Consumer products and retail (CPR) companies are anticipating supply chain challenges ahead of this year's holiday season, with 42% foreseeing stockouts or product shortages, according to Capgemini Research Institute’s latest report.
Moreover, 38% expect late deliveries to their customers due to import delays and 35% foresee labour shortages.
The study titled Illuminating the path: Building resilient and efficient supply chains in the consumer products and retail industry explores how CPR organisations are transforming their supply chain strategy to infuse resilience, efficiency and sustainability into their businesses.
The Capgemini Research Institute surveyed 300 organisations in the CPR industry during August and September 2023 to understand their approach to handling supply chain challenges and conducted in-depth interviews with senior industry executives.
Among retail organisations included in the study, two out of five expect to encounter stock outs or product shortages during Black Friday, while 47% percent expect the same during holiday season.
Among CPR companies, 38% expect stockouts or product shortages during the holiday season.
These companies are diversifying and localising their supply chain networks to deal with last-mile delivery challenges, quick commerce expectations, and prevent stockouts during the holiday season, the study found.
Nearly eight out of 10 (79%) CPR organisations are diversifying their supplier base, with 71% actively investing in regionalising and localising.
Data showed that 83% of organisations are actively investing in 'friend-shoring' – a growing trade practice where supply chain networks focus on countries regarded as political and economic allies to reduce risk exposure.
Supply Chain Challenges
Challenges faced by global supply chains include inflation, geopolitical tensions, over-reliance on certain countries for components, fluctuating freight rates and port congestions.
Over three quarters (77%) of CPR organisations said that geopolitical issues are impacting the costs and efficiency of supply chains.
Moreover, nearshoring and domestic sourcing are gaining prominence as organisations try to strike a balance between cost and resilience.
By 2025, global offshore procurement is expected to drop by 7%, with nearshoring and domestic sourcing set to increase by 4% and 3%, respectively, data showed.
North America is leading the nearshoring trend, with a 9% increase in nearshore procurement in terms of dollar value, a 4% increase in domestic, and a 15% reduction in offshoring procurement predicted by 2025.
“As supply chain disruptions continue to pose new challenges for retail and consumer product organisations, they are pivoting their sourcing strategies to build resilience. Balancing cost efficiencies with resilience while focusing on adopting sustainable and circular economy practices will go a long way in creating future-ready supply chains that can drive profitable growth,” said Lindsey Mazza, Global Retail Lead at Capgemini.
Cautiously Optimistic Approach
The report also highlighted that businesses have maintained a cautiously optimistic approach this year.
CPR organisations have focused on building cost efficiency in supply chains through better planning, process improvement and automation.
For 42% of CPR organisations, improving supply chain cost efficiency is the top focus in the next 12–18 months, research showed.
These organisations believe that their supply chain will need to change significantly, with 86% stating that data and technology will be key in securing the transformation.
The respondents identified data management (56%), cloud computing (55%), and automation (52%) as priorities for achieving cost savings and driving revenues.
Mazza added, "In order to adapt and thrive, consumer product and retail organisations should also focus on preparing for the holiday season, which can be a profitable yet challenging period.
"Optimising inventories, localising supply chain networks and exploring alternate fulfilment options can help businesses be more prepared during this period to meet consumer expectations. Technology and data will play a key role in this – be it helping with demand sensing, automating warehouses, improving customer experiences, or ensuring efficient fulfilment."