NRF 2019 Supply Chain Roundup: Inventory Visibility is on the Rise

In mid-January the Javits Center in New York hosted the National Retail Federation (NRF) Big Show, where the latest retail technologies were on display to nearly 40,000 visitors. Above all, NRF 2019 stood out for focusing more on critical operational technologies than flashy customer-facing tech designed to engage the digital-native consumer. This meant fewer customer assistant robots, virtual reality, and Amazon Go-style stores, and more RFID, shelf-monitoring cameras and AI-driven optimization software. While engaging the new generation of customers remains an ongoing challenge for the retail industry, it’s becoming clear that brick and mortar retailers are now turning to the supply chain as a key strategic weapon in the fight against the march of online retail and the dominance of the Amazons of this world. 

On day one of the show Alibaba highlighted how it has pressed home its advantage omnichannel retail by focusing on operational technologies that streamline the in-store supply chain. The Chinese retail giant showcased its Freshippo store, an immersive, tech-laden grocery store and eatery that doubles up as a fully integrated e-commerce fulfillment center. Rather than being an awkward compromise between online and offline, it provides the best of both worlds by offering an engaging physical customer experience without neglecting the importance of an efficient and frictionless experience for the digital customer. This is achieved by having online orders picked by staff directly from the store shelves before being sent for dispatch by an intelligent overhead conveyor system connecting the shop floor to the back-of-store. Alibaba’s proprietary fulfillment system, which it also provides to partner retailers across China, integrates order management and picking with an efficient network of delivery drivers using advanced AI and machine learning algorithms to optimize processes. What Freshippo represents is arguably the first successful implementation of a truly integrated smart grocery store and fulfillment center that can work in urban environments, unlike other co-locations that require enormous fulfillment centers away from city centers. But the twist comes when you realize that Alibaba has already implemented over 100 of these stores across China as of January 2019. Alibaba CEO Jack Ma’s ‘“New Retail”’ vision we have heard so much about is bearing fruit at a much faster rate than any omnichannel retailer in the West.

NRF 2019 also signaled how the great RFID resurgence in retail continues to gather pace, with technology vendors such as Impinj, Mojix, Nedap, Avery Dennison, and Zebra showcasing more mature products that facilitate greater levels of automation in the retail supply chain. As the cost to deploy RAIN RFID solutions continues to fall and the value they provide increases, thanks to the maturing AI-enabled software platforms on show in 2019, adoption rates will rise further in the coming year. This was the consensus on the exhibition floor at least, with RFID even being a central component of demos given by wider ecosystem players, such as Cisco. But NRF showed that RFID’s ability to benefit retail operations does not limit it to in-store use cases. We were reminded how it is a key provider of inventory visibility in retail distribution operations, too, as demonstrated by Impinj’s new automated container tracking solution.

NRF 2019 once again went beyond the retail shop floor by showcasing an abundance of warehouse tech across the exhibition hall. Vastly improved voice-picking solutions built on deep neural networks were demonstrated by EPG and Zebra, while Panasonic dedicated its entire booth to warehouse-related operational technology, including its impressive Visual Sort Assist capabilitythat provides product handlers with augmented visual cues to sort packages at speed. Robotics were of course on show too, with the likes of 6 River Systems demonstrating how automated fulfillment solutions are becoming more accessible to online retailers.

It would also have been impossible to walk around the exhibition hall without coming across any computer vision analytics tools. Using AI-enabled cameras to capture demographic, sentiment, and behavior data has well and truly become fashionable as vendors back the technology in huge numbers. Computer vision shelf monitoring technologies were also back in force this year with Bossa Nova making a big impact. The most notable development here though perhaps is the vastly reduced cost of shelf-mounted cameras, from the likes of Trax, and the emergence of shelf-roaming drones that can fly through the aisles scanning shelves to aid inventory management and replenishment operations.

