Artificial Intelligence Could Boost Retail Sales 65% by Aligning Inventory with Demand
Artificial intelligence, internet of things, cloud computing, big data analytics and 5G are nearly impossible to clearly separate. All are parts of the expected emergence of “insight” as a major outcome and revenue driver.
Better forecasts are one outcome. AI-based approaches to demand forecasting are expected to reduce forecasting errors by 30 to 50 percent from conventional approaches, according to McKinsey.
Lost sales due to product unavailability can be reduced by up to 65 percent when artificial intelligence is applied. Costs related to transportation are expected to decrease between five and 10 percent while warehousing and supply chain administration costs will decline 25 to 40 percent.
Using AI, overall inventory reductions of 20 to 50 percent are feasible, McKinsey estimates.
Most of that AI-enhanced processes are possible because of IoT.
According to Aruba Research, 57 percent of companies have already adopted IoT and 85 percent are expected to do so by 2019. It is transforming the way companies do business and in a survey of global companies, the respondents' average return on investment was 34 percent with over a quarter of respondents reporting a 40 percent ROI and 10 percent of respondents reporting 60 percent ROI.
Some of the areas where IoT is having the biggest impact according to the percentage of respondents: