Amidst global demand fluctuations and macro-economic pressures, inventory optimization and allocation across multiple locations and channels without excess stock poses a challenge for fashion businesses. However, generative artificial intelligence (AI) could hold the key to addressing this issue, according to a report by management consultancy BCG and Italian luxury association Altagamma.
While generative AI has the potential to transform core processes in the luxury sector, including supply chain and logistics, there are significant barriers to overcome. Currently, generative AI is not considered suitable for supply chain settings, as it relies heavily on large cohorts of training data and is complex to implement. Nevertheless, experts suggest that establishing a strong foundation in machine learning and data science now will pave the way for effective use of generative AI in the future.
Generative AI offers numerous benefits for retailers, including improved customer-centricity through consumer research, scenario forecasting, and the creation of new products using synthetic customer data. This can accelerate the introduction of new ranges, product design, and sourcing, while enhancing time to market.
AI is already revolutionizing supply chain management by facilitating accurate demand forecasting and automating decision-making processes such as pricing, promotions, replenishments, and forecasting. Brands are also exploring how AI can improve traceability in the supply chain. For example, Google partnered with Stella McCartney to pilot a machine learning tool that traces raw materials throughout the supply chain using data from the brand.
The differentiating factor of generative AI lies in its ability to analyze vast amounts of data from various sources to provide customized answers. By feeding inventory data and asking targeted questions like “Where do I face the risk of over and understocking based on current sales numbers?”, generative AI tools, including pricing platforms and search engines, can rapidly streamline the inventory management process.
In conclusion, while there are challenges surrounding the use of generative AI in supply chain settings, it holds great potential for luxury fashion businesses. By leveraging generative AI technologies, brands can enhance warehouse operations, optimize inventory management, and ultimately improve overall business performance.
