Consumer Product Companies and Retailers to Overhaul Supply Chain Strategies

Consumer product companies and retailers plan to overhaul their supply chain strategies in the next three years as Covid-led disruptions prompted companies to have better visibility on their supply chains, predict demand trends effectively and reduce dependence on global suppliers.

“As a result, over 65 percent of organizations are likely to change their strategy significantly in the next three years, as they adapt to the pandemic and embed resiliency into their operations," according to a report by Capgemini.

Only 23 percent of consumer product organizations and 28 percent of retailers feel their supply chain is agile enough to support the organization’s evolving business needs, Capgemini Research Institute said. 

Organizations said they are investing and ramping up capabilities in technologies that will help predict demand and plan their supplies in a better manner.

Close to 85 percent companies globally faced disruptions as Covid-led lockdowns halted supplies of raw materials, disrupted production lines and go-to-market route for consumer goods companies despite demand for essentials remaining high.

In fact, globally 63 percent of consumer products companies and 71 percent of retailers said it took at least three months for their supply chains to recover from the disruptions, Capgemini’s research said. 

In India, 50 percent of organisations took 3-6 months for their supply chains to recover. Companies faced challenges spanning demand planning, anticipating consumer demand and over-reliance on global supply chains.

“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," the research note said. 

In India, 73 percent of organisations had difficulties in demand planning due to lack of data on fluctuating demand. However, over 65 percent of organizations plan to segment supply chains according to demand patterns, product value and regional dimensions post pandemic; over 50 percent plan to rely on analytics and AI-machine learning for demand forecasting going forward.

Covid has also created a greater need for companies to localize their supplier and manufacturing base. In fact, global suppliers will represent just 25 percent of retailers’ capacity in three years’ time, down from 36 percent today, the report said. 

In India, 73 percent of organisations are actively investing in regionalizing and localizing their supplier base; with 55 percent of organisations actively investing in regionalizing and localizing their manufacturing base, the research said.

The research noted that companies also faced difficulties on visibility of demand i.e. 75 percent of consumer product companies were challenged to increase or decrease production capacity in the aftermath of the pandemic. Over 60 percent of organisations in India lost sales due to stockouts.

Organizations now understand the significance of digital investments in improving visibility.

“In fact, 58 percent of retailers and 61 percent of consumer product organizations are planning to increase investments in digitization 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 optimization respectively," it said.