Dusseldorf There are currently gaps on supermarket shelves, and not just for sunflower oil. Michaelfeint gives the retailers and the brand manufacturers a clear share of the blame for this.
“For cost reasons, manufacturers and retailers have extremely optimized their supply chains and keep as few inventories as possible,” criticizes the expert for artificial intelligence in retail and logistics. As a result, there was a lack of safety stocks for such extreme situations.
The traders have hardly learned any lessons from the hamster purchases of the past year, sofeint. The use of artificial intelligence could have reduced this considerably.
The algorithms could not predict hamster purchases either. “But you can recognize them as such faster and then make the right adjustments,” saysfeint, who was named “Leader of the Year” by the Logistics Hall of Fame last year. However, retailers lack the courage and openness to introduce such systems.
With the help of this software, the price hikes across the board that are now being seen in supermarkets could also be avoided. With artificial intelligence, you can increase individual prices in a more targeted manner and thus reduce the burden on low earners. “If you do it sensibly, you can make the pricing system very socially acceptable,” saysfeint.
Read the full interview here:
Mr.feint, what is driving people to hoard flour and sunflower oil now?
Panic buying is mainly a German phenomenon. They are based on a herd instinct. Customers are quick to be unsettled by reports of alleged shortages, and when they see an empty shelf somewhere, it escalates. The hamster purchases are not necessary at all, there is still enough of everything. The actual crop failures are yet to come.
Nevertheless, the prices are already rising.
Many traders take advantage of the stronger demand for higher prices. Then there is the pressure from the sharp rise in costs. A threshold has now been crossed and we are seeing price increases across the board. At the latest since Aldi raised prices, everyone else has followed suit. Once the real scarcity shows up, the price increases become even more extreme.
When can this be expected?
We won’t see any real scarcity until autumn at the earliest. So far there has only been panic among buyers, but there is also a systematic problem among retailers: the entire delivery process is geared towards the norm and can only deal with certain uncertainties. He is not prepared for the fact that demand will multiply in one fell swoop.
Why don’t companies take that into account?
For cost reasons, manufacturers and retailers have optimized their supply chains extremely and keep as few stocks as possible. As a result, there is a lack of safety stocks for such extreme situations. Especially with longer-lasting products such as flour, toilet paper or oil, it would be possible to make the supply chain a little more resilient.
But it’s not the first time we’ve seen panic buying. Haven’t the dealers learned anything from this?
Exactly, the dealers also experienced these effects a year ago. You could have learned a few lessons from it on how to deal better with such situations. That largely didn’t happen. The same applies to dealers: they like to forget the problems of the past and then go back to the cheapest solution to reduce costs. After all, our economies are very money-driven.
Could artificial intelligence help prevent the problem of panic buying?
The algorithms of artificial intelligence can at least deal with it better than humans. You cannot foresee hamster purchases either. But you can recognize them as such faster and then make the right adjustments. And as a result, they can show the further development of customer demand well.
Couldn’t artificial intelligence have ensured that the first reports of future delivery problems raised the alarm in procurement?
Basically yes. It was well known that, for example, 60 percent of the world’s sunflower oil comes from Ukraine. Properly trained software could have recognized this dependency immediately and adjusted deliveries. But these systems are not yet commercially available.
Why is it that retailers are not using more artificial intelligence yet?
I think it’s mostly the head. The people who make decisions in retail trust their many years of experience more than the new technology. You probably need to explain a lot more to them that the software is proven to produce better results.
Will we also get dynamic prices in the supermarket in the future like at the gas station?
It can not be excluded. We’re already seeing that in online retail. It’s almost non-existent in grocery stores as of now, but that would make sense.
“Many customers who have a lower income will soon no longer be able to afford the purchase”
Would the customers in the supermarket accept that?
What is happening now shocks the customer much more, namely that all prices are rising across the board. That’s definitely not the best idea. It would make more sense to measure how customers react to price increases for individual products. Many customers who have a lower income are in the situation that they will soon no longer be able to afford the purchase.
>> Read here: These products are more expensive and scarce in the supermarket
And could more artificial intelligence in the supermarket help them?
If you do it sensibly, you can make the price systems very socially acceptable. It’s not about ripping everyone off equally. It is much smarter to make more expensive the products that are more likely to be bought by the wealthy who can afford higher prices. Artificial intelligence can measure and analyze this very precisely and ensure fairer prices, especially in times like these.
And that is not yet possible?
Precise analyzes of how the costs have actually risen and how customers react to price increases are not made for every single one of the 20,000 items in a supermarket. A lot of decisions are made based on instinct and a lot of potential is wasted. Appropriate software could deal with the increasingly complicated situation much better, analyze all factors of demand and adapt faster and more specifically.
Wouldn’t the rituals of the annual talks between retailers and suppliers, which in many cases escalate to such an extent, then be superfluous?
Yes of course. The software could automatically set the prices and quantities in a way that would be optimized for both parties. But there is a lack of trust between retailers and manufacturers. This requires a lot of information that is still a trade secret today. It will therefore probably take more than a generation before such a system changes.
There are numerous start-ups that develop such software systems. Are they experiencing an upswing now?
In the long term yes. This is already used as a matter of course by online retailers. But stationary trade in Germany is still noticeably reticent. Many emerging countries are much further ahead, such as Chile, Peru or South Africa. In Asia, retailers are skipping entire technology cycles and taking what’s cutting-edge that’s on the market now. In Great Britain, too, all large retail chains are dealing with the automation of business processes.
In Germany, the big retailers have so far limited themselves to pilot projects. There is a lack of openness and courage to put this into practice and really change the standard processes.
More: “Who should pay for that?” – Rewe does not want to pass on all price increases