The Current State of the Evolving Global Supply Chain

The supply chain is the lifeblood of the consumer goods industry. It is constantly evolving to meet changing market conditions — an evolution that was accelerated to light speed in the face of the worldwide COVID-19 health crisis. Unforeseen and unprecedented demand spikes highlighted shortcomings in the supply chain that forward-thinking CGs are working diligently to fill. This CGT Targeted Research report provides a snapshot look at the current state of the CG supply chain with a focus on the technology enhancements CGs are deploying today and over the next 18 months to ensure they are prepared to meet changing demand whenever, wherever it appears. Read on to discover where the smart supply chain investment dollars are headed, and see if your tech roadmap is on par with your peers. The report comes out of the gate swinging, benchmarking 20 unique supply chain technologies (Figure 1), highlighting consumer goods companies’ current capabilities as well as their short- and long-term plans to upgrade. Not surprising in a study targeted to supply chain professionals, 41% of respondents report they have up-to-date supply chain planning software in place. Other notable tech scoring high marks for current maturity include supply chain management (38%) and returns management (38%). Interestingly, not one CG executive reported having up-to-date software in place for blockchain, and 62% have no plans to implement the technology. In addition, no CGs report up-to-date software in place for AI/machine learning, and an eye-opening 45% report no immediate upgrade plans. CGs are constantly enhancing their supply chain efforts, and sourcing drop-ship management (38%), fulfillment (34%) and replenishment (34%) top the list of current tech projects. Investment in technologies designed to get goods in end-user hands quickly and seamlessly is not surprising considering the disruption brought on by the COVID-19 pandemic. When looking at where CGs will be investing over the next 18 months we see they will continue to allocate funds to next-gen technologies like advanced analytics (48%) and AI/machine learning (38%). Simultaneous with their high-tech investments, CGs will continue to allocate funds to solutions that improve their DTC capabilities like direct-to-consumer management (38%) and order execution (38%). Getting goods from the factory to the consumer either through traditional retail channels or direct-to-consumer efforts is the backbone of the CG industry. Without a rock-solid infrastructure powered by an equally powerful and dependable technology suite, the CG supply chain simply couldn’t function, evidenced by the 26% of total IT spend that is allocated to supply chain capabilities (Figure 2). Where is all of that supply chain IT investment headed? We asked CGs which tech they are investing in this year and next to grow revenue and profits. An overwhelming 62% report they are looking to improve their ability to respond to fluctuations in demand this year, and another 24% have earmarked it as a 2021 initiative. The ability to seamlessly react to unforeseen changes in demand has become a critical issue for CGs thanks to COVID-19, as has the ability to maximize their digital channels, which 45% are looking to do in 2020 and another 31% in 2021. Understatement alert ― 2020 has been a challenging year for the consumer goods supply chain. Unprecedented and unpredictable demand spikes incurred by the pandemic have brought CG supply chain inefficiencies to the forefront, prompting companies to look long and hard at their operational preparedness. To uncover the largest supply chain challenges, we asked CGs to rank their biggest obstacles that reduce efficiency and productivity (Figure 4). They told us that the inability to adjust or respond to fluctuations in demand (48%), lack of accurate, real-time inventory visibility (41%), and the inability to run detailed what-if scenarios (31%) are their highest priorities. CGs marked inability to make rapid adjustments with supply chain partners (59%), inability to respond to inventory swings (55%), an emphasis on efficiency stifling agility (52%), and no visibility into downstream supplier data (52%) as medium concerns. As attention has shifted to simply getting goods from Point A to Point B, former hot-button issues like tariff and trade wars, and sourcing from geopolitical hot spots, are cited as low priorities this year, at 66% and 62%, respectively. With the inability to adjust or respond to fluctuations in demand the top supply chain obstacle, it is no surprise that the ability to respond quickly to demand or supply disruptions (66%) is the top supply chain initiatives CGs are evaluating to improve efficiencies (Figure 5). Just 7% of CGs report that their IoT technology is up-to-date, while 14% are currently working to