Multi-Armed Bandit Technologies for Automated Inventory Management and Pricing Decisions in Food Retail (Phase I)

点击翻译按钮获取中文摘要

Despite food retail generating $14TN+ CAD in revenue globally (2021) and helping feed billions across the world, the market segment largely remains reliant on archaic processes. Today, over one-third of all food is thrown away and most food retailers experience low profit margins in the range of 1-3%. Furthermore, supply chain disruptions (delays) often exacerbate financial and operational challenges, especially, for smaller businesses. Amidst rising food prices, improving food retail business efficiency is an economic necessity. Moreover, poor inventory management leads to unsustainable practices such as excess refrigeration, delivery, and food waste, which alone represents 6-8% of global greenhouse gas emissions. Manual optimization is exceptionally difficult due to large complexity, greatly complicated by variable delays between decisions and their outcome. Our goal is to exploit AI technology for inventory and pricing optimization to improve operational sustainability and efficiency.Recently, we developed novel multi-armed bandit methods and a software package to determine optimal decision-making strategies for situations where delay is observed. Billions of simulations validated that our methods can offer over 40% better decision-making performance than traditional multi-armed bandit methods in the presence of delay. The methods work by evaluating possible decision outcomes and using them to calculate expected outcomes.The NSERC I2I grant will allow us to augment and validate our technology in a real market scenario in food retail to better address retail customer needs. Our technology will improve both human-in-the-loop and autonomous decision-making for sustainable inventory management by providing effective recommendations and explanations concerning purchase amounts and pricing (including discounts for consumers). This will lead to improved margins in food retail and lower prices for consumers, as well as more sustainable practices which minimize food waste, cut down on unnecessary deliveries, and reduce energy consumption.