Retail & CPG sectors underestimate AI's role in demand volatility
The latest study by RELEX Solutions, a provider of unified supply chain and retail planning solutions, suggests that global retailers and Consumer Packaged Goods (CPG) companies may be underestimating the role of Artificial Intelligence (AI) in dealing with consumer demand volatility. The research found that only 57% of retailers and CPG companies plan to invest in predictive and generative AI within the next three to five years. In fact, AI and machine learning (ML) ranked fifth, behind e-commerce capabilities enhancement, inventory management improvement, demand forecasting, and data analytics leveraging.
The 'RELEX State of Supply Chain 2024: Retail and CPG Dynamics' report uncovers valuable insights into the future challenges, strategic investment areas and opportunities for these businesses in the coming years. Responses indicated that the most significant threats to enhancing supply chain efficiency and accuracy over the next three years were rapidly shifting consumer demand volatility (55%), global events and disruptions (50%), and an inaccurate understanding of customer-specific demand (43%). The report also discovered that 94% of respondents declared that they were impacted by social media influence or "de-influence" over the last one to two years.
Focusing on the retail sector, companies are restructuring their supply chains in order to accommodate evolving consumer expectations, channel changes, disruptions and uncertainty. Essential capabilities required to manage consumer demand and inventory levels include real-time inventory visibility, customer demand sensing and inventory optimisation tools (respectively garnering 45%, 45%, and 43% of responses). Furthermore, 59% of respondents are introducing multi-channel options from some locations to suit shifting consumer delivery preferences. Over half (53%) are expanding their supplier base and sourcing options to add variety and mitigate the risks linked with disruptions.
As for the CPG sector, the report highlighted that combined supply chain planning capabilities are vital for achieving a balance between volatility and retail collaboration while growing consumer touchpoints. The insights revealed that 79% of CPGs consider day-level planning as crucial for accurately forecasting and responding to consumer demands. The main hurdles faced by these companies include disconnected planning across different teams, systems and regions (32%), and slow and unaligned planning cycles and levels (27%) that affect the synchronisation of end-to-end value chain planning and execution.
Commenting on the findings, Laurence Brenig-Jones, VP of Strategy & Marketing at RELEX Solutions, noted: "The retail and CPG industries continue to face complex, global challenges that require actionable insights to accurately predict, anticipate, and manage consumer demand…" He emphasised the need for companies to fundamentally transform their approach to supply chain management by breaking down silos, adopting new technologies like AI and ML, and encouraging a culture of collaboration and agility. By applying these strategies, he believes that retailers and CPGs can build the supply chains of the future and unlock new levels of growth and profitability."
The RELEX State of Supply Chain 2024: Retail and CPG Dynamics report explored strategic investment areas, challenges, and opportunities for CPGs and retailers over the next three to five years. The survey was carried out in February 2024 by Researchscape and is based on responses from 285 retail, CPG and wholesale leaders globally.
