Marketing

Why consumer goods and retail industries need a new supply chain strategy – eCommerce Magazin

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Only 23 percent of the international consumer goods companies surveyed and 28 percent of retailers believe that their supply chain is agile enough to handle the changing business needs meet. For the study of Capgemini Research Institute 400 executives from eleven different countries were surveyed between August and September 2020. The corona pandemic was a wake-up call for companies in the consumer goods and retail sectors: 85 percent of consumer goods companies and 88 percent of retailers state that they have faced impairments.

63 percent of consumer goods companies and 71 percent of retailers said it took three months or more for their supply chains to recover from the disruptions. In Germany, 72 percent of companies in both areas needed this period of time. As a result, companies are realigning their strategies and focusing on three critical areas: needs analysis, supply chain transparency and regionalization.

Supply chain
The Impact of Covid-19 on Supply Chain Strategy. (Graphic: Capgemini)

Supply chain: the move to needs analysis

68 percent of the companies surveyed internationally and 58 percent in Germany stated that they had difficulty planning requirements because they gave accurate and up-to-date information about the fluctuating customer demand were absent during the pandemic. 54 percent now say they will use artificial intelligence or machine learning analytics to forecast demand to cope with the effects of COVID-19.

75 percent of consumer product manufacturers struggled when they had to quickly increase or decrease production capacity due to COVID-19. In order to develop the agility for this, manufacturers should optimize the transparency within their supply chain, recommend the study authors. This approach can help to make operational decisions of a strategic or tactical nature in real time.

Adjust supply chain for greater resilience

Capgemini Achim Himmelreich
Achim Himmelreich is Head of Consumer Engagement at Capgemini. (Picture Capgemini)

“Consumer goods companies and retailers recognize the great risk of future disruptions. Most therefore want to become more agile in order to be able to adapt their supply chains quickly and thus develop resilience. Ultimately, the pandemic acts as an accelerator for digitization, ”explains Achim Himmelreich, Head of Consumer Engagement in the Retail & Consumer Goods Sector at Capgemini.
“Organizations are discovering that new technologies are delivering the much-needed agility – from improving demand forecasting and accelerating order fulfillment to faster, more cost-effective last mile deliveries.”

Companies recognize the importance of investing in digital solutions to improve predictability. 58 percent of retailers and 61 percent of consumer goods companies intend to step into the international market Digitization of the supply chains to invest. Specifically, 47 percent of companies are planning to invest in automation, 42 percent in robotics and 42 percent in artificial intelligence. In addition, 64 percent and 63 percent of the companies plan to make extensive use of artificial intelligence and machine learning in the areas of transport and price optimization.

Regionalization instead of globalization

In order to avoid disruptions in the future, consumer goods and retail companies are switching from globalization to regionalizing their supplier and production base. 72 percent of consumer goods companies and 58 percent of retailers say they are active in the Regionalization of your production facilities or invest in relocating production to nearby countries.

65 percent of consumer goods and retail companies internationally and 60 percent in Germany also invest in the Regionalization of your supplier basein Great Britain, 83 percent do so and in India 73 percent. According to these strategies, global suppliers will only make up 25 percent of retail capacities in three years’ time – compared to the current 36 percent. In the case of consumer goods, the share of global manufacturers will drop from 25 percent today to 17 percent.