Five steps to an autonomous, networked supply chain

The disruptions caused by the global pandemic have shone a light on existing supply chain issues. In a recent HFS survey study of 302 retail and consumer packaged goods (RCPG) executives conducted in partnership with Genpact, 90% agreed that COVID-19 significantly impacted their supply chains. Inflation, recessionary fears, and the war in Ukraine have exacerbated the situation. Creating modern, value-based supply networks, redesigning the supply chain for sustainability and omnichannel, resiliency and adaptability, and proactive planning are some of the biggest challenges RCPG firms face.

To combat the disruption, 75% of RCPG firms are trying to transition from traditional linear supply chains to autonomous supply networks. HFS recommends attaining enhanced visibility, minimal human intervention, analytics-driven systems, baking sustainability, and leveraging ecosystem data to walk this path.

The supply chain is now a boardroom discussion topic, and 70% of RCPG firms are in recovery mode

RCPG firms identify supply chain disruption as the second most concerning macroeconomic factor adversely impacting organizational goals
(see Exhibit 1).

Exhibit 1: Supply chain disruption issues surfaced as the second-most concerning macroeconomic factor, just behind inflation

Sample: 302 retail and CPG executives across the Global 2000 enterprises
Source: HFS Research in partnership with Genpact, 2023

Most RCPG firms now realize that supply chains are no longer an operational conversation; they’ve become a boardroom discussion. As Exhibit 2 depicts, CPG and retail firms acknowledge the mayhem the COVID-19 pandemic caused and are still grappling with its aftereffects. Interestingly, CPG firms have managed the supply chain disruption slightly better than retail firms.

Exhibit 2: Seventy percent (70%) of respondents feel that they have yet to recover from the pandemic shock on their supply chain

Sample: 302 retail and CPG executives across the Global 2000 enterprises
Source: HFS Research in partnership with Genpact, 2023

Five supply chain challenges plague today’s RCPG enterprises (see Exhibit 3): creating modern value-based supply networks, redesigning the supply chain for sustainability, redesigning for omnichannel and direct-to-consumer, resiliency and adaptability, and proactive planning.

Exhibit 3: Creating modern value-based supply networks is the biggest challenge

Sample: 302 retail and CPG executives across the Global 2000 enterprises
Source: HFS Research in partnership with Genpact, 2023

We attribute these challenges to traditional supply chains’ linear structure; they are limited by design. Traditional supply chains are often a product of siloed functions, limited automation, lack of a feedback loop, variance in the degree of outsourcing, and half-hearted sustainability initiatives. This leads to slow and tardy change management, non-agile response mechanisms, a lack of visibility, and limited automation-induced benefits. Therefore, RCPG firms want to transform from traditional linear structures to networked and autonomous networks.

Most RCPG firms are transitioning to networked and autonomous supply chains

An autonomous and connected supply chain network—with each function connected to and sharing data with the other with minimal human intervention—will ensure RCPG firms have more control and visibility of the supply chain and less dependence on humans to navigate unforeseen disruptions. As a result, most RCPG firms (see Exhibit 4) plan to transition from traditional and linear supply chains to networked and autonomous supply chains.

Exhibit 4: Seventy-five percent (75%) of RCPG firms want to make their supply chains networked and autonomous

Sample: 302 retail and CPG executives across the Global 2000 enterprises
Source: HFS Research in partnership with Genpact, 2023

Tech-enabled business initiatives help RCPG firms transform their traditional and linear supply chains

However, the road to transformation is complex, and building an autonomous and networked supply chain requires forward-looking initiatives enabled via tech. Besides, most RCPG firms would need to work with experienced and capable service providers to accomplish this goal. HFS recommends the following measures for RCPG enterprises looking to take the plunge:

• Focus on enhanced visibility. Capture data generated at various supply chain process nodes, such as material movement, warehousing, and transactions via process mining. Also, employ a dynamic control tower solution.
• Focus on minimal human intervention. Leverage commercial off-the-shelf planning solutions to achieve more inventory planning, warehousing, and fulfillment automation. CPG firms should also focus on installing IoT-enabled, always-on AI/ML systems in their manufacturing sites.
• Use an analytics-driven system from procurement to fulfillment. Develop an intelligent algorithm-driven network model that dynamically switches suppliers based on fulfillment capacity. Similarly, create delivery management systems based on route optimization algorithms that can dynamically select the fastest last-mile fulfillment option.
• Bake sustainability through the supply chain. Think beyond decarbonization to incorporate company-wide sustainable sourcing, traceability, green packaging, and logistics. Develop pre-built applications aligned with primary sustainability goals—scope 1, 2, and 3 emission norms. Invest in governance, compliance, and performance tracking of sustainability goals.
• Work toward sharing and leveraging ecosystem data. Form industry consortia for data sharing of crucial supply chain aspects, such as supplier data, to significantly reduce operational costs at an individual enterprise level. Service providers like Genpact can play an orchestrator role in data-driven ecosystems.

Aim for interim goals, such as evolving from linear to circular chains, where each function connects to the next function in the value chain and the first and last functions are in sync. For example, aftermarket services demand feeds into the existing procurement strategy. Then, gradually move to a more autonomous and networked supply chain with each function connected to the other with minimal human intervention.

The Bottom Line: RCPG firms’ transition from traditional linear supply chains to autonomous supply networks can alleviate most present-day challenges. However, it requires major technology investments and purpose-led provider partnerships.

Such transitions don’t happen in weeks or months. RCPG firms should consider two-to-three-year horizons with an incremental approach toward modernization. In a nutshell, the first step should be to focus on gaining more visibility, followed by applying automation at various functions and finally integrating all these functions.