Retail and consumer goods organisations around the world must have an efficient supply chain to achieve financial success and drive customer satisfaction, and right now they are identifying new technologies and tools that can help them achieve this.
Recent 2024 research from analyst firm IDC shows that retailers are responding by investing heavily in supply chain modernisation. In fact, it’s now one of the fastest growing areas of digital transformation in retail, with annual spending in the Americas rising by about 22 per cent. Why? Because an intelligent supply chain can cushion the business against external shocks, acting as a safeguard against wider economic fluctuations. Those who leverage the latest technologies to reinvent their strategies stand to gain a significant competitive edge.
According to Felice Miller, business strategy lead for retail and consumer goods at Microsoft, “a resilient and optimised supply chain is no longer a competitive advantage, it’s a necessity”.
“The pandemic exposed the fragility of global supply chains, and now retail and consumer goods organisations are navigating a landscape shaped by tariff volatility, shifting trade policies and macroeconomic uncertainty,” she explains. “International trade policies are in flux and the impact of these trade uncertainties on the retail and consumer goods industry is substantial. Rising import tariffs drive up costs for raw materials and finished goods, driving margin compression. Supply chain teams must constantly re-optimise their logistics and sourcing strategies to adapt.”
Simply put, agility is paramount in this new normal of continuous disruption as Miller emphasises. Organisations can no longer rely on static forecasts and single-source suppliers. Instead, they must build flexible networks, diversify sourcing and balance efficiency with resilience.
To survive and thrive, retail and consumer goods organisations are pivoting from traditional, reactive supply chain management to data-driven intelligence and real-time planning. The days of fixed spreadsheets and manual, after-the-fact adjustments are fading. In their place, advanced analytics and AI are enabling companies to anticipate changes and respond swiftly.
This shift is well underway and many use cases for generative AI have already been established worldwide. Digital intelligence offers opportunities to optimise and streamline operations, enhance cost-effectiveness by reducing expenses and improve decision-making with better data and insights for informed choices. Agility and adaptability are crucial for creating a supply chain that can respond quickly to changes in the environment.
“Generative AI can produce insights, forecasts or content from large data patterns and has proven especially powerful in tackling supply chain volatility,” says Miller. “For example, generative models can simulate demand scenarios based on historical data and external variables such as weather or social trends, enabling more accurate planning.
For instance, Japanese fresh food supplier Super Hosokawa recently used AI to tackle the perennial challenge of overstock and waste in grocery stores. As part of a 2024 government-backed project, Super Hosokawa worked with forecast model developer Imamura Shoji, supermarket cooperative Kyushu CGC and the Japan Research Institute to link data across its supply chain and apply advanced demand forecasting models.
Using Microsoft Azure cloud tools and AI algorithms, the system analysed point-of-sale data and even generated customer personas to predict buying patterns. The first notable find of the trial was that people made far fewer mistakes – 31.8 per cent fewer – when they used the demand forecast model to place shop orders, compared to when they ordered on their own.
The improved accuracy also helped to reduce food waste. Before the trial, overall food waste across Super Hosokawa’s different product sections was recorded at 0.52 per cent. This dropped to between 0.13 and 0.20 per cent after using the demand forecasting model. These improvements translate to cost savings and more efficient operations, directly addressing pain points exacerbated by supply uncertainty,
Many retailers are also looking to go beyond generative AI and move towards a truly intelligent, autonomous supply chain.
“Agentic AI represents a shift from passive analytics to proactive decision-making systems,” says Miller. “Unlike traditional analytics or even generative AI, agentic AI is designed to act towards defined goals. These agents don’t just predict outcomes, they can dynamically adapt plans and execute decisions with minimal human oversight, all while pursuing objectives like cost minimisation or service maximisation.”
Agentic AI is revolutionising supply chains by enabling faster and more efficient decision making through goal-based optimisations. Enhanced automation allows AI agents to autonomously manage routine activities, reducing manual labour and minimising errors. Proactive decision-making with advanced predictive analytics helps anticipate disruptions and recommend pre-emptive actions. Real-time monitoring and visibility ensure immediate response to anomalies, reducing downtime.
In practical terms, agentic AI could autonomously manage many routing supply chain activities and constantly optimise them. For instance, an AI agent might automatically reroute shipments, adjust inventory levels or negotiate supplier orders in response to real-time changes without waiting for human approval. This is a leap towards goal-driven automation. Such agents use advanced predictive analytics and then trigger proactive adjustments to keep the supply chain on track. They also offer real-time monitoring and visibility, alerting stakeholders immediately to anomalies and handling many issues instantly so that disruptions cause minimal downtime.
“The combined power of generative and agentic AI will redefine strategic value and productivity derived from technology, incorporating more advanced decision-making processes with greater accuracy and speed,” says Miller. “In a world of constant uncertainty, having an autonomous, self-adjusting supply chain is a game changer. The new mantra is proactive adaptability: rather than just responding faster to each crisis, let the AI anticipate and navigate around many issues entirely. It’s a vision of the future where agility and resilience are built-in features of operations, not heroic efforts every time something goes wrong.”
