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Morrisons revealed stellar full-year results last month and said British produce had helped woo customers to its stores.
The grocer has been beefing up its Britishness and now 66% of total sales come from home-grown produce, including 750 new local products that have been added to its range over the year.
There is a growing desire from customers to buy local. As Morrisons chief executive David Potts explains: “It’s important for customers – they perceive local to be fresher.”
And Morrisons’ produce is certainly fresh. The retailer quite literally brings products from the field to the store and allows producers close to its shops to deliver direct, cutting out the need to take goods to a central depot.
Potts gave the examples of the strawberries in its Garforth, West Yorkshire, store, which are grown just down the road, and the sausages made at Plumgarths farm in Kendal, now stocked across all its Cumbrian shops.
Demand forecasting
Getting suppliers to deliver direct seems like a straightforward solution. However, there are many challenges that come with this approach.
To keep local stores replenished, retailers need to know what customer demand is for those products on a daily basis.
Morrisons is using AI to solve this problem.
Working with technology supplier Blue Yonder, the grocer is analysing vast quantities of data, such as sales patterns, footfall, weather and external events like big sports events or holidays, to predict customer demand at each individual store.
“Morrisons brings products from the field to the store and allows producers close to its shops to deliver direct, cutting out the need to take goods to a central depot”
Blue Yonder has worked with three years of Morrisons’ sales data for every store, along with the exact weather in each location over the same period.
Live weather data is fed into the system, and if the algorithm gets the resulting stock amounts wrong the machine learns from its mistakes.
During the trial of the technology, Morrisons found it reduced gaps on shelves by 30%.
Throughout this year, all Morrisons product lines apart from clothing will be stocked using the system.
The AI revolution
AI, undoubtedly a hot topic for 2018, is being put to good use in supply chain management, not only in demand forecasting but also in warehouse distribution.
Online grocery Ocado is making use of robots that pick and pack within its warehouses, while Amazon has used AI to power its checkout-free store.
The ecommerce giant uses AI systems to monitor the products shoppers take off shelves at its Amazon Go stores and customers are automatically charged for the items they leave the shop with.
It’s no wonder retailers are investing in this area. A study by McKinsey & Company last year found that early adopters of AI in retail enjoyed profit margins 8% greater than the industry average.
For Morrisons, the technology is already helping to create a Great British success story.
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