventory for hundreds of items that don't require daily recounts, and then request targeted counts from store associates only when needed to ensure that the most critical data is consistently accurate and up-to-date. In fact, store teams accept Afresh's intelligent order recommendations 94% of the time.
2. Supply Chain Optimization
Efficiently managing the supply chain for fresh products involves coordinating the sourcing, transportation, and distribution of thousands of items. AI can optimize supply chain logistics by analyzing routes, delivery schedules, and transportation costs as well as predicting disruptions to minimize the impact of shelflation, the compromise of a product's shelf life due to supply chain issues.
3. Shelf and Layout Optimization
Retailers like Walmart and Amazon Fresh are using AI to optimize their stores’ layouts and provide more personalized shopping experiences. By analyzing data on customers' shopping habits, grocers can place products in the most impactful locations and recommend products they are likely to be interested in. Creating a more intuitive and efficient shopping environment can in turn enhance the customer experience and boost sales.
4. Shrink Reduction
While AI has vastly improved operational efficiency in the areas above, AI’s greatest impact will be on shrink reduction. AI can analyze historical data to identify patterns and correlations related to product spoilage. For example, AI can detect which products tend to expire or spoil more frequently, which days or times of the year have higher shrink rates, or which storage conditions lead to spoilage.
Equipped with this data, store teams can place truck-to-shelf orders so that food doesn’t languish in the backroom. Instead, fresh products go straight to the customer, so these products can be enjoyed at peak freshness and retailers can move closer to their sustainability goals.
Afresh's impact
As grocery tech executives navigate the paradigm shift AI has introduced to this industry, it's crucial to recognize where AI can drive transformational impact. While some may see AI as a means to cut labor costs, Afresh prioritizes the empowerment – not replacement – of store associates. The best way to do this is by leveraging intelligent inventory management solutions to reduce shrink.
On average, Afresh helps partners reduce shrink by 25%, a transformative achievement in an industry where average margins are only 1-3%. Since Afresh was founded in 2017, the company has also:
- Helped prevent 44 million pounds of food from going to waste
- Reduced stockouts by 80%
- Enhanced inventory turns by 7%
- Delivered a 3% sales lift on average
In a competitive industry where customer satisfaction and operational efficiency are paramount, leveraging AI to enhance fresh department operations is a strategic move. But AI’s true power in fresh lies not in replacing humans but in improving processes, reducing shrink, and ensuring fresher products for customers.