upgrade their capabilities and another 31% will do so over the next 18 months (Figure 1). But nearly half (48%) report that they have no plans to do so. With a clear divide between those embracing IoT and those that are not, we asked CGs their top organizational challenges to investing in the technology (Figure 6). Topping the list is a lack of skilled workers required to implement (48%), no clear ROI (45%), and budget concerns (41%). Another technology yet to be embraced by CG execs is blockchain. No survey respondents report up-to-date technology in place, and just 37% are either involved in a current upgrade or will begin one in the next 18 months (Figure 1). The top challenges preventing a blockchain love affair? No clean ROI (59%) and various standards and competing products on the market (31%), making investment decisions difficult. The COVID-19 crisis highlighted some shortcomings in both CGs' and retailers' ability to successfully predict and plan for future demand. When asked to rate their current planning solutions just 10% of CGs ranked them as very accurate and agile, 59% said their efforts were fairly accurate, and 31% admitted they are not optimal and they need to make improvements (Figure 8). The pandemic brought some supply chain inefficiencies to the forefront, and in response CGs are committing to improving their visibility into demand, inventory accuracy (62%), diversification of supplier base (48%), and better multi-tier supplier visibility (41%), (Figure 9). A unified approach to internal operations is key to CG success. Operating with traditional siloed processes saps productivity and efficiency and can cost CGs both time and money. We asked CGs where their traditional approaches are hurting them (Figure 10) and the top responses were: linking multichannel order fulfillment to inventory availability (28%), trade promotion management and supply chain/operations (17%), linking procurement to supply chain (17%), and aligning master data across organization (17%). A key piece of a unified organization is the idea of “one version of the truth,” or a united approach to data and insight. The biggest disconnects exist between sales/promotions to planning (52%) and planning to sourcing/manufacturing (24%), according to survey respondents (Figure 11). Methodology This research was conducted July, targeting high-ranking headquarters staff at major consumer goods manufacturers. Forty-four percent of respondents hold VP titles or higher (Figure 14). Job functions among participants run the gamut from IT/technology (23%) to supply chain (19%) to customer management/sales (15%) (Figure 15). Nearly 7 of 10 (69%) of survey takers identified as consumer packaged goods manufacturers (Figure 12), with 48% tallying revenues north of $500 million (Figure 13). Conclusion Forward-thinking consumer goods manufacturers consistently invest in vital technology to ensure their brands keep pace with the competition, and nothing is more vital to CG survival than a highly-functioning, bullet-proof supply chain. The current health crisis has brought with it unpredictable demand spikes that overwhelmed many CG supply chains leading to empty shelves and disappointed consumers. While the inability to effectively respond to once-in-a-lifetime demand swings is certainly understandable, the health crisis has helped CGs pinpoint holes in their supply chain infrastructure that must be addressed. Over the next 18 months CGs will be hard at work upgrading systems and streamlining supply chain operations to ensure if/when unforeseen demand strikes again, they are better prepared. For further analysis of the findings of this report, and thought-leader insight into where the industry is headed post-COVID, be sure to check out the accompanying webinar. Key Takeaways No CG executives report up-to-date blockchain software, and 62% have no plans to implement. Over the next 18 months CGs will continue to allocate investment to next-gen technologies like advanced analytics (48%) and AI/machine learning (38%). Nearly two-thirds of CGs (62%) are looking to improve their ability to respond to fluctuations in demand. The ability to respond quickly to demand or supply disruptions (66%) is the top supply chain initiatives CGs are evaluating to improve efficiencies. There is a clear divide between those embracing IoT and those that are not. Topping the list of reasons is a lack of skilled workers required to implement (48%), no clear ROI (45%), and budget concerns (41%). Just 10% of CGs ranked their current planning solutions as very accurate and agile, 59% said their efforts were fairly accurate, and 31% admit that it is not optimal. When building one version of the truth the biggest disconnects exist between sales/promotions to planning (52%) and planning to sourcing/manufacturing (24%).

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