There was also a lot of discussion about managing the complexities of reverse logistics, with innovative vendors such as Optoro demonstrating a platform for optimizing product returns, something that still causes headaches for retailers. NRF also highlighted that the need to offer flexibility to the customer, leveraging click-and-collect and ship-from-store fulfillment models, is a growing trend and proving difficult for pure play online stores that lack a physical retail footprint.  The emerging power of coopetition is relevant here, with companies such as Doddle facilitating partnerships between pureplay online retailers and brick and mortar retailers by housing product return facilities in other retail stores. This allows e-retailers to offer more return points for customers while physical stores benefit from higher footfall within their stores. We can expect to see more partnerships emerge in 2019 as retailers look to address the growing complexity and rising customer expectations associated with product fulfillment and returns.

After years of talk about seamlessly integrating online and offline channels and delighting new generations of customers, NRF 2019 demonstrated that the way to do this is by addressing deficiencies in the supply chain. Viewing retail’s biggest trade show through the supply chain lens highlighted one area above all where technology will have the greatest long-term benefit for retailers: inventory management.

The Freshippo operating model would not be possible without precise inventory visibility on the shop floor and back-of-store, which enables efficient replenishment of fresh goods and prevents online orders from cannibalizing in-store inventory. This has enabled Alibaba to integrate online and in-store shopping experiences more effectively and deeply than any major grocer in the West, including the likes of Amazon and Walmart. No retailer can realistically fulfill orders from a store in an optimal way unless available inventory is known. The same is also true for other retail verticals or operating models besides groceries.

The strong representation of RFID at NRF 2019 is also a testament to the power of inventory visibility throughout the retail supply chain. Being able to track individual products, or the containers they are distributed in, is providing companies with the insights they need to make operational decisions. With increasingly intelligent and automated software platforms digesting the data from RAIN RFID readers, not only are retailers able to manage their inventories more efficiently from a labor perspective, but online and offline inventories can be integrated on a single system as well. This delivers enormous operational benefits by enabling the replacement of centralized distribution centers with a wider network of dispersed retail stores. For omnichannel retailers, this is a powerful capability as it massively reduces the average distance between products and the consumer. Again, without real-time intelligence on the quantity and location of stock, this is simply not possible and leaves the door open to pure play online retailers, who continue to eat up overall share of the retail market.

To understand the true importance of the rise of inventory intelligence, it needs to be seen in context of another key trend highlighted at NRF 2019: the increasing sophistication of Supply Chain Management (SCM) solutions. The likes of JDA Software, who presented its recent acquisition of Blue Yonder, and Manhattan Associates had a vast presence at the event, and for good reason.

SCM vendors are going to market with incredibly powerful tools that are capable of optimizing incredibly complex processes within the supply chain. One of the biggest trends we are witnessing here is the shift from volume-based decision making, where retailers aim to maximize shipment volume and keep inventory as low as possible, to value-based decision-making, which prioritizes profit to the organization above all else. This makes SCM, which includes demand planning and optimization, an enormously valuable business tool. However, this requires instant access to vast amounts of accurate, real-time data and a highly advanced optimization engine. However, if this can be achieved, and inventory visibility is high, the effects are powerful.

Let’s use an example. If a customer orders a product online from a ship-from-store retailer, conventional wisdom would state that the closest store with the available inventory should ship the product. But what if said store knows it is running low on this particular product (and so, thanks to price optimization, can charge a higher price) while a store further away is struggling to sell the same item? By understanding the opportunity cost of removing the same item from either location and factoring in other variable factors, such as delivery time and cost, a decision can be made that ensures the customer is served and total profit yields are maximized. In reality, decisions such as these are never this simple and require hundreds of factors to be analyzed. But in no scenario can any level of optimization like this occur if inventory is unknown. There are countless examples of how decision-making can be transformed once retailers know the exact quantity and location of products and combine this intelligence with supply chain optimization engines. In multi-echelon environments consisting of hundreds of stores and distribution centers at various levels within the supply chain, this ability will become game-changing.

As omnichannel retailers look to optimize an increasingly complex combination of fulfillment options, such as click-and-collect or ship-from-store, the importance of inventory management only grows. Old methods of infrequent cycle counts and inexact inventory figures are simply not good enough. If companies want to reach the level of maturity achieved by the likes of Alibaba’s hundreds of Freshippo stores, they need to get serious about how they manage their inventory. This requires a unified approach that provides visibility at the store, distribution center, and warehouse levels. In this context it’s clear to see why inventory technologies made a big splash at NRF and why 2019 will only see this trend grow.