Tesco Accumulates Significant Savings through Sophisticated Supply Chain Analysis
Tesco's AI-Powered Supply Chain Revolution
Tesco, the British multinational grocery retailer, has been leveraging advanced AI technologies to transform its supply chain operations, resulting in significant cost savings and improved stock management.
The retail giant's supply chain analytics function, which includes machine learning (ML), predictive analytics, generative AI, and other cutting-edge AI methods, has been instrumental in this transformation. These tools enable Tesco to optimize inventory levels, accurately anticipate demand, and reduce waste and overstock situations, thereby driving operational efficiency and lowering costs.
One of the key ways Tesco's supply chain analytics contributes to cost savings and improved stock management is through demand forecasting and predictive analytics. By employing ML models, Tesco can predict customer demand patterns more precisely, enabling the company to align stock replenishment with actual sales trends, minimizing excess inventory and stockouts.
Another area where AI-driven operational optimization comes into play is through the use of tools like computer vision and agentic AI. These technologies are not only used for customer experience but also to improve in-store and supply chain operations, streamlining processes and reducing inefficiencies.
Tesco's use of cloud-based, globally collaborative AI platforms allows for real-time data integration from various sources, enhancing responsiveness to supply chain disruptions or shifts in consumer behavior. This data-driven insight supports supply chain agility, enabling Tesco to adapt quickly to changing market conditions.
The supply chain analytics team at Tesco has developed a predictive model for promotions, taking into account variables like product positioning and simultaneous offers. This model has allowed Tesco to optimize its promotions, ensuring they are more effective and contribute to increased sales.
In addition, Tesco has been applying sophisticated analysis to its supply chain data for the past five years. This analysis has led to the removal of £50 million-worth of stock from its depots and has saved the company £6 million so far.
Tesco's partnership with retail analytics provider Dunnhumby is well-known for its customer data analysis. However, Tesco's data-driven initiatives, which were enabled by the implementation of a Teradata enterprise data warehouse 15 years ago, have also played a crucial role in the company's supply chain transformation.
Recently, Tesco's supply chain analytics team purchased its own Teradata data warehouse, which has increased the frequency and complexity of the analyses Tesco can perform. This new data warehouse has also allowed Tesco to help its non-UK divisions build similar data infrastructure to analyze their supply chains in detail.
The web-based workflow system allows stock controllers to access a sales uplift forecast for their specific store, further aiding in efficient stock management. The team has grown from five people to 50, mainly staffed by science and engineering graduates.
However, some of Tesco's non-UK divisions have data that is not as well-organized as its UK division. Despite this challenge, Tesco continues to strive for supply chain excellence, understanding that every improvement made contributes to a better shopping experience for its customers and a stronger market position for the company.
For example, certain goods sell more when the weather is hot, such as barbecue meat, while others sell more when it's cold, like cat litter. By understanding these patterns, Tesco can adjust its stock levels accordingly, ensuring it has the right products in the right places at the right times.
In a world where consumer behavior is increasingly unpredictable, Tesco's commitment to leveraging advanced AI technologies to optimize its supply chain operations is commendable. By doing so, Tesco is not only ensuring operational resilience and scale advantages but also supporting digital initiatives like the Clubcard loyalty program to boost customer retention and sales.
The AI-powered supply chain revolution at Tesco extends to the finance aspect of its business, as demand forecasting and predictive analytics have resulted in significant cost savings of £6 million and the removal of £50 million-worth of stock from its depots.
The streamlined processes and reduced inefficiencies achieved through the use of AI technologies in Tesco's supply chain operations not only drive operational efficiency but also indirectly support the company's financial standing by reducing costs and increasing sales.
