Starbucks AI Inventory Tool Gets Booted After Struggling To Tell Oat Milk From Dairy

Starbucks has scrapped an AI-powered inventory system used across its North American stores after months of reported inaccuracies, including confusion between oat milk and dairy products, according to internal communications seen by Reuters. The move marks an abrupt reversal for a high-profile technology push that had promised slicker stock control but instead exposed the risks of relying on automation for everyday store operations.

The decision ends a nine-month rollout of the tool, which had been introduced as part of chief executive Brian Niccol's effort to address persistent stock shortages that have weighed on sales. Its withdrawal highlights the challenges the company faces as it leans on automation to improve store performance and supply chain reliability.

Starbucks AI Inventory Tool Withdrawn After Errors

An internal newsletter dated Monday confirmed the decision. 'Starting today, Automated Counting will be retired,' the notice read, adding that beverage components and milk would revert to manual counting methods already used for other inventory categories.

The system, developed to streamline stock checks, used tablets equipped with cameras and LiDAR sensors to scan shelves and automatically tally items such as syrups and milk. Staff were expected to benefit from faster and more accurate counts compared with manual processes.

However, the tool struggled in practice. Reuters reported in February that it frequently miscounted items or mislabeled products, particularly similar-looking goods such as different types of milk. In some cases, items were missed entirely.

Oat Milk And Dairy Milk Errors Persist

Starbucks said on Thursday that the decision to discontinue the programme was part of a broader effort to 'standardise how inventory is counted across coffeehouses as we continue to focus on consistency and execution at scale'. The company added that it is working towards more frequent daily replenishments and ongoing supply chain improvements.

'Our goal is simple – if it's on the menu, customers should be able to order it,' the company said in a statement.

Internal feedback shared by Starbucks suggested some employees welcomed the change. One message cited by the company read: 'Thanks for discontinuing Automatic Counting! The thought behind it was great, but the execution was proving difficult.'

Rapid Rollout Of Starbucks AI System

The AI inventory tool had been rolled out rapidly in September across North America, replacing manual counts for selected product categories. At the time, Starbucks said the technology would support 'smarter supply chain optimisation'.

A promotional video released during the launch showed the system failing to recognise a bottle of peppermint syrup while counting adjacent items, underscoring early reliability concerns.

The programme itself had been in development for several years before Niccol, who took over in late 2024, expanded its deployment nationwide. His tenure has focused heavily on operational improvements under a turnaround strategy known as 'Back to Starbucks'.

Starbucks Turnaround Relies On AI Technology

Niccol has also recruited logistics executives to address what current and former employees described to Reuters as a fragmented supply chain reliant on outdated systems. Product shortages at store level have been a recurring issue, affecting customer experience and sales consistency.

Despite the setback, Starbucks has continued to invest in technology-driven solutions, including AI tools designed to sequence orders and assist baristas during peak hours. Analysts at Morningstar said last month that such initiatives could support long-term improvements in restaurant-level margins by reducing labour hours and waste.

The company's financial performance reflects both progress and ongoing pressure. Starbucks reported its strongest quarterly sales growth in two and a half years last month, but operating margins in North America have fallen to 9.9%, down from 18% two years earlier before Niccol took charge.

Investors have been watching closely as the company balances increased spending on staffing and technology with the need to improve profitability. After a slow start under Niccol, Starbucks shares have risen 24% so far in 2026.

NomadGo, the provider behind the AI system, said it is 'continuously learning from customer and user feedback' to improve its products.