Use cases for AI in CPG and retail will grow exponentially

Artificial intelligence (AI) raises the analytical capabilities of CPG manufacturers and retailers to a new level and helps to optimize decision-making and to automate processes and actions. This includes optimizing internal processes such as logistics, inventory, and supply chain management in order to reduce costs as well as increasing revenues as a result of addressing market and customer demand more effectively and through optimizing the individual customer experience through improved analysis of consumers’ preferences and buying behavior.

Leveraging AI in order to drive sales may, for example, involve using conversational commerce systems based on natural language processing to enable text or voice-enabled chatbots or smart assistants such as Google Home or Amazon Echo. Visual searches based on image recognition techniques can also help to drive sales, and analysis of consumers’ mood, sentiment, and behavior can provide insight into consumer preferences, which also helps to drive sales. Machine learning techniques can enable pricing optimization to improve the performance of recommendation engines or to better target promotions and marketing campaigns to the individual profiles of potential customers, thereby also increasing sales potential.

For CPG & retail companies, ensuring product availability at the point of sale is among the major goals. For online retailers, it is particularly important to be able to offer fast delivery times. At the same time, inventory and stock-related costs and logistics costs are also often factors to consider in order to further reduce costs. AI can be leveraged to optimize assortment and inventory planning, warehouse operations, and a more efficient routing of goods in the channel. Based on machine learning techniques, algorithms, and rules, products can be automatically allocated in an optimum way and in the optimum amounts to various channels and store locations, based on sales history and demand forecasts.

AI is an exciting new technology which is still in the early stages of adoption among CPG companies and retailers. However, teknowlogy believes that given the huge potential of AI to improve process operations and also the customer experience, the number of use cases for AI will grow exponentially in the medium to long run, especially as more software and IT service providers become able to offer appropriate easy-to-use AI-based software applications and consulting and system integration support.

In the recently published report “AI in Retail & CPG” we focus on the challenges that the CPG and retail industries are currently facing and how AI can help to address these challenges.

We provide examples of use cases and project references for AI in the CPG and retail industries in the following domains:

  • Sales, marketing, and communications
  • Supply chain management and logistics

We also give our view on the current maturity level of AI in retail and CPG, major challenges to overcome, and an outlook on future trends.