Companies like Amazon and Netflix have used cutting-edge Artificial Intelligence (AI) tools to drive growth and disrupt business-to-consumer (B2C) markets. Business-to-business (B2B) distributors have been slow to adapt this technology, however. This will soon change. B2B distributors that leverage the power of AI technology have the potential to turbocharge revenue and disrupt their own markets. Those that fail to do so will risk getting left behind.
Distributors today must understand what AI is and how it can be used. In its most broad definition, AI is any form of intelligence demonstrated by machines. AI programs analyze aggregated data and perform specific tasks. The more information they have, the more effective they are at their assigned jobs.
Many people benefit from this type of technology without even knowing it. Daily conveniences such as email spam filters, mobile check deposit and voice recognition are all made possible by AI.
But where AI technology is useful for individuals, it is something of a kingmaker for businesses. Amazon uses AI to power its recommendation engine, a tool that generates 35% of the giant’s e-commerce revenue. The world’s most popular video game, Fortnite, also relies on AI to keep attracting players (250 million of them) and profits ($3 billion in 2018). Developers use AI to analyze game data, and then use their findings to create a better player experience. The resulting AI-improved gameplay then draws in more players, creating a cycle of more data to be analyzed, better gameplay and evermore players.
Media disruptor Netflix uses AI to create a similar cycle of positive momentum. When subscribers watch shows, Netflix collects data on viewer preferences, allowing it to refine its recommendations and produce better programming — all of which lead to more viewed shows, more data and more subscriptions.
The two key takeaways here are that many different businesses — including distributors — can benefit from AI, and that the technology becomes more effective and more accurate when fueled with more data.
AI will positively impact distribution in three key places: at the point of sale, throughout the supply chain and within internal processes.
First, it will allow distributors to evolve from order takers into order makers; that is, smart technology will identify patterns in customer purchases to make product and next-action recommendations based on data (this can be very powerful; remember, Amazon’s search recommendations generate 35% of sales revenue). With the support of AI, sales reps and e-commerce sites won’t just take orders, but they will actively offer customers products that they are more likely to buy. AI will also track and encourage regular reorders. As data points —purchases, clicks and views — accumulate, AI will provide customers with more personalized, proactive shopping experiences and distributors with more revenue.
Second, distributors who use AI will also experience secondary and tertiary benefits. Data does not only reveal what customers buy, but when and where they buy it. AI will identify when specific products should be sent to certain distribution centers and when perishable products should be promoted to reduce inventory waste. In short, the AI-equipped distribution manager will be able to optimize inventory and supply chain management.
Third, AI technology will shape the internal improvement of distributors. AI will not replace workers, but it can guide personnel decisions, make accurate financial predictions and contribute to the development of new software.
There are many positive impacts that AI will have on distribution. However, one critical caveat must be noted: Time is of the essence. Distributors currently have a big leg up on would-be disruptors in the form of information and time. AI runs on momentum, and in the AI world more data points mean better customer experiences, which means more data points. Right now, distributors have an information advantage. However, if they want to keep the data (and thus the customers) in the future, they’ll need to embrace AI and make the data start working for them.
Originally published at https://www.naw.org/how-ai-will-impact-distribution-leveraging-the-power-of-ai-1/ on July 24, 2019.