Starbucks has decided to discontinue its AI inventory counting tool just nine months after launching it in North America. This decision, confirmed through an internal newsletter seen by Reuters and corroborated by two sources, comes as part of CEO Brian Niccol's strategy to address ongoing product shortages that have impacted sales.
Initially implemented to enhance the coffee chain's awareness of store inventory issues, the AI tool faced challenges, including frequent miscalculations and incorrect item labeling, such as confusing different types of milk or failing to recognize them altogether. As reported in February, the roll-out was initially touted as a way to improve product availability.
The company announced the tool's retirement in a newsletter stating, "Automated Counting will be retired starting today. Beverage components and milk will now follow the same inventory counting methods as other products in our stores."
Despite earlier claims that the technology improved product availability, Starbucks cited a need for standardization in inventory management across its locations as the rationale for ending the program. The company aims to ensure consistent execution and is focusing on enhancing its supply chain to facilitate more frequent daily restocks.
In response to the change, employees expressed appreciation for the decision, indicating that while the intention behind the AI tool was valid, its implementation proved challenging. Comments shared internally reflected positive feedback, with one stating, "Thanks for discontinuing Automatic Counting! The thought behind it was great, but the execution was proving difficult."
The AI tool was launched rapidly in September, intended to automate product counts and increase efficiency. Workers used tablets equipped with LIDAR and camera technology to scan shelves of syrups and milk. However, early demonstrations highlighted issues, such as the tool failing to recognize specific products on the shelves.
Since taking the helm in late 2024, Niccol has focused on bolstering the coffee chain's logistics by bringing in experienced executives. He has been tasked with addressing a fragmented supply chain system marked by outdated practices, as described by employees.
Morningstar analysts noted last month that improvements to restaurant-level margins might be on the horizon, contingent on technological advancements aimed at improving labor efficiency and minimizing waste.
Niccol's turnaround strategy, termed "Back to Starbucks," incorporates several tech-driven initiatives, including new AI solutions designed to streamline order processing and assist baristas. However, he faces pressure from investors to continue driving sales growth and enhance profitability, which has seen a decline despite increased staffing efforts.
Although the automated counting program had been in development before Niccol's era and rolled out nationwide under his leadership, Starbucks posted its best quarterly sales growth in over two years last month. Nevertheless, the operating margin in North America has dropped to 9.9%, down from 18% two years ago.
The AI tool's developer, NomadGo, acknowledged in a statement that it is committed to improving its products based on user feedback.
