A new report from the Capgemini Research Institute examining the impact of the past year’s disruption on consumer product and retail (CP&R) supply chains has found that 66% of organisations say their strategy will change significantly in the next 3 years, as they adapt to the pandemic and embed resiliency into their operations.
According to the findings, just 28% of consumer product organisations and 23% of retailers believe that their supply chain is agile enough to support the organisations evolving business needs. COVID-19 was a huge wakeup call for CP&R companies: 85% of consumer products organisations and 88% of retailers say they faced disruption, while 63% of consumer product organisations and 71% of retailers say it took three months or more for their supply chains to recover from the disruptions. As a result, organisations are realigning their strategies to focus on three critical areas.
The move to demand sensing
Over two-thirds of organisations (68%) 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% of organisations plan to segment supply chains according to demand patterns, product value and regional dimensions post pandemic, while 54% say they will use analytics/AI-ML for demand forecasting to cope with the impact of COVID-19.
Traceability becomes critical
75% 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 traceability. This can help deal with the challenge of strategic, tactical, and real-time operational decisions.
Organisations understand the significance of digital investment in improving visibility. 58% of retailers and 61% of consumer product organisations are planning to increase investments in digitisation of supply chains. In particular, 47% of organisations are planning to invest in automation, 42% are planning to invest in robotics and 42% in artificial intelligence. 64% and 63% of organisations are also planning to make extensive use of artificial intelligence and machine learning across transportation and pricing optimisation respectively.
From globalisation to hyper localization
To prevent future disruption, organisations are recognising the importance of hyper localisation and are actively investing. CP&R organisations are shifting from globalisation to localisation of the supplier and manufacturing base. 72% of consumer product organisations and 58% of retailers say they are actively investing in regionalising or localising their manufacturing base or nearshoring production.
65% of CP&R companies are also investing in regionalising and localising their supplier base, rising to 83% in the UK and 79% in India, while only 42% of CP&R organisations in China are planning to localize in this area. In line with these strategies, global suppliers will represent just 25% of retailers’ capacity in three years’ time, down from 36% today. In consumer products, global manufacturers will represent just 17%, down from 25% 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 tool for fulfilling online orders as physical footfall decreases. Earlier Capgemini research shows that if deliveries from dark stores increase by 50%, profit margins could grow by 7% as a result of lower delivery costs and higher delivery throughout compared to stores (while also not affecting store operations).[i]
“Consumer products and retail organisations recognise that further disruption could be just around the corner, and they need to have the agility and resilience to adapt within their supply chain,” says Lindsey Mazza, Lead Consultant for the Global Consumer Products and Retail Group at Capgemini. “The pandemic was a learning. Organisations realise that new technologies can enable much-needed agility – from improving demand predictions, to boosting fulfilment to quicker last mile deliveries. By investing now, organisations put themselves in good stead to support consumers in their time of need – whenever that may be.”
