Exploring the Complexities of AI in FMCG Distribution

Artificial intelligence (AI) has become a buzzword in the business world, promising efficiency, improved decision-making, and increased profitability. In the realm of B2B commerce, AI offers a wide array of advantages, including the utilization of intelligent chatbots, personalized product recommendations, optimized inventory management, and enriched customer experiences. However, the adoption of AI in FMCG distribution comes with risks that many distributors are rightfully concerned about. In this blog post, we explore the potential challenges and highlight important considerations for FMCG distributors as they embrace AI. 

AI Project Failure Rates

Despite all the excitement and attention AI receives, it’s important to face the truth about project failures. According to multiple studies, the failure rates of AI projects can range from 50% to 85%. FMCG distributors, well aware of these statistics, understandably question whether it is feasible and beneficial to rely on AI for crucial business decisions.

Loss of Autonomy in Decision-making for FMCG Distributors

One of the primary concerns of FMCG distributors is the loss of control over decision-making processes. As AI algorithms analyze vast amounts of data and make recommendations, distributors may feel they are relinquishing control over critical business aspects, such as which products to promote, how to describe products, or which markets to target. By relying solely on AI recommendations, they risk losing the personalized touch and market intuition that has made them successful. An AI-powered recommendation engine suggests promoting certain products based on data analysis but fails to consider external factors or customer preferences that human intuition would recognize. This may result in the promotion of products that do not resonate with the target audience, leading to missed sales opportunities and potential brand damage.

Impact on Branding and Product Differentiation

FMCG distributors invest significant effort in crafting their brand image and differentiating their products from competitors. They carefully curate product descriptions, marketing messages, and promotional campaigns to align with their brand identity. Entrusting AI algorithms with the task of describing products and recommending promotions raises concerns about losing control over brand messaging and leading to customer confusion.

Potential Overreliance and Dependency for FMCG Distributors

As FMCG distributors become increasingly reliant on AI technology, there is a risk of over-dependency and a loss of critical thinking. Relying solely on AI-generated insights may limit the exploration of alternative strategies or creative solutions. This overreliance may lead to a lack of experimentation and missed opportunities to discover new market trends or customer preferences that fall outside the boundaries of AI algorithms.

Data Integration Nightmares

AI requires a strong foundation of unified data, streamlined processes, and standardized systems to work effectively. Simply implementing AI without addressing the underlying issues will not provide the desired results. Disparate systems often have different data formats, structures, and quality standards, making data integration a complex and time-consuming task. Attempting to integrate data from multiple sales channels can lead to inaccurate insights and flawed decision-making.

Scenario: A field representative takes an order using one system, while the B2B e-commerce portal operates independently, and the inside sales team uses a separate system. Attempting to extract meaningful insights or make accurate predictions across these systems individually is challenging for AI algorithms, as they lack a complete picture of customer behavior, sales patterns, and inventory management.

Fragmented Customer Experience

A key goal of sales solutions is to provide a seamless and consistent customer experience across various touchpoints. Disparate sales solutions can result in fragmented customer experiences, with inconsistent product information, pricing discrepancies, and disjointed interactions. AI alone cannot bridge these gaps without a unified platform that consolidates customer data, order history, and preferences.

Scenario: A buyer places an order through the B2B e-commerce portal and expects real-time inventory visibility. However, if the inventory data is not synchronized across systems, the customer may receive an out-of-stock notification despite inventory being available through the inside sales team. This disjointed experience erodes customer trust and can negatively impact revenue generation.

Operational Inefficiencies

Disparate sales solutions not only impact the customer experience but also create operational inefficiencies. Sales teams may struggle with navigating multiple systems, duplicating efforts, and dealing with data inconsistencies. AI may offer insights, but if the underlying processes and systems are fragmented, the operational challenges remain.

Scenario: The inside sales team receives an order through one system, while the field representative simultaneously enters the same order in a different system. This redundancy can cause confusion, delays in order processing, and potential errors. AI algorithms, without the ability to reconcile and consolidate data, cannot alleviate these operational inefficiencies.

Conclusion

While AI technology offers potential benefits in FMCG distribution, the concerns surrounding loss of control are valid and should not be taken lightly. FMCG distributors must carefully consider the risks and challenges associated with adopting AI without addressing the underlying issues of fragmented sales solutions.

AI project failure rates highlight the need for caution and proper planning when implementing AI in the FMCG distribution space. The loss of autonomy in decision-making, potential impact on branding and product differentiation, overreliance and dependency on AI, data integration nightmares, fragmented customer experiences, and operational inefficiencies are all valid concerns that distributors must address.

Rather than blindly adopting AI, FMCG distributors should focus on building a unified B2B commerce platform as a prerequisite for successful AI adoption. With a unified platform in place, such as Pepperi B2B Commerce, AI can be leveraged effectively to scan all systems, provide accurate insights, and enable personalized experiences for customers.