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Driving sustainability alongside AI’s profitability promise

Driving sustainability alongside AI’s profitability promise

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Andre N. Verdier, Managing Director, Blue Yonder Middle East, shares with us the benefits of Artificial Intelligence (AI) and why the application of the technology in the retail sector offers an appealing avenue for future competitiveness.

As the Middle East’s retail sector continues to look for ways to regain momentum following COVID-19 restrictions, the application of Artificial Intelligence (AI) within the retail supply chain offers an appealing avenue for future competitiveness.

Often the primary motivator for retailers exploring AI revolves around either profitability or sustainability.

Many organisations are stuck in a conundrum believing that they can either be profitable or sustainable. As a result, some businesses have doubts as to whether either is enough of a reason to invest in AI activities.

It’s a siloed presumption that’s simply not true. In most cases, both goals-profitability and sustainability-are actually the same thing. More work is being done to explore the link between AI, profitability and sustainability.

As just one example, PwC research recently established that using AI for environmental applications could contribute up to US$5.2 trillion to the global economy by 2030.

This becomes all the more important as retail supply chains in the Middle East are under significant pressure right now. If you’re using AI to order an as-close-to-perfect amount of each item as possible for that specific time, then the reduction of waste is an inevitable benefit along with greater profitability. For perishable items, as an example, retailers are more likely to evade the risk of either running out of stock (a negative for the customer) or having too much leftover and wasting money (a negative for the environment and company) by applying greater AI insight to their supply chain.

Likewise, many stores have to reduce the price of items in a desperate attempt to get rid of them before they expire. If they’ve stocked in a way that means they’re running out of items at the exact right time, they won’t have to do such reductions. In that sense, the retailer isn’t just saving money or reducing its carbon footprint. It’s actually making money.

One reason that this disconnect between profitability and sustainability remains is that there are still organisations-in charge of millions of data points every day-that believe they can make better decisions than machines. They rely on personal experience to make this claim, whether it revolves around stock control, revenue management or seasonal expectations. That experience is certainly valuable in many cases. However, the sustainability angle has changed this dynamic. When it comes to really understanding climate control, eco concerns, global warming and companies’ carbon footprints, many C-level executives struggle to justify their reluctance to embrace AI, as its often a subject that they are far less experienced with.

Vigilant to a megatrend

Despite all this, there can still be some hesitancy to invest in AI processes and tools in the current economic climate. This is partly because some of those investments-especially when considered from a sustainability perspective-don’t pay off immediately. It takes a leap of faith to know it will pay off in the future instead. Yet if retailers are not being seen as vigilant to this megatrend and not making efforts to become more sustainable, that reputation could cause far more long-term harm than any misfire in their procurement ranks.

Some of the steps that retail leaders can take now to overcome this hesitancy include:

  • Bringing together the CEO and executives from finance, sustainability, PR and marketing, technology and supply chain to one table to discuss the megatrend toward sustainability and its importance for the organisation’s reputation and long-term customer loyalty
  • Talking to supply chain consultants to learn how the connection of sustainability and AI can address short-term profitability
  • When judging AI applications, to choose the right vendor, ask whether the AI algorithms are flexible enough such that the strategy can be steered seamlessly between financial and sustainability goals, and smart enough that all individual decisions are calculated in order to optimise this chosen strategy

Those who indulge in the connection between AI and sustainability will quickly find out that they are also addressing profitability in the same breath.

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