Consumer sector struggles with supply chain challenges finds survey
Over two thirds of CPG and retail executives rate their supply chain operations as average or below average, with low rates of modernisation in procurement and replenishment functions
Retail and Consumer Packaged Goods (CPG) executives are hard-pressed to keep up with the current environment says a new survey, as operations struggle to keep up with evolving demand and disruption, particularly in the e-commerce sections of their businesses.
According to a survey of over 300 leaders by Genpact and HFS Research, there were significant gaps in the transport, procurement and logistics foundations of their businesses. Some 71% of CPG executives rated their supply chains as average of below average, while 68% of retailer in the study said the same. Additionally, 70% of CPG respondents also think their merchandising and replenishment systems are average or below.
A core part of these struggles are ageing systems in critical areas. When asked whether they had achieved modernised order management or procurement functions, just 22% confirmed they had done this in the former and 27% in the latter. A third said that they had only made some progress or had yet to start a modernisation effort for their order management systems.
With the growth of fast-paced retailing, led by the massive expansion in e-commerce, this is leaving retailers struggling to keep up, on top of which they continue to face long-tail disruption from the pandemic, high inflation and supply chain issues resulting from the Russia-Ukraine War.
The biggest demand challenge noted in the survey was ‘digital or e-commerce disruption’, which was chosen by 67%, and 72% said they are operating or growing out a direct-to-consumer business.
Seventy-one percent said inflation had led them to put more efforts into stabilising supply chains affected by COVID-19 and the conflict.
The research highlighted that investing into digital modernisation, customer experience and new business models would help companies to handle these challenges. However, the research says that just 6% in the survey are investing into all three of these elements.
"Retail and CPG companies struggle to balance the macroeconomic 'slowdown' with the 'big hurry' to innovate," said Saurabh Gupta, President, Research and Advisory Services at HFS Research. "Most companies are not investing across all the areas they need to meet. Beyond survival, they must take a balanced approach to their people, processes, sustainability initiatives, and technology to thrive."