As with any organisational change, retailers must consider several key factors to successfully transition to these AI technologies.
“Organisations should focus on three pillars: data readiness, ecosystem collaboration and workforce enablement,” says Miller. “Most importantly, organisations must foster a culture of continuous learning to empower employees to work alongside AI.”
Furthermore, efficient use of generative and agentic AI requires thorough preparation which, according to Miller, involves “unifying siloed data sources and investing in scalable cloud platforms”.
To achieve this, Miller suggests retailers use Microsoft’s Azure OpenAI Service combined with solutions from a partner such as Blue Yonder. Taking this approach will allow companies to embed generative AI into their supply chain workflows and enhance everything from inventory planning to supplier collaboration.
Blue Yonder has launched new AI-driven cognitive solutions on the Blue Yonder Platform, including five domain-specific AI agents to help businesses improve supply chain efficiency in key areas: inventory, logistics, warehouses, networks and shelf operations. These agents are designed to help retail and consumer goods organisations minimise and respond to disruptions, while uncovering new opportunities for growth amidst a turbulent landscape.
Various other Microsoft partners are also developing solutions to help organisations solve specific supply chain challenges.
For example, Avanade’s new Tariff Navigator solution is helping businesses to adapt quickly to changing regulatory environments, ensuring compliance while minimising operational friction. Meanwhile, Neudesic’s Inventory Control Tower allows organisations to monitor inventory positioning and predictive insights into demand and supply fluctuations in real-time with embedded agentic AI and enable adjustments and automated replenishment.
In addition to implementing these solutions, retail and consumer goods organisations must implement robust security solutions to reap the full benefits of an intelligent supply chain. A cyberattack can halt production lines, empty store shelves or expose sensitive information, all of which can be catastrophic for a business.
“Focusing purely on speed and efficiency is not enough,” says Miller. “If security is neglected, a single disruption or breach can unravel any progress made. A truly optimised supply chain must also be secure and resilient, ensuring that operations can continue smoothly despite cyberthreats or other risks.
“Modern supply chains are highly digital and interconnected, often spanning hundreds of supplies and partners. This interdependence brings agility and efficiency, but it also expands the attack surface. In essence, you’re only as secure as the weakest link in your supply chain.”
While it may be daunting to take the leap and invest in an AI-powered supply chain, if done correctly it has the potential to create a ripple effect of benefits that spread across the entire business.
“An intelligent supply chain has the potential to improve forecasting, which can reduce excess inventory and free up capital for innovation,” says Miller. “It can also provide enhanced visibility into supplier performance to support environmental, social and governance goals. Plus, having faster and more accurate fulfilment can boost customer satisfaction and brand loyalty.
“Moreover, AI insights can inform marketing, product development and finance, creating a more connected and responsive organisation. This cross-functional value is why AI is central to digital transformation strategies.”
Partner perspectives
We asked selected Microsoft partners how they are working with Microsoft to develop solutions that allow retail organisations to establish intelligent supply chains
“Coretek collaborates with Microsoft to develop intelligent supply chain solutions that transform retail operations,” says Brian Barnes, chief product officer at Coretek. “Our advanced systems integrate AI-driven insights, cloud analytics and real-time data to optimise inventory management, accurately forecast demand and streamline logistics.”
“Powered by Azure, GEP delivers intelligent procurement and supply chain solutions that help retail organisations improve profitability, resilience and agility in a dynamic market,” says Alex Zhong, global head of product marketing at GEP. “These solutions provide comprehensive real-time visibility and empower data-driven decision-making across complex retail operations that address key challenges for retail.”
“We’re helping retailers modernise their operations by integrating LS Central, built on Microsoft Dynamics 365 Business Central, with point-of-sale and e-commerce platforms like Shopify,” says Mathieu Galipeau, partner at LIDD Consultants. “This creates a unified, intelligent supply chain where the enterprise resource planning platform acts as the single source of truth for inventory, orders and fulfilment. Customers can begin their journey online and complete it in-store, with Dynamics 365 Customer Service ensuring seamless support.”
“Neudesic is working closely with Microsoft to develop industry-specific supply chain solutions in areas such as demand forecasting and inventory management,” says Shannon Wu-Lebron, global vice president of strategic growth for retail and consumer industries at Neudesic. “For example, we launched a retail inventory management control tower solution powered by Microsoft data platforms and AI capabilities. It changes the game by providing end-to-end visibility, AI-powered decision-making and automation capabilities to optimise retail operations, without adding or replacing a costly software platform.”
Discover more insights from these partners and others in the Summer 2025 issue of Technology Record. Don’t miss out – subscribe for free today and get future issues delivered straight to your inbox.