Consumer product companies and retailers plan to overhaul their supply chain strategies for better resilience
- Published: Tuesday, 16 March 2021 09:58
A new report from the Capgemini Research Institute examining the impact of the past year’s disruption on consumer products and retail (CP&R) supply chains, has found that 66 percent of organizations say their strategy will change significantly in the next 3 years, as they adapt to the pandemic and embed resiliency into their operations. Just 23 percent of consumer product organizations and 28 percent of retailers believe that their supply chain is agile enough to support the organization’s evolving business needs.
COVID-19 was a wakeup call for CP&R companies: 85 percent of consumer products organizations and 88 percent of retailers say they faced disruption, while 63 percent of consumer products organizations and 71 percent of retailers say it took at least three months for their supply chains to recover from the disruptions. As a result, organizations are realigning their strategies to focus on three critical areas:
The move to demand sensing
Over two-thirds of organizations (68 percent) say they faced difficulties in demand planning due to a lack of accurate and up-to-date information on fluctuating customer demand during the pandemic. To improve forecasting, 66 percent of organizations plan to segment supply chains according to demand patterns, product value and regional dimensions post pandemic, while 54 percent say they will use analytics/AI-machine learning for demand forecasting to cope with the impact of COVID-19.
Visibility becomes critical
75 percent of consumer product companies faced difficulties when they needed to quickly increase or decrease production capacity due to COVID-19. To create the agility to respond to sudden shifts in demand, manufacturers can identify opportunities to improve visibility, cites the report. This can help deal with the challenge of strategic, tactical, and real-time operational decisions.
Organizations understand the significance of digital investments in improving visibility. 58 percent of retailers and 61 percent of consumer product organizations are planning to increase investments in digitisation of supply chains. In particular, 47 percent of organizations are planning to invest in automation, 42 percent are planning to invest in robotics and 42 percent in artificial intelligence. 64 percent and 63 percent of organizations are also planning to make extensive use of artificial intelligence and machine learning across transportation and pricing optimisation respectively.
From globalisation to localisation
To prevent future disruption, organizations are recognising the importance of localisation and are actively investing. CP&R organizations are shifting from globalisation to localisation of the supplier and manufacturing base. 72 percent of consumer product organizations and 58 percent of retailers say they are actively investing in regionalising or localising their manufacturing base or nearshoring production.
65 percent of CP&R companies are also investing in regionalising and localising their supplier base, rising to 83 percent in the UK and 73 percent in India. In line with these strategies, global suppliers will represent just 25 percent of retailers’ capacity in three years’ time, down from 36 percent today. In consumer products, global manufacturers will represent just 17 percent, down from 26 percent today.
In line with the move to localisation, dark stores, which have independent operations and are closer to the delivery locations, are becoming an increasingly useful alternative for fulfilling online orders as physical footfall decreases. Earlier Capgemini research showed that if deliveries from dark stores increase by 50 percent, profit margins could grow by 7 percent as a result of lower delivery costs and higher delivery throughput compared to stores (while also not affecting store operations).