Many retailers are giving a thumbs up to artificial intelligence and machine learning.

According to a recent study by LLamasoft, which provides AI-powered supply chain analytics software, 73% of retailers believe that AI and machine learning can add significant value to their demand forecasting processes, and more than half say it will improve eight other critical supply chain capabilities.

Ann Arbor, Mich.-based LLamasoft, which provides software to about 750 brands, also found that while 56% of overperforming retailers, also known as “retail winners,” use technology to model contingency plans for severe supply chain interruptions, only 31% of retailers that are not overperforming do the same.

In addition, 73% of retail winners have the foresight and ability to monitor capacity, which allows them to prepare for sudden shifts in demand and supply, compared to 35% of other or underperforming retailers, the report found. This is a clear indication that retail winners are outmaneuvering the competition by predicting and preparing for the future, the report concluded.

“However, without the ability to adapt to these sudden spikes and troughs with contingency planning, the forecasting would be of little use. Therefore, the two must be married together to produce a ‘retail winner,’” the report stated.

Overall, 56% of retailers surveyed are struggling with the ability to respond to rapid shifts and the lack of flexibility has cost them during the disruptions such as COVID-19, with many seeing a huge drop in revenue as a result, LLamasoft found.

“COVID-19 has further illustrated that, moving forward, retailers must rapidly adjust to the ‘never normal’ world we find ourselves in and they must act to consistently enable faster responses to succeed, according to the company’s research. There will always be market variations and disruptions, meaning that retailers must be able to forecast for these changes and adapt quickly.

The study found the following when looking at what retail winners are doing to overachieve:

• 53% of retail winners have invested in data scientists that are competent with data analysis and modeling tools, while just 22% of underperforming retailers have.

• 80% of retail winners place a high value on demand forecast modeling using macro indicators, while just 65% of underperforming retailers do.

• 53% of retail winners rank geopolitical issues such as tariffs, trade wars and rapidly changing consumer demand in their top three challenges, while just 23% of underperforming retailers do.

• Meanwhile, 46% of retailers who are either underperforming or performing at an average level are clinging to the old normal and focusing on cost (at the expense of flexibility), while just 38% of retail winners are.

Rather than implementing newer AI and analytic technologies, which enable organizations to better prepare for the future, underperforming retailers are struggling to move away from strategies designed to find the lowest-cost point of manufacture on a product-by-product basis, according to the report.

While some retailers are ahead in terms of their technical ability, the study shows the retail industry as a whole still has much room for improvement. For example, more than 50% of all retailers surveyed said their current systems were causing a “big” or “somewhat” of a problem in all 10 supply chain capabilities presented to them, yet 13% of retailers have not even planned to invest in technology.

“Retailers and other businesses across the world should now embrace that we are in a ‘never normal’ world,” said Sandra Moran, chief marketing officer of LLamasoft. “Being prepared for uncertainty, such as continued disruptions from COVID-19, Brexit, trade wars, new market entrants or changing customer preferences must be part of company core competencies. However, accepting this is not enough: Retailers must act to prepare for the unprecedented.

“This research demonstrates there are clear performance variations between retail winners who have leveraged predictive technologies and enterprise decision platforms to deliver faster and smarter responses to disruptions and new opportunities, and those that have not.”

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