CPG Supply Chain Sees Value Prop Dip: Gartner
Once the most popular kid in the room, the CPG supply chain is finding itself a tad less appreciated in the C-suite.
That’s according to Gartner, which shared recent findings from its “Future of Supply Chain for Consumer Products Manufacturing Report,” indicating the function has some work to do to regain its value proposition.
“There is a perception that things have largely normalized, which is not essentially true,” Claudia Clemens, Gartner senior director and analyst, told CGT.
There’s no shortage of pressures: regulatory, particularly for food and beverage; economic constraints and inflation; and changing consumer behavior, including decreased loyalty. Layer in lagging digital skills, lower adoption rates, digital transformation fatigue, and generational shifts, and today’s supply chain leaders have plenty of things to keep them up at night.
Since investments aren’t translating directly into increased productivity, there’s “this concept of not only are we not showing productivity, but there's also a lot of disappointment in the value realization for a lot of the digital investments so far,” said Clemens.
What’s more, 63% of consumer products leaders expect rapid tech advancement to require supply chain upskilling over the next three years.
“The vast majority [of leaders] are saying that digital investments are underperforming and not meeting expectations,” she said. Beyond the skill sets, there’s less understanding of the ability to extract necessary value.
Michel Oostwal, industry consultant and most recently SVP/CRDO at Mars North America, Pet Nutrition, echoed these findings. “There’s a rather parochial approach to functional leadership with CIOs or chief data officers effectively working with internal functional customers like supply chain, R&D, or sales and marketing,” he texted with CGT.
“Modern leadership takes an enterprise approach with digital capabilities as an integrated element of how we run supply chains or R&D — not a bolt-on for value creation,” he noted.
Example in action: To help combat fatigue within its supply chain workforce, Unilever established a “Shape Your Own Adventure” program to increase employee development and better define career opportunities. In addition to empowering employees with new growth paths, the program is simultaneously upskilling future leaders.
AI Anxiety
Perhaps unsurprisingly, employees are very concerned about what the rapid rise in artificial intelligence means for their jobs, and they’re starting to ask questions about how their roles might change, said Clemens.
“There's a lot of uncertainty and fear that is preventing some of this adoption or willingness to upskill. At the same time, as leaders, we're not doing a good job easing or addressing these concerns.”
In fact, 70% of organizations aren’t addressing any of the concerns about how it will impact employees’ roles, skills, or stability. “Communication and transparency is highly lacking.”
Data Integrity
“Garbage in, garbage out” may have already hit cliche status, but it’s never been more critical. The increase of external and customer data is driving a greater need for data understanding, cleansing, and governance, in turn fueling an increased focus on supply chain cybersecurity, said Clemens.
One need look no further to see this in action than Clorox, which suffered a data breach that impacted distribution. The company is more aggressively investing in its security, sinking twice as much as in the past.
Fittingly, 69% of consumer products supply chain leaders are partnering with IT to establish data security, according to Gartner.
Customer Collaboration
While supply chain leaders may be ready to collaborate across their organization, there’s less of a priority to do so with their retail partners: Only 40% of consumer products leaders said it’s a focus area.
Retailers, however, are taking a much stronger position in the driver's seat when it comes to making decisions about their business, said Clemens, including investing in analytics and point-of-sale technology, reclaiming shelf space and merchandising decisions, and dictating it back to suppliers.
“We see the likes of Walmart, who are using generative AI to do supplier negotiations. If suppliers/ manufacturers are not prepared for that, they could easily [have a disadvantage]. Understanding how to come with your best offers and negotiate with generative AI is something that they need to think about, but it has not really been on the radar.”
