AI-powered retail: 3 reasons to start digitalizing your warehouse in 2025

Of all the new opportunities and challenges supply chain leaders face in 2025, agility tops the list. To compete in today’s retail and consumer goods industries, supply chain leaders need to be responsive to consumer demand volatility, to adapt, and make faster business decisions.

Agility helps retail and consumer goods supply chains:

Quickly switch suppliers, develop more flexible sourcing strategies, and mitigate disruptions from potential tariffs¹
Adapt product offerings and pricing strategies to combat the lingering effects of inflation
Adopt more real-time demand forecasting tools and flexible warehousing solutions to keep up with shopping patterns
Augment human labor with automation to improve productivity and address labor shortages

Retail and consumer goods organizations that develop greater agility will catapult themselves forward by using insights from their supply chains as a critical enabler.

Discover Microsoft Cloud for Retail

Nonetheless, many retailers’ supply chains struggle with agility because warehouse data is often still on-premises—and that’s holding them back from the latest technologies. Because data is central to all business processes, it’s data that either fuels or inhibits supply chain growth. Reliance on on-premises data and legacy systems likely inhibits supply chain growth because it:

Causes latency that slows decision-making since leaders lack access to real-time data and often rely on outdated snapshots of old data
Prevents visibility and collaboration since data is often fragmented and siloed
Limits scale because systems can’t efficiently process increased data volumes and fluctuating demand
Impedes flexibility when systems can’t adapt quickly to shifting market conditions and demand
Impairs adoption of new technologies and processes when existing platforms aren’t adaptable

The warehouse is the ideal starting place for increased digitalization because investments made at the warehouse create value that extends to other parts of the supply chain and enterprise.

Digitalizing the warehouse enables operational excellence and innovation through:

Data-driven decision-making through real-time insights that help managers make more informed decisions and get teams unified around the same information so retailers can get ahead of demand.
Reduced operating costs related to warehousing operations through enhanced efficiencies gained by automation and robotics—and improved warehouse throughput through layout optimization, labor efficiencies, and automation. This includes reduced time and labor required for tasks such as picking, packing, and shipping.
Seamless integration throughout supply chain systems, such as enterprise resource planning (ERP) and warehouse management systems. It also sets the stage for other powerful capabilities, such as intelligent stores.
More scalability, making it easier for retailers to handle seasonal demand fluctuations or rapid growth without disrupting operations.

Agility helps supply chain leaders drive operational excellence and innovation. Nothing enables that level of agility like the cloud. Here are three compelling reasons to start digitizing your warehouse today with Microsoft and its partner ecosystem.

1. Help warehouse managers drive operational excellence with agentic AI

The role of the warehouse manager is pivotal in the supply chain ecosystem, yet warehouse managers are overloaded with information from multiple sources, making it hard to parse what’s relevant and useful.

Blue Yonder’s warehouse manager AI agent offers an easy-to-digest, interactive report designed to help warehouse managers stay up to date with the most important data and information. The agent delivers those key insights when they’re needed, helping ensure operational excellence every day.

Instead of sifting through hundreds of charts and dashboards, pages and pages of report analysis, or piecing together fragments of information from their teams, warehouse managers get a simplified view of what’s happening, what caused the issue, and what to do about it.

It’s like having a personal analyst working alongside the warehouse manager who knows all about their role, their company, and warehouse. That partnership helps the manager move much more quickly from information overwhelm to clear, decisive action.

Blue Yonder expects more developments coming soon, including more data highlights, summaries, and suggested actions, as well as an expanding list of tasks the agents can perform with human guidance.

2. Optimize warehouse design, planning, and operations with simulation

Today’s customers expect retailers to have what they want and deliver it fast to their store or home. Warehouses are critical nodes in the supply chain where optimizations can improve growth and profitability. From receiving shipments to sorting, picking, and packaging, every step of warehouse operations is being modernized with AI that analyzes changes in the physical world.

Simulating facility designs and layouts, processes, and discrete events in fulfillment and distribution centers helps retail and consumer goods enterprises make more informed and faster decisions without the need to physically install systems to evaluate use cases. Simulation also lets enterprises create and use synthetic data to orchestrate between manual labor and automation systems applying AI, machine learning, robotics, sensor technology, management systems, cloud platforms, and data analytics. How can warehouses achieve operational excellence at every step of the orchestration?

