Wayfair is Battling Supply Chain Woes with Digitization and AI

It’s no secret that many retailers have been struggling to fulfil orders and acquire the stick they need for their core business goals in recent years.

Subsequent geopolitical events and crises such as the COVID-19 pandemic, labor shortages, the Russian invasion of Ukraine, and the UK’s disastrous exit from the European Union, have conspired to make the business of moving products around the world significantly harder than they used to be.

All is not hopeless however as we are now seeing many brands in the ecommerce space adapting to this rapidly evolving landscape and leveraging digital technology to help them repair these damaged supply chains and try to get business back to something resembling normality.

One such brand is online furniture and homeware retailer Wayfair which has been investing heavily in digital technology such as its cloud data capabilities and AI to make sure its catalogue of products is available for customers to purchase.

Artificial Intelligence

In a recent interview with Chain Store Age VP of supply chain technology for Wayfair, Nitin Kapoor laid out the challenges the retailer had been facing as a result of the current global situation.

"Back in 2020, Wayfair faced struggles with our third-party partners who help make our end-to-end supply chain possible,” said Kapoor. "This includes ocean and trucking companies, last-mile assembly and delivery companies, and more. Like many, these businesses faced labor and inventory shortages, which resulted in unpredictable performance variabilities. The ramifications of delayed shipments are fairly obvious, especially with customers who are counting on their items to arrive in the time frame promised.”

To help meet this crisis head on, Wayfair deployed AI technology to augment its demand forecasting capabilities. It needed a better way of predicting what assortment would be needed, the volume of those products which would be required, and be able to break that data down into the various geographic areas it does business in. And, Wayfair needed a method of achieving this in a manner which was agile and flexible enough to respond to shifting conditions which could sometime change literally overnight.

"Most retailers, including the more traditional businesses, utilize demand forecasting to purchase inventory,” continued Kapoor. "But forecasting is a little more complex for Wayfair since we don’t purchase most of our inventory from suppliers. The majority of the inventory in our supply chain is owned by our supplier partners.”

This means that Wayfair’s situation required what it describes as explainable AI - i.e., logic, that makes it easy for suppliers to understand why we make certain recommendations on how much inventory they should commit to Wayfair and where it should be placed.

"For consumers that purchase from us, the big three are faster speed, lower costs, and a greater, more relevant assortment,” he said. "We also apply AI-based models to make and deliver on customer promises. For example, when a consumer finds an item on our site, they can see exactly when it will be delivered. That delivery date is our promise to them, and AI plays a vital role in ensuring that we make it accurately and meet it every time.”

Data Cloud Technology

Wayfair has also expanded its capabilities by moving its entire data center operation to a cloud-based solution – something it says will empower the company to provide customers with an even better experience than they currently enjoy.

Having migrated fully to the cloud, Wayfair can now better handle heavy web traffic during sales and other key events, deploy fraud and scam detection solutions more effectively, use machine learning models to understand customer preferences and personalize interactions, and equip its developers with more tools and data to create solutions for its customers. In addition, using Google Cloud AI, Wayfair can create digital models which leverage data from visitors’ onsite behavior and purchase histories to identify high value customers and target those people for repeat business.

"The complete migration of our data center operations to Google Cloud is an essential part of ensuring Wayfair’s long-term competitiveness and resilience,” said Wayfair Chief Technology Officer, Fiona Tan said in a press release. "With this partnership, we’re better able to handle sudden traffic, empower our engineers with more autonomy, and use [artificial intelligence and machine learning to create a better shopping experience for our customers.”

Final Thoughts

By embracing cloud computing and AI, Wayfair has evolved into a more agile and customer centric organization, far better equipped to manage the tumultuous and changeable times in which we find ourselves.

Digital transformation’s ability to meet the challenges of the modern ecommerce landscape is sure to be part of the conversation at eTail Boston 2023, being held in August at the Sheraton Boston Hotel.

Download the agenda today for more information and insights.