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Discover the next generation of supply chain capabilities to deliver a comprehensive range of business value, from resilience and sustainability to new competitive advantage.
3-MINUTE READ
August 29, 2024
Our recent report reveals that companies with the most mature supply chains are 23% more profitable than their counterparts (based on research across 10 industries). A mature supply chain is characterized by the extent to which companies use advanced machine learning, generative AI and other evolving technologies for autonomous decision-making, advanced simulations and step-change improvements in their supply chain function.
These advancements allow companies to go beyond operational efficiency to drive sustainability and resilience for competitive advantage. Despite these clear advantages, only a small percentage of CPG companies have achieved true supply chain maturity.
The overall median supply chain maturity rate for CPG companies is just 22%, the lowest among the 10 industries surveyed (1). Our maturity index shows a great polarization, with many CPGs still in the legacy or first stage of digitalization. However, the top 10% of companies, dubbed as “leaders,” are in a “near” set of capabilities.
The Past stage is marked by outdated technology, limited data visibility, reliance on manual tasks and human decision-making.
The Now stage involves using some digital tools to support basic operational tasks with partial digitalization of routine activities.
In the Near stage, digitalization is scaled up across operations, with high-quality data integration, eco-friendly practices and strong ecosystem relationships.
The Next stage enables autonomous decision-making, advanced simulations and step-change improvement through data analytics and AI-driven insights.
The challenge in the CPG industry is that over half of C-suite executives still view the supply chain as a method for cost optimization. On the contrary, supply chain “Leaders” across the industries surveyed view supply chain as a competitive advantage for growth.
Only 35% of CPG leaders see the supply chain as a competitive advantage for their company. Additionally, 34% of leaders align the supply chain's ability to deliver customer satisfaction, compared to the industry average of 33%.
Leaders reported that they were nearly eight times more likely (60% versus 8%) than other companies to say their supply chain and manufacturing capabilities support their company’s business priorities "very well," regardless of how those priorities are defined.
This focus on supply chain and manufacturing excellence has translated into tangible financial benefits. While, on average, companies in the study achieved a positive five-year revenue compound annual growth rate (CAGR) from 2019 to 2023, the leaders who prioritized their supply chain strategies have been notably more profitable.
Adopting and scaling mature capabilities leads to greater value, and this value comes from investments that transform how companies design and make products rather than what they make.
Leading CPGs illustrate how adopting and scaling more advanced capabilities translates into enhanced value.
In the CPG industry, many companies still use fragmented, legacy and often home-grown tools to manage their supply chain. Approximately 61% of executives said their supply chain’s technology foundation involves a combination of numerous legacy tools, multiple enterprise resource planning solutions and general-purpose productivity tools such as spreadsheets and data management systems. However, these tools hinder capability maturity.
To advance, companies must enhance their digital infrastructure by optimizing enterprise platforms, establishing robust data foundations and implementing cloud-native solutions. Some 10% percent of the CPG companies in our study are engaged in large-scale AI deployment and generative AI deployment, which gives them a significant advantage over their competitors. Interestingly, “Leaders” are 8.9x times more likely to have implemented AI and generative AI centers and large-scale deployment compared to others.
Data quality remains a persistent challenge for many companies, characterized by inaccuracies, omissions and outdated information exacerbated by disparate systems with varying formats. This fragmentation hinders comprehensive supply chain integration across domains, corporate functions and with external stakeholders.
Sixty-seven percent of executives said they have a dedicated platform specifically tailored for their operations. While this may be true, our experience indicates that most of these platforms lack the necessary data governance resulting in severely constrained data capabilities.
Adopting an advanced operations data platform that features a unified, interconnected data model addresses key barriers such as data accessibility, reliability, readiness and timeliness, enabling companies to seamlessly connect distinct parts of their supply chain network. "Leaders" in the industry are 4.1x times more likely to have implemented advanced technology in data management than others.
Past disruptions have prompted many businesses to address vulnerabilities in their global supply and production networks. Companies need to build resilience in the face of continuous change, uncertainty and continued scarcity of resources. It requires them to build a supply chain that responds to market signals in real-time, allowing them to evaluate scenarios across functions and make choices that ensure value and drive growth.
As manufacturing “interprets” production requests from the supply chain, companies need to ensure that both functions operate as a fully integrated, demand-driven team that monitors and adjusts without human interventions. The CPG industry is heavily investing in industrial automation for plant sites and warehouses and in manufacturing digitization to bolster supply chain resilience. This may soon allow companies to integrate a wide range of data from different sources, including consumer trends in specific geographic areas and supply chain operations data such as inventory and order patterns. This will enable them to respond to pockets of demand, producing the right products and services for the right locations at the right time.
Organizations often grapple with numerous disconnected applications spread across silos, which hinder effective business support. Short-term fixes are inadequate; instead, companies should establish an "organization platform" fostering enterprise-wide agility. An end-to-end organization platform for operations creates digital continuity–across the enterprise and with business partners and fully connected products and processes from design to delivery. In the CPG industry, only a small number of companies, about 8%, have fully interconnected products and processes to achieve end-to-end digital continuity.
Consumer goods companies that have previously underestimated the importance of these capabilities must act decisively now. Failing to implement them means missing out on reaching higher performance levels and falling further behind competitors with more advanced infrastructures.
Next-generation capabilities are reducing barriers to entry across industries, favoring agile startups and increasing competition for slower legacy companies. This isn't merely about incremental improvements but about fundamentally transforming supply chain networks with new technologies and practices to consistently achieve superior business performance.
Contact Adheer Bahulkar to learn more about next-generation supply chain capabilities in the consumer goods and services industry.
1 Accenture Supply Chain & Operations capabilities global survey, 2023.