Predictive Analytics and the Agile Supply Chain

— October 08, 2014

Traditionally, the phrase “going shopping” has meant getting in your car, driving to the mall, walking through the door and purchasing products. But for many in today’s digital world it means kicking off your shoes after a long workday, flipping open the tablet and browsing for whatever your heart desires from the comfort of your favorite recliner.

As the “store” continues to be redefined by technology, consumers hold tremendous power. But retailers and brands can take more control of their supply chains and proactively shape demand before a consumer even expresses a need or want. The future of retail in the post-omni-channel era relies on the retail sector’s ability to harness disparate consumer social sentiment data, use it to build a model for predicting and influencing consumer buying behavior and seamlessly share that data with key trading partners. Together retailers and brand owners can flawlessly drive demand, deliver upon consumer needs and, in the process, gain consumer loyalty.

Gaining a Glimpse into the Future
Instead of simply analyzing sales, predictive analytics provide retailers with a glimpse into the future and an opportunity to identify patterns that lead to effective and highly personalized customer engagement strategies. Many retail and social commerce experts believe that predictive analytics are what make big data useful in a retail environment. As opposed to descriptive analytics, which measure what has already happened, predictive analytics apply statistical modeling and data mining to study recent and historical data, allowing for more accurate forecasting.

Every day consumers are willingly offering up pools of potential product data from a multitude of sources. Today it is common for consumers to share valuable, individualized opinions and purchasing habits via social media, product reviews, wish lists and online purchase histories; and they look to each other as influencers. Further, according to a 2013 survey from Dimensional Research, 90 percent of respondents claimed that positive online reviews influenced buying decisions, while 86 percent said buying decisions were influenced by negative online reviews. Earlier this year, Amazon revealed its plans for predictive shipping, in which they scan consumer-generated information to synthesize it with a sophisticated algorithm in order to optimize their fulfillment strategies.
Location-aware proximity or beacon technologies provide an enhanced level of unique consumer data and are growing in popularity. These GPS-enabled technologies can be used to trigger features on smartphones, including targeted coupons and store maps. They leverage a shopper’s openness to receiving instant offers and/or personalized communications.  Using them, retailers are able to gather real-time shopper data and use it to provide location-based actions and promotions. In fact, a recent study by Accenture gauged the attitudes of 6,000 consumers, from eight countries, on in-store mobile offerings. A strong majority of respondents reacted positively to a number of suggestions, including gathering loyalty points as they shop (88%), real-time promotions (88%) and the ability to order out-of-stock items for home delivery (82%).

With the consumer warming up to the idea of data as a way to expedite and personalize the shopping experience, an agile retail supply chain that is able to withstand constant readjustments dictated by consumer data becomes a necessity for omni-channel success. Utilizing predictive analytics to shape consumer demand equates to a new monetization opportunity for retailers and brand owners. Once a responsibility relegated to marketing and sales professionals, demand shaping is now an internal team effort with supply chain managers working to ensure a sufficient supply is in place to meet the demand created effectively through the learnings provided by predictive analytics.

Focus on inventory visibility and best practices
Retailers and brand owners cultivating a predictive analytics strategy need to commit to at least two focus areas. First, they need to attain highly accurate inventory visibility to know which product will move in which channel to anticipate future trend shifts. The second focus should be on achieving industry-agreed upon best practices for sharing consumer data.

For both of these requirements there must be more collaboration and communication between trading partners — which will be more valuable than ever before. Retailers and brand owners using a standards-based framework can enable the real-time visibility needed to tap into rich information sources and effectively leverage more customer-centric strategies.

To many retailers, omni-channel success means optimizing stores as fulfillment centers, or otherwise stepping up fulfillment capabilities to be able to offer customers a consistent, efficient experience across channels. Item level RFID is an essential component to enable the supply chain visibility and inventory accuracy needed to know what’s available, where it’s located, and how to best deliver it — helping meet consumer expectations anytime, anywhere. GS1 US, the non-profit standards organization and administrator of the U.P.C. barcode, provides a system of GS1 Standards as a ready-made outline for companies to get started.  Because the EPC® framework is based on the same GS1 Standards thousands of businesses already have in place, retailers can leverage existing technology investments — such as enterprise resource planning (ERP), inventory management and point-of-sale (POS) systems — when implementing EPC-enabled RFID.
EPC-enabled RFID allows brand owners to assign a unique serial number to each item, which is then stored in a common database. Some of the world’s leading retailers have already piloted successful programs using EPC-enabled RFID for replenishment items to increase inventory efficiencies and gain visibility into their supply chains. They have successfully linked product information exchanged between trading partners to physical products traveling throughout the supply chain.

Retailers who have adopted RFID into their supply chains say having true item-level data gives them a whole new level of information, which leads to more sophisticated merchandising, planning and allocation systems. Real time visibility means cleaner data and better delivery insights into real-world conditions. Ultimately, the retailers and brands looking to data as the next big profit driver need to completely evaluate their capabilities to be able to use it to its fullest extent. Standards provide the roadmap for technology to truly deliver the desired end result.

Abel García, the director of IT for Levi Strauss, Latin America summed up this sentiment in a recent case study on successful Item level RFID use in their Mexico stores. “Technology as an enabler, on its own, doesn’t really do anything,” he said. “You must effectively integrate RFID into a store’s operations for it to be useful.” The RFID program helped Levi’s gain a more complete and detailed inventory view in selected stores. They consolidated hypothetical and on-shelf inventory, reduced inventory in stores from a four-month to a two-month supply and improved inventory accuracy to 99 percent when comparing on-shelf inventory levels with levels reported in the company’s system.

What García says about technology can be easily applied to the focus on big data—it only works if it’s effectively integrated across the board operationally and if the industry collaborates to use standards as the common language of business.

Right now, the retail industry is at a crossroads. On one path, there are retailers and brands standing by witnessing the transformation of today’s supply chain while the consumer whizzes by them in a speeding race car. The other path is a flowing synergy where retailers, brands and consumers are driving along happily at the same pace. Those who are taking an active role in predictive analytics, coupled with the adoption and usage of standards-based technologies in their everyday business practices are working with the consumer, improving their lives and building sales in the process.

Melanie Nuce is Vice President of Apparel and General Merchandise at GS1 US and leads the GS1 US Apparel & General Merchandise Initiative.


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