As retailers continue to navigate a fast-changing and often unpredictable global environment, artificial intelligence (AI) is emerging as a critical tool for supply chain optimization. From predicting inventory demand to simulating the impact of geopolitical disruption, AI’s role is growing rapidly—particularly in distribution centres (DCs).
Retail Insider spoke with Kim Baudry, Market Development Director at Dematic, to better understand how AI is influencing retail supply chains and what the future may hold.
The Omnichannel Shift and the Rise of AI
According to Baudry, AI’s emergence in retail supply chain operations is being driven in large part by the ongoing evolution of omnichannel retailing.
“We’re really just at the tip of the iceberg,” she said. “Retailers are trying to offer a seamless experience whether it’s in-store, online, or click-and-collect. That puts pressure on the supply chain to be flexible and responsive.”
With more retailers filling orders from stores, distribution centres, and even direct-to-consumer shipments from the same facility, AI is increasingly being tapped to improve inventory visibility and planning.
“AI can help make predictions and recommendations for where inventory should be placed,” explained Baudry. “It can support planning for seasonal changes or unexpected surges in demand.”
AI’s Expanding Role in Inventory and Demand Forecasting
While Dematic’s primary focus is on automation within distribution centres, Baudry noted that AI is quickly proving useful in forecasting and demand planning—especially given the uncertainty introduced by events like the COVID-19 pandemic and geopolitical tensions.
“Retailers used to keep leaner inventories,” she said. “But now, due to supply chain disruptions and geopolitical volatility, they’re storing more inventory both in their DCs and stores. That has changed the kind of automation solutions we’re selling—more storage-focused, compact systems that don’t require building new facilities.”
AI helps retailers make data-informed decisions on where to position inventory and how much to store. “It’s not just about cost—it’s also about agility and resilience,” she said. “AI can simulate supply chain scenarios and help retailers determine the best course of action if, say, tariffs are imposed on goods from a specific region.”
Navigating Geopolitical Uncertainty with Predictive Tools
Baudry recalled a recent industry conference attended by both American and Canadian retailers. The original agenda focused on tariff planning related to China, but post-election discussions shifted toward potential tariffs on Canada and Mexico.
“When your supply chain strategy has to pivot that quickly, predictive AI tools become essential,” she explained. “If you need to shift sourcing from China to Vietnam, for instance, AI can help assess the cost, the delay in supply, and the knock-on effects on your entire operation.”
From Machine Learning to AI-Powered Automation
Although the industry isn’t fully immersed in AI-powered robotics yet, Baudry said the groundwork is being laid through machine learning applications.
“We’re still in the machine learning phase more than true AI, especially when it comes to robotics,” she said. “But that’s the building block. Right now, predictive maintenance is one of the key use cases.”
Baudry explained that software connected to equipment, like conveyors or diverts, can already detect irregularities and alert operators to possible failures before they occur.
“In the future, we’ll see AI used not just for predictive insights, but for decision support,” she said. “It will help determine the right type of automation for a facility, how workflows should be adjusted, and how to optimize performance in real-time.”
AI-Driven Efficiencies in the Warehouse
Even without full AI integration, warehouse systems today already create significant operational efficiencies. Baudry gave an example of a distribution centre where the system detects that a worker has too much on their plate.
“The software can reallocate tasks to balance the workload,” she said. “As we introduce more machine learning and AI, these adjustments will become even smarter and more proactive.”
Ultimately, this helps workers perform better while improving overall output, without requiring major infrastructure changes.
AI for Customer-Facing Retail Applications
AI’s influence is not limited to the back-end. Baudry said she’s seeing growing interest in consumer-facing AI tools as well.
“For example, grocery apps are starting to use AI to anticipate customer needs,” she said. “If the system sees you buy two gallons of milk every two weeks, it could prompt you to reorder before you even realize you’re out.”
This type of personalization deepens customer loyalty—but it also increases pressure on supply chain accuracy. “If a retailer promises the milk will be there and it’s not, that’s a problem,” Baudry added. “AI helps tighten that entire value chain.”
Tariffs, Transportation, and the Role of AI in Planning
Another area where AI is gaining ground is in transportation optimization.
“Whether it’s planning for port disruptions or rerouting trucks more sustainably, AI can help retailers respond faster,” said Baudry. “It’s about reducing fuel costs, improving delivery speed, and lowering carbon emissions.”
She also emphasized the importance of supplier-retailer communication. “AI is going to give suppliers more visibility into what retailers need and when they need it,” she said. “That transparency benefits everyone.”
A Future of Continuous Disruption
Baudry concluded with a sobering yet realistic view of the retail landscape: constant change is the new norm.
“In the past, change happened every ten years or so. Now, we’re looking at disruption every three years—if not sooner,” she said. “Between customer behaviour, e-commerce, and global instability, retailers need to be more agile than ever.”
That means investing in flexible, scalable solutions, including robotics, machine learning, and AI-powered systems. “We can’t plan 10 years out anymore,” she noted. “But we can build systems that help us adapt quickly, and that’s where AI really shines.”
Key Takeaways:
- AI is reshaping retail supply chains by improving forecasting, inventory placement, and demand planning.
- Geopolitical disruption, including tariffs, is forcing retailers to adopt predictive tools and re-evaluate sourcing strategies.
- While true AI-powered robotics is still evolving, machine learning is already improving warehouse operations.
- Customer expectations for speed and accuracy are driving the need for better inventory visibility across all fulfillment channels.
- Retailers can’t afford long-term rigidity—the focus now is on building agile, data-driven infrastructure for future adaptability.
As Baudry put it, “AI isn’t just about replacing humans or automating tasks—it’s about creating a supply chain that can keep up with the world we live in today.”
