AI-powered diagnostics: Solving retail’s supply chain puzzle

May 6, 2025 • 5 min

In today’s rapidly evolving retail landscape, supply chain challenges continue to mount as consumer behavior shifts and economic uncertainties persist. Legacy systems often hinder retailers’ ability to effectively address operational issues like stockouts and spoilage.

Join us as host Sasha Hodes speaks with Markus Mäkynen, Product Manager for Forecasting and Replenishment, and Wan-Chien Tsou, Product Marketing Manager at RELEX Solutions. They’ll explore how RELEX Diagnostics leverages advanced analytics and AI to identify root causes of inventory challenges, automate problem-solving, and drive cross-functional collaboration—ultimately transforming how retailers tackle their most pressing supply chain obstacles.

Sasha Hodes: What are the most pressing supply chain and inventory management challenges related to operational performance? The second part of this question concerns legacy systems and updated approaches. How do they make it difficult for retailers to resolve these operational challenges effectively?

Wan-Chien Tsou: So, when we talk about supply chain challenges, major macro trends are always at play. With all the economic and geopolitical uncertainty, consumer confidence is still shaky. Shoppers are more cost-conscious and less loyal to retailers and brands. So, it’s making it much more complex to meet demand. Retailers face the tricky balance of staying efficient while ensuring availability and minimizing waste or spoilage. Adapting quickly is key, but legacy tools and systems slow things down. Many retailers still rely on manual tools and analysis, which takes time and limits their ability to respond to volatility.

Markus Mäkynen: Yeah, and I want to dive a bit deeper into the challenges of legacy systems. Tackling out-of-stock and spoilage issues without fully understanding their root cause is a difficult task. Identifying these causes manually requires much time and expertise, even for a single out-of-stock or spoilage incident. Now let’s imagine we’re dealing with thousands of these issues daily. It becomes pretty impossible to manually uncover what’s really driving these issues.

Also, there are limitations to analyzing root causes on a reactive ad hoc basis, as any improvements that we make may be short-lived. While the immediate issues are addressed, the underlying causes often remain, leading to new problems cropping up shortly after the previous ones have been solved.

SH: And so, when we think about the challenges you guys have laid out, how do new solutions like RELEX Diagnostics address them, and why is it worthwhile to move from a legacy system to something like RELEX Diagnostics?

WT: Yes, RELEX Diagnostics is a tool that removes guesswork in understanding why certain products, regions, or stores aren’t performing as expected. Instead of spending weeks, sometimes with multiple analysts analyzing data on a case-by-case basis, retailers can utilize RELEX Diagnostics to quickly identify what’s going wrong and why, saving time and effort.

For example, a retailer can quickly identify the top 20 product categories experiencing the highest stock-outs and comprehend the factors contributing to the issue. The solution illustrates the relevance of each factor, whether it’s related to forecasting, inventory, or suppliers. By knowing which factors impact stock-outs, retailers can focus on making the most critical improvements for those categories.

MM: Building on what Wan-Chien mentioned. Imagine there’s an issue with products being out of stock, and it turns out that supplier performance is the root cause here. RELEX makes it easy to address this problem by providing an intuitive dashboard that highlights which suppliers require the most attention. Users can then share these insights directly with suppliers to improve collaboration.

Also, RELEX can automatically address various recurring issues by, for example, increasing safety stock or safety lead times when suppliers consistently deliver products late. RELEX Diagnostics operates in the background to automatically analyze the root causes of problems such as stockouts, spoilage, or excess inventory. This allows users to avoid spending time determining the actual causes of these issues, enabling them to focus on solving the problems and improving business performance.

Another example is that RELEX Diagnostics can also analyze exactly how much a case pack size needs to be reduced to minimize spoilage driven by high case pack sizes. This gives your supply chain team concrete data to share with the commercial team during supplier negotiations.

RELEX Diagnostics is not just useful for one department. The insights it provides benefit teams across the entire organization, from supply chain to store operations and commercial teams.

SH: Moving to the technology available on RELEX Diagnostics — what’s particularly exciting is the concept of the integrated AI agent. Can you walk us through how this AI capability helps users interpret insights and what types of actionable recommendations it produces? How can users, for example, apply these recommendations to improve operational performance?

MM: First, analyzing and displaying root causes is just the first step. Our Diagnostics dashboards are designed to guide users toward resolving issues, whether that involves adjusting parameters within the system or utilizing the diagnostics data, such as in supplier negotiations and collaborations with various stakeholders.

But to come back to AI agents. From RELEX, there are often thousands of issues to tackle every day, and sorting through them can be a real challenge. That’s where AI agents can come in. They can really help users to prioritize which issues to focus on by spotting different kinds of hidden patterns and outliers in the data, which can be hard for the human eye to catch. On top of that, AI agents can suggest ways to resolve issues, making the whole process smoother and more efficient for everyone. Since they are configurable, they can even provide recommendations tailored to each customer’s unique processes, helping to drive continuous improvements.

SH: Interesting. Wan-Chien, what’s your perspective on the AI agent in RELEX Diagnostics?

WT: I truly believe that AI agents in diagnostics are a game changer. As Marcus already mentioned, they make individual teams and users more effective by providing information and recommendations and enabling the prioritization of issues. Furthermore, for retail executives, AI in RELEX Diagnostics offers a clear and practical way to bring GenAI into the business and increase adoption. It has a very tangible use case that can impact multiple teams and help top-line growth — RELEX Diagnostics essentially is a solution that focuses on improving lost sales. Plus, it is a great opportunity to upscale employees and get everyone in the organization ready for the future of agentic AI and AI-driven decision making.

SH: As we conclude the discussion, looking back at everything we discussed today, what are the key takeaways about RELEX Diagnostics that listeners should remember? Why don’t we start with you, Wan-Chien?

WT: Sure. To summarize, there are two key benefits. First, RELEX Diagnostics simplifies and automates the process of identifying why the business is underperforming. It eliminates manual work by providing instant insights into challenges like stock-outs, spoilage, and excess inventory. Second, beyond automation, it is a tool that drives cross-functional collaboration by enabling teams to make informed, data-backed decisions. Instead of relying on assumptions, retailers can quickly address key issues and determine which team should take action first, whether it be the supply chain, commercial, or store operations team.

SH: That’s a really good overview of our discussion. Markus, is there anything you’d like to add?

MM: The key takeaway is that RELEX Diagnostics focuses on helping businesses continuously improve. It identifies the root causes of various issues and provides clear, actionable solutions. We view diagnostics as a crucial step toward a future where AI can handle most routine tasks, allowing people to focus on more important work. Our vision is for RELEX to evolve into a self-learning system that automatically fixes the issues detected in Diagnostics. This would all be powered by AI. Diagnostics serves as the foundation that makes all of this possible. It’s the stepping-stone toward an AI-powered future.

SH: Wonderful. Thank you so much for all of that. It was an interesting discussion.