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Coles shares on watch after revealing key Microsoft alliance

The Coles Group Ltd (ASX: COL) share price could be on the move on Tuesday after revealing a major alliance with Microsoft that will see the supermarket giant use artificial intelligence to revamp its supply chain, product range, customer engagement, and workforce.

According to a report in the AFR, Coles has signed a long-term, multimillion-dollar agreement which will see it use Microsoft’s Azure cloud platform, Dynamics 365 enterprise resource planning, and modern workplace suites to support its Smarter Selling program.

Management expects the Smarter Selling program to deliver $1 billion in cumulative savings by FY 2023. This will be achieved through a number of initiatives including the use of technology to automate manual tasks, allowing Coles to offset the impact of rising costs including energy and labour.

The report explains that Coles plans to build an enterprise data platform in Azure, which it believes will create advanced analytics and artificial intelligence to improve the performance of stores.

This will be done by assisting store managers with things such as forecasting, on-shelf availability, and community preferences. It also aims to improve range reviews by better understanding which products are substitutable.

In addition to this, the company aims to use artificial intelligence to improve and personalise its offers. This will take into account things such as purchases, weather, and local community events.

Coles chief information and digital officer, Roger Sniezek, told the AFR: “By using this huge power of Azure it enables us to do computation on a scale we couldn’t do before because we were limited by the amount of tin (physical storage capacity) we have on site. Going forward this enables us to put even more data into those AI algorithms and drive better outcomes for our customers.”

This Microsoft deal appears to be the final piece in the puzzle for Coles following its agreement with German automation specialist Witron for two fully automated distribution centres and its partnership with Ocado to build two highly automated fulfilment centres and a new website.

Coles certainly has been busy since its demerger from Wesfarmers Ltd (ASX: WES) and looks well-positioned to take the fight to arch rival Woolworths Group Ltd (ASX: WOW) over the coming years.

Overall, I think this could make it a top blue chip share to buy along with these three buy-rated blue chips.

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Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Microsoft. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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