It’s Friday evening and everyone has left the office and gone home for the weekend. But this doesn’t mean the company is closed for business, because while there isn’t somebody at the office, there is something still hard at work. Sophisticated predictive analytics software is in action, ready to take advantage of hidden opportunities in the market while you’re at the bar with your friends.
Later that night, your product shows up in a Taylor Swift tweet. Almost immediately, your product is going viral. And, without having to do anything, your product forecast over the next 36 hours changes dramatically. Your supply chain can now deal with this real-time spike in demand, and ensure enough product for the orders rolling in.
On Monday morning you’re back in the office where an automated report is waiting, showing you the 38 percent lift in sales you captured over the weekend, the estimated impact on retail replenishment for the next period and how this affects your financials for the year.
The big thinker
This is the beauty of artificial intelligence (AI). Today, algorithms are constantly crunching data, predicting market trends, and responding to market changes in real time.
Sales of products can be easily affected by price changes, short-term trends in user preferences, promotional activities and much more. The real value of AI lies in the ability to create better forecasts that adapt to short these term changes, taking into account “hidden” information that goes far beyond just looking at historical sales. Such improvements in forecast accuracy solve perennial business problems like unhappy customers who don’t have your products on their shelves and a disgruntled CFO dealing with cash flow problems and overstocked warehouses.
More than humans can do
At the Institute of Business Forecasting, what we’re stressing to our members is that reaction time is critical, not only to thrive, but to simply survive. Having a good and — more importantly — timely forecast can make or break a company. Being able to identify risk and opportunities earlier can enable you to change and adapt before your competitors. Those who leverage it win, while those who don’t get left behind. Make no mistake, this technology creates an unlevel playing field.
These algorithms not only predict but also influence consumer behavior, driving and influencing sales instead of just waiting for them to happen. With this level of information and access to the consumer, we can influence their buying choices in the way that benefits a business most, like getting them to buy the products that are gathering dust in warehouses or those with the biggest profit margins.
AI interprets the complete ecosystem of the marketplace, analyzing data like weather, traffic, sports and other variables, understanding how seemingly random things impact sales. This is the mega game changer: drawing conclusions into cause and effect that the human brain simply cannot do and then turning these insights into actions.