Global retailer, AI-powered supply chain transformation
Situation
A prominent international sports retailer faced a series of supply chain challenges, including:
Ineffective Forecasting: A narrow product scope, combined with limited data, manual processes, and a top-down approach.
Replenishment Issues: Excessive safety stock, poor coordination between channels, and a lack of advanced tools.
This led to inventory imbalances, resulting in lost sales from stockouts and increased holding costs from overstocks, negatively impacting customer satisfaction, growth, and profitability.
To address these challenges and achieve its strategic objectives, the retailer partnered with a data science and AI startup to explore ways to optimise its supply chain operations through the adoption of advanced technologies and data-driven insights.
Approach
We led the project on behalf of the tech startup, acting as a liaison with the retailer. We bridged the cultural gap between the nimble startup and the large corporate, driving the initiative forward.
We initially ran a demand forecast pilot, demonstrating improved accuracy and coverage compared to the retailer’s existing SAP F&R system. We also gained key insights from the pilot, revealing that regional warehouses struggled to fulfil demand and lacked stock for many items, while stores missed a significant number of sales due to stock issues.
We encouraged the AI startup to tailor its replenishment tool to the retailer's specific needs, offering a user-friendly interface with advanced functionalities. We also facilitated a demonstration of the tool for the retailer. Subsequently, we convinced the retailer to expand the initiative into a broader Proof of Concept (PoC) encompassing both forecasting and replenishment.
We supported the design and preparation of the PoC, defining objectives, scope, tool MVP requirements, as well as data specifications and queries. The PoC covered a range of sports articles across multiple use cases and encompassed all European stores and warehouses, including e-commerce platforms and consolidation centres.
We run the PoC and conducted a rigorous A/B test to measure its impact. By analysing the results, we identified key learnings, quantified the size of the prize, and recommended key next steps for the supply chain digital transformation.
Results
The Proof of Concept demonstrated that the possibility to improve supply chain efficiency and customer satisfaction by implementing an innovative, omnichannel solution, thereby reducing excess inventory and improving inventory turnover, meeting customer demand promptly and accurately, and thus driving revenue growth.
We highlighted the potential for significant value creation through a data-driven supply chain transformation by quantifying the potential for EBITDA improvement.
We identified the remaining challenges that the retailer faced in its journey towards full-scale digital transformation, including data quality issues, lack of senior sponsorship and resources, and cultural resistance to change.
To overcome these challenges and achieve the retailer’s objectives, we submitted recommendations for making digital transformation a top strategic priority, establishing a dedicated governance structure with strong senior sponsorship, investing in talent and fostering collaboration, improving data quality and automating data flows, implementing a robust change management plan, and initiating preparations for a wider rollout to realize benefits in 2025.
The retailer committed to the supply chain digital transformation project, pending the completion of necessary data quality improvements and IT system upgrades.