NVIDIA Omniverse is a platform for developing and deploying physical AI and simulation applications for industrial digitalization. Developers use Universal Scene Description (OpenUSD) to build solutions on a platform that enables warehouse scale, digital twins, and simulations to optimize layouts and achieve operational efficiencies. These digital twins also serve as virtual training grounds for autonomous systems and robotic fleets that increasingly operate inside these facilities.

Today, leading retailers and consumer goods companies use applications and solutions built on NVIDIA Omniverse to design and simulate greenfield and brownfield warehouses from scratch, establishing an optimal layout and process flow all in a physically accurate digital space. They can evaluate technologies like robotic shelving systems, robotic grid-based storage, or vertical lift modules (VLM) for high-density storage.

Solutions built on Omniverse let retailers integrate data from different enterprise and industrial systems to create, test, and measure design, process, and operational twins before spending precious capital or stepping foot in the building. For greenfield sites, this means a fully optimized virtual version of the entire design before construction begins. For brownfield sites, retailers can seamlessly integrate new automation technologies with existing systems, ensuring the entire warehouse achieves its operational benchmarks and performs as one cohesive unit.

Applications developed with the Omniverse platform also allow supply chain leaders to understand the impact of discreet events that impact efficiency so they can make decisions that improve key performance metrics like warehouse throughput without the risk of costly physical trials.

In the fast-paced world of commerce, time to value is everything. But platform technologies are never the end-all, be-all. That’s why collaborating with the right partners and experts is crucial for retail and consumer goods enterprises. By bringing together integration partners like Accenture to simplify the development and implementation of end-to-end advanced automation and robotics solutions and services, Microsoft’s powerful cloud solutions, and NVIDIA’s cutting-edge accelerated computing, AI, and simulation platforms, retailers can accelerate warehouse transformation and realize value faster than ever.

3. Boost productivity and collaboration with robotics-enabled automation and intelligent orchestration

Warehouse managers have traditionally relied on manual processes and human labor to keep their operations running smoothly. But labor shortages and rising operational costs are making it increasingly difficult to maintain efficiency and productivity. Additionally, the complexity of managing inventory and ensuring timely order fulfillment often leads to bottlenecks and errors.

Advancements in robotics can help supply chains augment staffing, improve employee safety, and drive warehouse productivity. New capabilities are emerging every day and startups are the ones embracing these new capabilities.

Intelligent orchestration and sortation with Unbox Robotics

The last mile can be a significant chunk of the cost in getting the supply chain right. Unbox Robotics is one of hundreds of startups Microsoft works with to deliver retail supply chain solutions. Unbox Robotics can help automate the last mile process by using robots and swarm intelligence that mimics what a swarm of bees or ants do by carrying goods from one place to another. These robots pick items, sort them, and put them in one lot lightning fast so they can easily be picked up and delivered. And because robots can work around the clock, Unbox Robotics can help retailers offset labor challenges with “always on” reliability.

Smart redistributions with YDISTRI—a new era in inventory optimization

Even the best demand forecasting systems can’t fully prevent real-time overstock and understock issues. YDISTRI doesn’t compete with these systems—it complements them by providing an AI-based reactive inventory redistribution solution. For example, in a supermarket chain, YDISTRI analyzes sales patterns, local demand, and product turnover to identify overstocked items—such as specialty foods or seasonal goods—and moves them to stores where they will sell faster at full price, reducing markdowns and waste.

By weighing transfer costs against the risk of discounts or write-offs, YDISTRI helps retailers maximize revenue from existing stock, improving inventory efficiency without relying on heavy markdowns.

Bend the curve on innovation by digitalizing your warehouse in 2025

Improving agility gives retailers the ability to future-proof their business, flex and scale their operations, and be more responsive and adaptive to consumer demands. Supply chain leaders can achieve operational excellence and catapult themselves forward with generative AI, digital twins, and robotics.

Microsoft partners with Blue Yonder, an organization that provides complete solutions across the entire supply chain, and with hundreds of today’s most innovative startups to complement a retailer’s existing technologies. Start using your supply chain as a business enabler by digitalizing your warehouse in 2025 and gain more agility for years to come.