Wednesday, October 04, 2017

How predictive shopping can remorph supply chain frontiers ..

Most of us by now are aware of the most common e-commerce business model of shopping-then-shipping. Once the customers makes the choice of items, the e-commerce portal would initiate operations to get the ordered items to reach the customer by accessing different databases.

With advances in Artificial Intelligence(AI) which we are advancedly witnessing in our daily lives, a day will come soon when AI would be able to predict with more than 50% probability items which we would like to purchase or are looking to purchase and the e-commerce portal would ship the items to us in advance of our placing orders. On receiving the items, the customer would favourably look up the items and select the items which he wanted to buy but never had the time or inclination to purchase. The business model now changes to shipping-then-shopping.

This idea was discussed by Prof. Ajay Agarwal and team from the Rotman School of Management, Toronto, Canada in the Oct issue of HBR. They looked at the benefits it can bring to an organisation in terms of the change in strategy it entails. But from a supply chain professional's view point, it makes more of business sense to catch the customer earlier before he goes to competitors and their products. This brings in better profitability and in the long run dedicated customer base and better customer retention.

Knowing your customers' likes and dislikes before-hand and shipping the required items to him with higher probability of acceptance, reaching anywhere near to 90% acceptability and a proportionally high profitability,(as sales are realised faster, reliably, with less costs and with less returns) would in fact be the utopia a supply chain professional would be dreaming in his organisation.

George..

Ref : 1. How AI will change strategy, a thought experiment, Ajay Agarwal et al, HBR, Oct, 2017.

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