More than 75% of Consumer Product Organizations and Retailers Adopt Regional Sourcing Strategies for Stability.

  • Nov. 21, 2023
More than 75% of Consumer Product Organizations and Retailers Adopt Regional Sourcing Strategies for Stability.

Consumer Product Organizations and Retailers Strategically Transform Supply Chains for Resilience, Efficiency, and Sustainability

Consumer Product Organizations and Retailers (CPR) are undergoing strategic shifts in their supply chain networks to overcome challenges in last-mile delivery, meet quick commerce expectations, and prevent stockouts during the busy holiday season. According to the latest report from Capgemini Research Institute titled 'Illuminating the Path: Building Resilient and Efficient Supply Chains in the Consumer Products and Retail Industry,' CPR organizations are reshaping their supply chain strategies to enhance resilience, efficiency, and sustainability.

Diversification and Localization Trends: Responding to last-mile challenges and global uncertainties, 79 percent of CPR organizations are diversifying their supplier base, with 71 percent actively investing in regionalization and localization. A noteworthy trend is the rise of friend-shoring, with 83 percent of organizations investing in supply chain networks focused on politically and economically aligned countries to reduce risk exposure.

Global Threats to Supply Chains: Geopolitical tensions, inflation, over-reliance on specific countries, fluctuating freight rates, and port congestion pose threats to global supply chains. Geopolitical issues impact the costs and efficiency of supply chains for 77 percent of CPR organizations. In response, nearshoring and domestic sourcing are gaining prominence as organizations seek to balance cost considerations with resilience.

Future Outlook: By 2025, offshore procurement is expected to decrease by 7 percent, while nearshoring and domestic sourcing are projected to increase by 4 percent and 3 percent, respectively. North America is leading the nearshoring trend, with a predicted 9 percent increase in nearshore procurement, a 4 percent increase in domestic procurement, and a 15 percent reduction in offshore procurement.

Strategic Insights: Lindsey Mazza, Global Retail Lead at Capgemini, emphasizes the need for CPR organizations to pivot their sourcing strategies for resilience. Balancing cost efficiencies with resilience and adopting sustainable practices is crucial for creating future-ready supply chains that drive profitable growth. Technology and data play key roles in this transformation, aiding in demand sensing, warehouse automation, customer experience enhancement, and efficient fulfillment.

Anticipated Challenges in the 2023 Holiday Season: For CPR organizations, the 2023 holiday season brings challenges, with 42 percent expecting stockouts, 38 percent anticipating late deliveries due to import delays, and 35 percent foreseeing labor shortages.

Strategic Focus: Cautiously optimistic in 2023, CPR organizations are prioritizing building cost efficiency through better planning, process improvement, and automation. For 42 percent of organizations, improving supply chain cost efficiency is the top focus for the next 12–18 months. However, 82 percent believe significant supply chain changes are necessary, with 86 percent emphasizing the pivotal role of data and technology. Data management (56 percent), cloud computing (55 percent), and automation (52 percent) lead technology priorities.

Sustainability Efforts and Adoption Challenges: While 75 percent of CPR organizations are consciously working towards sustainability, large-scale adoption lags. Ethical and responsible sourcing, transportation, and manufacturing are acknowledged by 86 percent as key to competitive advantage. However, deployment and scaling of sustainability initiatives remain below 50 percent, with 49 percent for responsible sourcing, 45 percent for circular product design, and 45 percent for recyclable packaging.

Data and Analytics for Resilient, Sustainable, and Efficient Supply Chains: Managing volatile consumer demand, the focus on cost efficiencies is a key priority for CPR businesses. Data and analytics play a pivotal role in improving demand forecasting, fulfillment, customer experience, and product portfolio optimization. Adopting circular economy practices and increasing transparency in the supply chain are highlighted as essential for meeting sustainability goals.