By: Jerry Abiog, CEO & Co-founder at Standard Insights
We’re often faced with hurdles beyond our control in life and business. Because of the tariffs, Canadian-owned companies could see a precipitous drop in their revenue if a portion is tied to US exports.
However, all is not lost. With the democratization of predictive AI, these Canadian companies can leverage their most valuable asset – their first-party data to mitigate the harmful effects of the tariffs.
Taking Ownership Of Your Supply Chain
Imagine you are a fifty-million-dollar Canadian food and beverage distributor of 1000 SKUs, serving 4,000 stores in Canada and 1,000 in the US. Your Canadian revenue is 40 million, and the US, 10 million. You run your warehouse operations manually (via spreadsheets) and have five years of sales, product, and customer data that is located in various silos. Your business spends $10M annually in inventory, with 20% of it being waste (2 million) mainly due to overstock of slow-moving, non-selling SKUs and understock of popular, fast-moving items. Overstocking certain SKUs costs money, while understocking popular SKUs causes your business to lose money.
While implementing hardware, AI software, and hiring supply chain consultants will not eliminate the tariffs, using all three together can mitigate the costs and/or lost revenue that may occur to improve operational efficiencies that may not have been feasible in years past. For the purpose of this article, we will look at improving the revenue on the Canadian side, making it stronger and more resilient to offset the potential loss in revenue from the US.
How It Works
Before discussing using AI to help improve operational efficiency, we must first address how inventory intake is handled. If you’re using manual procedures, consider implementing barcoding or RFID technology; doing so improves the accuracy and speed of managing inventory while minimizing the need for warehouse labor. Next, that data goes into a WMS – to help with real-time tracking, cycle, and physical counting. All this flows into an ERP that ties inventory, sales, and financial protocols together. Layer on predictive AI on top of all this data, with machine learning algorithms like time-series (inventory forecasting), pattern matching (upsell, cross-sell), or clustering (demographic, psychographic, behavior & geographic segmentation) to:
- Predict sales for each of the 1000 SKUs for the upcoming days, weeks, or 6+ months
- Help your 4K Canadian retailers order the right amount
- Increase the average order value for all the retailers
- Predict what SKUs will sell in each region
- Identify when to place orders to meet demand
By accessing your data, analyzing it, and applying what your business has learned from its data to your business ecosystem, your distributor’s potential ROI could experience the following:
- 7.8% Improvement in sales
- 9.2% Increase in average order value
- 5.1% Reduction in customer churn
- 4.7% Dead stock recovery value
- 30.2% Enhanced labor efficiencies
Could being more data-driven help your business during these challenging times? Could the efficiencies from your Canadian operations be strengthened so much that a drop in US revenues won’t hurt as much?
A Way Forward
Data is the new oil, a catchphrase, and mantra that companies that want to succeed need to apply to their business processes. Failure to do so could cause your company to become the Blockbuster or Sears of its time. Understanding the buying patterns of the distributor, retailer, and customer and understanding how it works in reverse gives your business an unmistakable competitive advantage. The tariffs and their adverse effects may just force your business to jump into the deep end of the pool in order to survive.
In the end, we can’t control the tariffs. However, all we can control is how we respond to them. Thankfully, AI-driven technology is readily available for businesses that want to respond and fight back. Oftentimes, they’ll come out stronger than they were before.
