Home >Industry >Retail >66% consumer product cos, retailers plan change in supply chain strategy: Report

New Delhi: 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, according to a report by Capgemini Research Institute.

As a result, over 65% 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 note by Capgemini.

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

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% 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% of consumer products companies and 71% 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% 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%) 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% of organisations had difficulties in demand planning due to lack of data on fluctuating demand. However, over 65% of organizations plan to segment supply chains according to demand patterns, product value and regional dimensions post pandemic; over 50% 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% of retailers’ capacity in three years’ time, down from 36% today, the report said. In India, 73% of organisations are actively investing in regionalizing and localizing their supplier base; with 55% 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% of consumer product companies were challenged to increase or decrease production capacity in the aftermath of the pandemic. Over 60% of organisations in India lost sales due to stockouts.

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

“In fact, 58% of retailers and 61% of consumer product organizations are planning to increase investments in digitization of supply chains. In particular, 47% of organizations are planning to invest in automation, 42% are planning to invest in robotics and 42% in artificial intelligence. 64% and 63% of organizations are also planning to make extensive use of artificial intelligence and machine learning across transportation and pricing optimization respectively," it said.

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