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In: Operations Management

The retail industry is undergoing another major shift — to ecommerce. The world’s largest clothing brand...

The retail industry is undergoing another major shift — to ecommerce. The world’s largest clothing brand is turning to artificial intelligence to win back shoppers, reports The Wall Street Journal (May 8, 2018), as it works to reverse one of the worst sales slumps in its history. H&M retail chain is ramping up its use of data to customize what it sells in individual stores, breaking with its longstanding practice of stocking stores around the globe with similar merchandise. A spike in online shopping has led to fewer customers visiting stores, and digital startups are putting up fierce competition. H&M has repeatedly slashed prices to clear out $4 billion of unsold inventory. H&M, like most retailers, relies on a team of designers to figure out what shoppers want to buy. Now, it’s using algorithms to analyze store receipts, returns and loyalty-card data to better align supply and demand, with the goal of reducing markdowns. As a result, some stores have started carrying more fashion and fewer basics. But H&M’s strategy of using granular data to tailor merchandise in each store to local tastes, rather than take a cookie-cutter approach that groups stores by location or size, is largely untested in the retail industry. Getting every store right is a mammoth task given H&M’s size. The brand has 4,288 stores, compared with Zara’s 2,127 and Gap’s 1,301. To detect trends 3-to-8 months in advance, H&M is analyzing data on a large scale from blog posts, search engines and other sources rather than relying on staff. With the help of 200 data scientists and analysts, H&M also is using analytics to look back on purchasing patterns for every item in each of its stores. The data pool includes information collected from 5 billion visits last year to its stores and websites, along with what it buys or scrapes from external sources. The chain uses algorithms to take into account factors such as currency fluctuations and the cost of raw materials, to ensure goods are priced right when they arrive in stores. Case Study Questions: 1. How can AI and data analytics help firms like H&M? 2. What is the impact of AI on inventory control? 3. What is Blockchain? How does Blockchain affect supply chain?

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Expert Solution

Answer 1=

Ai can be quite helpful for companies like H&M in order to have a better understanding of the environmental forces for different raw materials. This information can also be applied to the apparel supply chain. Apart from this, AI can also be used with predictive technology in order to gain greater sustainability of the supply chain. H&M is implementing it to fast fashion and it will help in matching the demand and supply.

Data analytics and AI will ensure the company that the right products are present at the right store and at the right time. The transportation of the products to the correct warehouse is also facilitated by these two. H&M is already utilizing AI to have improved sustainability. Now the company is looking to extend its use to the entire production

Answer 2= There is a positive and significant influence of AI on the inventory control and management activities. With the help of AI, different activities related to inventory management can be automated. AI places the orders of the suitable amount of raw material automatically so that the production orders can be fulfilled on time and datasets can be merged by the distributors so that the future demand for the products can be predicted. The AI facilitates these organizations to have to make a well-informed decision related to inventory management so that they can reduce waste and improve their profit.

Answer 3= Blockchain can be seen as a distributed digital ledger that is mainly used for the recording of different transactions in the series of different blocs. It can take the form of a number of copies which are distributed on the various computers which are commonly known as nodes

The efficiency and transparency of any supply chain can be improved drastically with the help of blockchain and it has the potential to affect positively every activity in the supply chain from warehousing to the distribution to payment. With the help of blockchains, consensus can be obtained which helps in overcoming the clashes in the supply chain related to the different transactions as the same version of the ledger is used to record all the entries on the supply chain


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