While more than half (57%) of retailers and CPG companies plan to invest in predictive and generative AI in the next three to five years, AI and machine learning (ML) ranked just fifth in importance for overall technology spend, according to a new global study by unified supply chain and retail planning solutions provider, RELEX Solutions. It ranked behind enhancing e-commerce capabilities, improving inventory management, demand forecasting, and leveraging data analytics.

The RELEX State of Supply Chain 2024: Retail and CPG Dynamics report offers valuable insights into the challenges, strategic investment areas, and opportunities for retailers and CPGs. Overall, respondents rated rapidly shifting consumer demand volatility (55%), global events and disruptions (50%), and inaccurate sense of customer-specific demand (43%) as the biggest threats to improving supply chain efficiency and accuracy over the next three years.

Almost all (94%) respondents also said they have been impacted by social media influencing or de-influencing over the last 12 to 24 months – another sign that anticipating and sensing demand surges across all channels will be especially critical to success.

The top three most essential capabilities for retailers to manage consumer demand and inventory levels are real-time inventory visibility (45%), customer demand sensing (45%), and inventory optimisation tools (43%).

Another 59% of respondents are expanding omni-channel options from some locations to accommodate shifting consumer delivery preferences, tackling the need to evolve to changing consumer preferences.

More than half (53%) are expanding supplier base or sourcing options to add sourcing redundancy to diversify and mitigate risks associated with disruptions.

Integrated supply chain planning capabilities are critical for CPGs to balance volatility and retail collaboration while expanding consumer touchpoints. However, change is difficult given complex legacy constraints and trade-offs required across disconnected organisations.

“The retail and CPG industries continue to face complex, global challenges that require actionable insights to accurately predict, anticipate, and manage consumer demand,” RELEX Solutions vice president of strategy and marketing, Laurence Brenig-Jones said.

“To thrive in this new reality, companies must fundamentally transform their approach to supply chain management by breaking down silos, embracing new technologies like AI and ML, and fostering a culture of collaboration and agility.

“The winners will be those that can achieve resilience and flexibility, to sense and respond to disruptions and opportunities in real-time, and continuously adapt their strategies in the face of change. With the right mindset, tools, and partners, retailers and CPGs can build the supply chains of the future and unlock new levels of growth and profitability.”