AI will soon permeate every part of the supply chain. Here’s why

The use of artificial intelligence (AI) in the fast-moving consumer goods industry has grown significantly in recent years, with companies looking to take advantage of the technology to improve efficiency, increase sales, and better understand consumer behaviour.AI is still in its early stages, but unlike other new technologies that are highly speculative and full of unfulfilled promises (such as cryptocurrency and the metaverse), it’s already well-established, tested, and proven in the market.When writing this article, I started by asking OpenAI’s free tool ChatGPT to “Write an article about AI in the FMCG industry”, and it wrote five paragraphs. I’ve included them in full in this article, exactly as generated, except for changes to American spelling. Try to guess which five! Answers at the end.AI is not a single technology; rather, it’s a broad term for any software that learns, adapts, and improves over time. So, it has a role in any part of your business that could benefit from getting better. And of course, that means every part.In an FMCG business, consider AI in every part of the supply chain – from sourcing (suppliers) through to sales and service (customers), and every touchpoint in between. It can also apply to internal functions, such as talent management and HR, but we’ll exclude them for now.Let’s consider AI’s potential role at five stages of the supply chain, starting with the customer (as we always should).1. Personalised marketingOne of the key ways AI is being used in the FMCG industry is through the development of personalised recommendations. By analysing data on consumer purchasing habits, AI algorithms can make recommendations on products that are likely to be of interest to individual consumers, increasing the chances of making a sale. This not only helps companies to increase revenue, but also improves the shopping experience for consumers, who are presented with options that are more likely to be relevant to them.Large companies like Coles and Woolworths already use AI to power their loyalty programs, delivering customised offers based on an individual’s buying history, combined with aggregated data from similar profiles (customers who bought X also bought Y). Smaller companies also have access to this personalisation now, through AI-powered software such as Indian start-up Gladminds, which provides a customer engagement platform, and Australian start-up RipenApps, which uses iBeacon technology to send personalised marketing messages to customers’ phones in-store.AI also powers dynamic pricing, where prices are adjusted automatically to optimise revenue and reduce waste; for example, the Wasteless AI, which marks down perishable goods as they near their expiry date. AI can also adjust pricing to match each customer’s spending patterns, especially in online stores, but that is more controversial.2. Marketing trendsAnother externally facing use of AI is to determine market demand, using sentiment analysis tools (for example, Kimola specialises in FMCG businesses) that interpret social media, customer reviews, and other brand feedback. This analysis operates at multiple levels, from high-level overall product perception down to more granular opinions about flavours, taste, and packaging.This analysis informs marketing and product decisions, and in the future could even automatically make some of those decisions.3. Customer ServiceAnother important use of AI in FMCG is in the area of customer service. AI-powered chatbots can be used to provide instant assistance to customers, answering questions and providing information on products and services. This can help to improve the customer experience, as well as reduce the workload on human customer service representatives.In their early days, AI chatbots were simplistic and, hence, frustrating for customers. This technology has evolved rapidly; chatbots can increase engagement up to 90 per cent and sales by 67 per cent.4. Supply-chain managementAI is also being used in the FMCG industry to improve supply chain management. By analysing data on sales and consumer demand, AI algorithms can help companies to forecast demand more accurately, allowing them to better manage their inventory and avoid running out of stock.For example, US-based start-up Predactica offers a machine-learning (AI) platform for any business to analyse their data; for example, for an FMCG company, it provides demand forecasting, allowing the business to optimise inventory and reduce waste.5. Compliance and contractsFinally (for this article; there are many other applications of AI in the FMCG sector), AI can analyse complex documents, such as contracts, legislation, and other regulatory information.For example, Deloitte’s DocQMiner software works alongside humans to interpret complex documents, not only to ensure compliance but also to identify opportunities and hidden value.SummaryOverall, the use of AI in the FMCG industry is helping companies to improve efficiency, increase sales, and better understand consumer behaviour. As the technology continues to develop, it is likely that we will see even more innovative applications of AI in the industry in the future.Oh, and these were the five paragraphs generated entirely by AI:The opening paragraph: ‘The use of artificial intelligence (AI) in the fast-moving consumer goods industry …’.The lead paragraph for personalised marketing: ‘One of the key ways AI is being used in the FMCG industry …’The lead paragraph for customer service: ‘Another important use of AI in FMCG is in the area of customer service.’The lead paragraph for supply chain: ‘AI is also being used in the FMCG industry to improve supply chain management.’The close: ‘Overall, the use of AI in the FMCG industry is helping companies to …’About the author: Gihan Perera is a business futurist, speaker and writer. He is the author of Disrupted: Leading the change through crisis, recovery, and growth.