Today, all businesses and retailers globally are faced with the tyranny of distance – which is now compounded by disruption. To combat this challenge, Australian based consumer product and retail (CPR) companies are transitioning, at a higher rate than global counterparts, to more regional and locally based supply chain models.
The trend of moving away from a more conventional global model reflects the efforts of retailers to establish more robust, local connections and more responsive and efficient supply chains.
Eighty six percent of Australian CPR companies, compared to 71% globally, are regionalising and localising their supplier base according to Capgemini’s latest research report ‘Illuminating the Path: Building Resilient and Efficient Supply Chains in the Consumer Products and Retail Industry’.
The report explains the current global transformation of supply chains and offers a nuanced perspective on how these changes impact the Australian market. The research also reveals that 76% of Australian CPR organisations are embracing diversification, transitioning from a traditional single-sourcing model to a more adaptable multi-sourcing approach. The move allows companies to be more relevant in a connected customer world.
Approach towards building a resilient and efficient supply chain
As the CPR sector faces a multitude of challenges through the Christmas holiday and summer season, from labour shortages, to stockouts, to expected late deliveries, it’s important to maintain a focus on securing a supply chain that balances cost and resilience. Reviewing the end-to-end network, adapting, and future-proofing the value chain must be one of, if not the most, critical focus of Australian CPR companies.
A notable example of a transformative journey is one of Australia’s leading grocery retailers, Coles, that is currently in the process of taking their grocery shopping to the next level with Ocado Group. Under this partnership, Coles will benefit from Ocado’s extensive expertise by receiving tailored support and engineering services, ensuring a seamless integration and long-term sustainability of their e-commerce operations.
The partnership will extend beyond the launch phase, integrating continuous learning and innovation from Ocado’s worldwide experience into the Australian market. This strategic decision underscores the achievement of embracing a varied supply chain strategy that aligns adeptly with the dynamic demands of the market.
The imperative for securing a responsive and efficient supply chain has never been more pronounced in the face of macro and global risks including cyber-attacks, inflation, geopolitical tensions, over-reliance on certain countries for components, fluctuating freight rates and port congestions. Australian businesses know all too well the risk of over-reliance on a single point in the supply chain following the recent hacking and shutdown of one of Australia’s largest port operators.
Inflation is a significant pain point for Australian companies across all aspects of business and is heavily influencing supply chain decisions. Ninety one percent of Australian CPR companies believe inflation is driving higher supply chain costs, compared to 82% globally. To adapt and thrive, consumer product and retail organisations should focus on optimising inventories, localising supply chain networks and exploring alternate fulfilment options to meet consumer demand.
Optimising inventories is a crucial aspect of this transformation. Businesses increasingly need to better manage risk – for instance, items with predictable and stable demand could still follow a traditional ‘push/pull’ supply chain model. However, for products influenced by trends, demand fluctuations, seasonality, and social factors, a different capacity in the supply chain is essential. This involves adapting to varying demands without oversaturating the supply pipe. Micro-fulfilment becomes a focal point, especially for grocery players, for example, aiming to deliver the freshest, longest-lasting products to consumers on time.
As organisations strive to reduce their environmental footprint, moving closer to demand centres saves on costs and effort. The evolving supply chain is transitioning from being a cost driver to a growth driver, with a sense of responsibility toward the planet, people, and organisational profitability. Taking operations online, as seen with platforms like Shopify, not only enables efficient fulfilment but also allows consumers to offset emissions, contributing to a more sustainable business approach.
Technology and future investments: Charting course to better cost efficiency
Australian CPR organisations are continuing to turn to technology/digitalisation as the cornerstone to future-proofing their supply chain. A resounding 85% acknowledge the critical role of technology and data in transforming their supply chain – be it demand sensing, automating warehouses, improving customer experiences, or ensuring efficient fulfilment.
Globally, nearly nine in ten (86%) CPR businesses state that data and technology must play a key role in securing a more cost-effective supply chain. Of the technologies being adopted, deployed, and scaled, data management (56%), cloud computing (55%), and automation (52%) are leading the pack as priorities for realising cost savings and driving revenues.
For example, Yum! Brands, the restaurant business that owns KFC, Pizza Hut, and Taco Bell, has focused on strengthening data management and supplier engagement capabilities to gain insights needed to apply machine learning to their demand forecasting processes to better predict the right amount of product thereby reducing cost and waste.
As organisations embrace these technological advancements, they position themselves not only to optimise their supply chain operations but also to meet the ever-evolving expectations of consumers in the digital age. Nearly half of Aussie CPR organisations (48%) intend to increase their investments in their supply chain over the next 12-18 months. Digitalisation has a significant role in organisations uplifting capability and meeting their business objectives.
Pioneering the future: A resilient and efficient consumer landscape
The transformation of supply chains in the Australian CPR sector is a dynamic journey, characterised by adaptability, resilience, and a commitment to ethical practices. The insights from our report provide a snapshot of the current state of the industry and provide a comprehensive guide for organisations navigating the transformative landscape.
The ability to seamlessly integrate global trends to local market requirements is critical for Australian organisations wanting to maintain a competitive position and drive more effective operations. The journey is ongoing, and with each strategic choice, the industry is paving the way for a supply chain landscape that is not only responsive to challenges but anticipates them, ensuring sustained success in the ever-evolving consumer market.
Michelle Akay (nee Grujin) is vice president of consumer products and retail at Capgemini Invent.