Digitized supply chains in consumer markets: Reduce costs, mitigate risk, transform for the future

As the protracted effects of public-health and geopolitical crises continue to pummel global supply chains, consumer-facing companies have begun adapting to find new ways to improve resilience, efficiency and sustainability as they work to satisfy customer demand. 

Digitization is a key component of that initiative. In fact, 60% of corporate leaders report that digital transformation is their most important growth strategy for 2022. 

First steps at digitizing supply chains have already yielded more streamlined supply chains, according to PwC’s Digital Trends in Supply Chain Survey. Consumer markets (CM) companies expect further payoff: reducing costs and increasing efficiency topped their list of priorities for the year ahead, well ahead of all other priorities. 

For CM leaders, who have spent the last few years combatting a series of especially thorny supply chain scenarios, our survey reveals a complex picture of challenges, aspiration — and action.

1. Supplier capabilities affect digitization efforts at CM companies

The bottlenecks in transnational supply chains that continue to threaten the timely delivery of goods have caused many companies to rethink their supply chains. A major component of that redesign has been digitization, which can bolster resilience.

One risk factor to digitization, however, lies in the capabilities of suppliers. Nearly three-quarters of CM leaders tell us they’re concerned about supplier operational issues, while two-thirds worry about suppliers not being up to the technological challenges of digitization — and the follow-on effects that could impede their own efforts.


Supplier capabilities could impede digitization initiatives


CM
All industries

Supplier operational issues
%
%
Insufficiently localized
%
%
Inability to respond to technological challenges
%
%
Supplier financial health
%
%
Insufficient diversification for critical supplies
%
%
Securing raw materials
%
%
Supplier-related political risks
%
%
Supplier ethical concerns
%
%

Source: PwC Digital Trends in Supply Chain Survey 2022; base of 244, CM base of 60
Q: Please assess the risk for your organization associated with each of the following supply/supplier attributes. (Responses include moderate to major risk.)

2. Budgetary constraints to supply chain digitization top of mind for CM leaders

As CM companies continue to digitize their supply chains, budgetary issues top their list of concerns, with nearly one-fifth calling it their biggest challenge. Next on the list is change management: providing the right mix of skills and incentives to implement new ways of working for existing teams. 

They are also concerned about the challenge of attracting, developing and retaining employees who are well-versed in tech and data analysis: digital-native talent. Grappling with supply chain challenges, some CM companies are building digital situation rooms in which cross-functional teams can interact with a common set of data, workflow and communication methods to collaborate on system challenges.

3. Emerging tech powers supply chain digitization

While emerging tech adoption across supply chain operations varies considerably among CM companies, nearly half have taken significant steps toward cloud and Internet of Things (IoT) adoption. Almost a third have implemented artificial intelligence (AI) or machine learning. 

Fully 88% are currently using or intending to use at least one form of emerging technology to automate and enhance execution for supply chain planning over the next 24 months while 84% say they will do so for supply chain delivery. 

Cloud leads planned investment, with almost a third of CM companies planning to commit at least $1 million over the next 24 months. And approximately a quarter intend to invest more than $1 million in third-party spend analytics tools, IoT and AI technology. 

Despite the promise and significant level of investment, however, roughly four out of five CM leaders tell us their investments in supply chain technology are not delivering the results they expected, which holds true across all sectors. 

The main reason they cite is lack of support from external tech vendors, followed by poor planning, lack of internal capabilities and technologies that don’t provide the right capabilities.

4. Digitization requires both new and upskilled talent

Well aware that it takes more than data or advanced technology to optimize supply chains to meet customers where they are and spot risks before they affect results, CM leaders are also focused on talent. They recognize that they need skilled internal teams willing to transform processes across functional lines. 

To a greater degree than other sectors (37% versus 23%) CM executives completely agree that their supply chain teams have the necessary skills to meet future goals. Like their peers, nearly a quarter say they will need to invest in upskilling staff. 

They are confident that they can further develop staff skills for greater effectiveness. One caution: More than a third of CM companies (37% versus 26% across sectors) face higher-than-normal turnover in their supply chain function.

As they digitize their supply chains, CM leaders acknowledge they will need more talent, especially those with digital-native skills. They also plan to increase their reliance on outsourcing. Meanwhile, a scant 9% expect to need fewer employees.


In talent we trust — for effective supply chain digitization


CM: % completely agree
All industries: % completely agree

We have the necessary skills within our supply chain teams to meet our future goals
%
%
Supply chain talent is considered a strategic asset for the enterprise
%
%
Our plan to invest and develop our digital skill sets will meet our future goals
%
%
We have dedicated supply chain IT support
%
%
We are experiencing higher-than-normal turnover in our supply chain function
%
%

Source: PwC Digital Trends in Supply Chain Survey 2022; base of 244, CM base of 60
Q: Using the scale provided, please indicate your agreement with each of the following statements regarding your current supply chain workforce.

5. ESG challenges take on renewed urgency

The growing interest in environmental, social and governance (ESG) issues has put supply chain teams broadly on the alert for challenges that will arise both today and in the coming years. CM executives tell us that their immediate supply chain ESG challenges involve:

  • Responding to regulatory changes
  • Establishing effective oversight and audit protocols
  • Identifying ESG supplier risks

They are also planning to tackle these challenges in the years ahead: 

  • Addressing stakeholder groups in ESG reporting 
  • Prioritizing racial and ethnic diversity among suppliers
  • Deciding on an ESG framework and key metrics

Most CM companies identify regulatory issues and supplier risks as immediate challenges, suggesting that they might still be finding their balance on the scope of ESG issues. Companies able to act now and engage proactively across the components of sustainability and purpose have an opportunity to gain a decisive edge over competitors.


Balancing the scope of ESG supply chain challenges


CM minor issue
CM major issue
All industries minor issue
All industries major issue

Deciding on the broad ESG framework and key metrics
%
%
%
%
Defining process and governance steps for confidence in ESG reporting
%
%
%
%
Adequately addressing stakeholder groups
%
%
%
%
Identifying ESG-related supplier risks
%
%
%
%
Establishing effective oversight and audit protocols
%
%
%
%
Staying aware of rapidly evolving legislative and regulatory frameworks in relevant jurisdictions
%
%
%
%
Prioritizing racially/ethnically owned, diverse suppliers
%
%
%
%

Source: PwC Digital Trends in Supply Chain Survey 2022; base of 244, CM base of 60
Q: To what extent is each of the following ESG-related issues posing a challenge to your supply chain function?

Creating value for the future

Amid growing public health and geopolitical uncertainty — as well as fluctuating inflationary pressures contributing to a volatile overall economy — CM companies are confronting supply chain challenges more complex than ever before. 

In response, they are focusing on increasing efficiency and managing costs while also seeking out longer-term transformations designed to build resilience into their operations for the future. PwC analysis illustrates that a digitized supply chain can deliver an estimated 43% increase in revenue over the long term. In addition, greater efficiency can lead to a 10% decrease in operating expenses across the board. 

Digitalization provides not only efficiency and cost-effectiveness but also enhances the ability to manage risk. Proactively understanding supply chain risk, sustainability impact and operating performance can empower CM supply chain leaders to respond to challenges and bottlenecks more nimbly while transforming supply chains into intelligent digital ecosystems.

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Barbra Bukovac

Barbra Bukovac

Vice Chair, Consumer Markets, PwC US

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