Consumer Products and Retail (CPR) companies anticipate supply chain challenges ahead of this year's holiday season, with 42% expecting stockouts or product shortages, according to the latest report from the Capgemini Research Institute.

Delays

Additionally, 38% expect delays in deliveries to their customers due to import delays, and 35% foresee labor shortages.

The study, titled "Illuminating the path: Building resilient and efficient supply chains in the consumer products and retail industry," explores how CPR organizations are transforming their supply chain strategy to infuse resilience, efficiency, and sustainability into their businesses.

Capgemini Research Institute surveyed 300 organizations in the CPR industry in August and September 2023 to understand their approach to managing supply chain challenges and conducted in-depth interviews with senior industry directors.

Other Findings

Among the retail organizations included in the study, two out of five expect stockouts or shortages during Black Friday, while 47% expect the same during the holiday season.

Among CPR companies, 38% expect stockouts or product shortages during the holiday season.

These companies are diversifying and localizing their supply chain networks to address last-mile delivery challenges, rapid commerce expectations, and to prevent stockouts during the holiday season, the study showed.

Almost eight out of 10 (79%) CPR organizations are diversifying their supplier base, with 71% actively investing in regionalization and localization.

The data showed that 83% of organizations are actively investing in "friend-shoring" – a growing business practice where supply chain networks focus on countries considered political and economic allies to reduce exposure to risks.

Supply Chain Challenges

Global supply chains face challenges such as inflation, geopolitical tensions, excessive dependence on certain countries for components, fluctuating transportation rates, and port congestion.

Three-quarters (77%) of CPR organizations stated that geopolitical issues impact the costs and efficiency of supply chains.

Moreover, nearshoring and domestic sourcing are gaining importance as organizations seek to strike a balance between cost and resilience.

By 2025, global offshore acquisitions are expected to decrease by 7%, with nearshoring and domestic sourcing expected to increase by 4% and 3%, respectively, according to the data.

North America leads the nearshoring trend, with a 9% increase in nearshore acquisitions in terms of the dollar value, a 4% increase in domestic acquisitions, and a 15% reduction in offshoring acquisitions estimated by 2025.

"As supply chain disruptions continue to pose new challenges for retail and consumer goods organizations, they are orienting their sourcing strategies to build resilience. Balancing cost efficiency with resilience, while simultaneously focusing on adopting sustainable and circular economy practices, will significantly contribute to creating future-ready supply chains that can drive profitable growth," said Lindsey Mazza, Global Retail Lead at Capgemini.

Prudent Optimism

The report also highlighted that businesses have maintained a cautiously optimistic approach this year.

CPR organizations have focused on building cost efficiency in supply chains through better planning, process improvement, and automation.

For 42% of CPR organizations, improving supply chain cost efficiency is the primary goal in the next 12-18 months, according to the research.

These organizations believe their supply chain will need significant changes, with 86% stating that data and technology will be key to ensuring transformation.

Respondents identified data management (56%), cloud computing (55%), and automation (52%) as priorities for cost savings and revenue growth.

Mazza added, "To adapt and thrive, consumer goods and retail organizations should also focus on preparing for the holiday season, which can be a profitable but challenging period. Optimizing stocks, localizing supply chain networks, and exploring alternative fulfillment options can help companies be better prepared during this time to meet consumer expectations. Technology and data will play a key role in this – whether helping detect demand, automating warehouses, improving customer experiences, or ensuring efficient fulfillment."