Q&A: How AI-powered diagnostics solve 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 address operational issues, such as stockouts and spoilage, effectively.
Markus Mäkynen, Product Manager for Forecasting and Replenishment, and Wan-Chien Tsou, Product Marketing Manager at RELEX Solutions, 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.
Listen to the full conversation:
Q: What are the most pressing supply chain and inventory management challenges for retailers related to operational performance?
A: (Wan-Chien Tsou) When we talk about supply chain challenges, major macro trends are always at play. With all the economic and geopolitical uncertainty, consumer confidence remains shaky. Shoppers are more cost-conscious and less loyal to retailers and brands. So, it’s making it much more complex to meet demand.
Q: How do legacy systems make it difficult for retailers to resolve these operational challenges effectively?
A: (Wan-Chien Tsou) Retailers must strike a delicate balance between efficiency and ensuring availability while minimizing waste and spoilage. Adapting quickly is key, but legacy tools and systems slow things down. Many retailers still rely on manual tools and analysis, which take time and limit their ability to respond to volatility.
(Markus Mäkynen) I’d like to delve 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 considerable time and expertise, even for a single incident of out-of-stock or spoilage. When we’re dealing with thousands of these issues daily, it becomes impossible to manually uncover what’s 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.
Q: How does RELEX Diagnostics address retailers’ inventory management challenges?
A: (Wan-Chien Tsou) 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 understanding which factors contribute to stock-outs, retailers can prioritize the most critical improvements for those categories.
(Markus Mäkynen) Imagine there’s an issue with products being out of stock, and it turns out that supplier performance is the root cause. 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.
For example, RELEX can automatically address various recurring issues by increasing safety stock or safety lead times when suppliers consistently deliver products late. Another example is that RELEX Diagnostics can 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 only useful for one department. The insights it provides benefit teams across the entire organization, from supply chain to store operations and commercial teams.
Learn more: RELEX Diagnostics: Uncovering the root causes of friction
Q: How do integrated AI agents help users interpret insights and apply recommendations to improve operational performance?
A: (Markus Mäkynen) First, analyzing and displaying root causes is just the first step. Our Diagnostics dashboards are designed to guide users in resolving issues, whether that involves adjusting system parameters or utilizing diagnostic data, such as in supplier negotiations and collaborations with various stakeholders.
There are often thousands of issues to address every day, and sorting them through can be a significant challenge. That’s where AI agents come in. They can help users prioritize which issues to focus on by identifying different kinds of hidden patterns and outliers in the data, which can be difficult for the human eye to detect.
Additionally, AI agents can suggest ways to resolve issues, making the entire 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.
(Wan-Chien Tsou) 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 contribute to top-line growth — RELEX Diagnostics essentially is a solution that focuses on reducing lost sales.
Additionally, it presents a great opportunity to upskill employees and prepare the entire organization for the future of agentic AI and AI-driven decision-making.
Q: What are the key takeaways about RELEX Diagnostics that retailers should know?
A: (Wan-Chien Tsou) 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 serves as a tool that drives cross-functional collaboration by enabling teams to make informed, data-driven decisions. Instead of relying on assumptions, retailers can quickly address key issues and determine which team should act first, whether it be the supply chain, commercial, or store operations team.
(Markus Mäkynen) 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 this possible. It’s a stepping stone toward an AI-powered future.
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