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Pandemic, tech and environment dominating global supply chain thinking

NTT Data’s Third-Party Logistics Study  has highlighted intense pressures and new demands on the supply chain.

The study, carried out in conjunction with Pennsylvania State University’s Dr. C. John Langley, clinical professor, supply chain information systems and director of development, Center for Supply Chain Research at Smeal College of Business focuses on several areas: the current state of the Third Party Logistics (3PL) market; Environmental, Social and Governance (ESG); the intelligent supply chain; the cold chain; and revisiting effects of COVID-19.

The 2022 3PL Study findings include:

  • Pandemic puts supply chain center stage. The pandemic placed a spotlight on supply chains in a manner never seen before, as the downsides of just-in-time inventory, and the frustrations felt when raw materials and finished goods failed to arrive on time (or not even made available for purchase), were very much noticed by the consumer. The worsening effects of the truck driver shortage played a role as well. Recent supply chain challenges have accelerated the adoption of technology and further demonstrated the need for visibility. 3PL providers were able to pivot resources to those industries that surged, to offset manufacturing shutdowns. Contingency planning also received more attention.
  • Supply chains face intense pressure, planning needs, and ongoing labor challenges. The pandemic either exposed or strengthened contingency planning and risk mitigation strategies across the world, as consumers needed vital supplies and foods delivered to brick-and-mortar locations or to their homes. The areas companies (shippers) stated were most impacted by the pandemic included: International transportation and logistics (43%); sourcing and procurement (30%) and manufacturing (24%). The 3PLs listed their top areas: Labor and workforce management (33%); manufacturing (24%); and international transportation and logistics (23%). Interestingly, 68% of shippers believe that their supply chains have become too global and must be rebalanced towards more regional and local ecosystems within larger global enterprises. About 83% of these market-leading companies stated they plan to adjust sources of supply as a direct result.
  • ESG is a growing priority for supply chain leaders. The study indicated that among corporations 59% had a formal environmental, social and governance (ESG) program; of those, 51% of their supply chains utilized an ESG program. Among 3PLs, only 45% noted that their organizations featured an established ESG offering. Both shippers and 3PLs indicated that cost was a factor in establishing a program. Key reasons for creating or enhancing an ESG program included: Consumer trends and preferences; environment and climate impacts; diversity, equity and inclusion; social contribution and responsibility; and laws, policies and regulations.
  • Tech and robotics driving smarter, more agile supply chains. At the forefront is 5G, real-time data transmission, Internet of Things, and data analytics. More than half of shippers (52%) and 3PLs (63%) stated that 5G technology is either moderately or critically important. The majority of 3PLs (53%) reported that they can provide real-time data to clients in 50% or more of their supply chain services. About 63% of 3PLs stated they are investing in Internet of Things technology to improve workforce productivity; real-time decision making and create a competitive differentiator. Cloud technology gets most used in transportation management systems followed by warehouse management systems. The top technologies that 3PLs are investing in are in robotics: High-dense storage pickers and palletizers (38%), autonomous forklifts (35%) and wearables (35%). Shippers are centering efforts on intelligent data analytics (26%), robotics (20%) and autonomous forklifts (20%).
  • Need for cold chain strategies and support heat up. Companies are using a mix of in-house and outsourced programs within their cold chains. A comprehensive cold chain strategy is a contributor to the success of medicines and foods transportation, with 89% of shippers reporting they have a strong program. For 3PLs, the most important cold chain services are a range of temperatures (refrigeration to deep freeze), active temperature monitoring and product traceability. Shippers (62%) ranked proper handling as the greatest challenge to operating a cold chain, as compared to only 25% of 3PLs. Top cold chain challenges for shippers are: Proper handling; regulatory compliance; recruiting skilled labor; proper last-mile handling; and product packaging. For 3PLs this list is: Infrastructure investments; temperature monitoring; tech investment and maintenance; recruiting skilled labor; and proper truck transportation.

The full 2022 edition is accessible at www.3PLStudy.com and is part of an in-person session at the Council of Supply Chain Management Professionals (CSCMP) EDGE conference in Atlanta.

“We are delighted to be part of this long-running and significant study to provide a view of what is happening in today’s global marketplace,” said Sylvie Thompson, vice president, consulting and supply chain practice, NTT DATA Services. “As the world has rapidly shifted, investments in technology, infrastructure, transportation and recruiting are all key to the success of improving the supply chain of the future.”

Just 16% of UK consumers are satisfied with delivery services every time

Over two thirds (68%) of UK consumers have had an issue with delivery in the last three months – and, as a result, 24% lost trust in a delivery company and 24% lost trust in the retailer.

That’s according to Descartes Systems Group’s latest Consumer Online Delivery Research, which set out to assess consumers’ online purchasing experiences across Europe.

Undertaken by SAPIO Research during July 2021, the interviews with consumers across Europe highlighted that quality of the delivery service is undermining overall customer perception of both delivery companies and retailers – leading to lost sales.

The research concludes that retailers need to take ownership of the end-to-end experience, in order to address consumer expectations regarding tracking and communication; safe delivery and ease of return; and, increasingly, environmental considerations.

Key findings include:

  • The quality of the experience has been far from perfect: just 16% of UK consumers are satisfied with the delivery service every time.
  • Over two thirds (68%) have had an issue with delivery in the last three months – and, as a result, 24% lost trust in a delivery company and 24% lost trust in the retailer.
  • Over a third (37%) of consumers also share their perception of both delivery company and retailer with friends and family – creating a ripple effect that rapidly undermines consumer perception.
  • 71% of European consumers consider the environment when making an online order
  • Almost a third are interested in bulking all orders to one weekly delivery.

Since the beginning of the COVID-19 pandemic, the proportion of purchases made online has grown from an average of 32% to 43% and is expected to remain at 41% for the foreseeable future. More than half (51%) of consumers have increased the number of purchases they make online, and 51% now make an online purchase at least once a fortnight – almost double the number (28%) pre-pandemic.

Despite these statistics, the research findings underline the fact that deliveries are failing to achieve complete customer satisfaction, with nearly nine in ten (87%) customers not always satisfied with the delivery services received. With satisfaction rates even lower for consumers who have reduced their online buying behaviour during the COVID-19 pandemic, the implications of inadequate delivery experiences cannot be overlooked.

Timing is the biggest issue for home deliveries – with two in three (68%) UK consumers reporting a delivery problem in the last three months. Delivery problems radically affect customer perception – and not just of the delivery company. While almost a quarter (24%) lost trust in the delivery company, 24% also lost trust in the retailer and 23% did not buy from that retailer again.

Given that many consumers were a captive audience during COVID-19 pandemic lockdowns, these delivery problems should raise serious alarm bells for retailers. With just 16% of UK consumers confirming they are totally satisfied with the delivery service, a company’s ability to meet its delivery promises will become increasingly important to reinforce the quality of customer experience and maximise the chances of customer retention.

Descartes says questions retailers should, therefore, be seriously considering, include:

  • How proactively is the retailer tracking delivery performance?
  • What is the strategy for managing spiralling delivery costs and optimising driver time?
  • What is the strategy for meeting customers’ environmental expectations? Can the delivery model support bulk orders and green scheduling? Are the right vehicles being automatically assigned to deliver in Clean Air Zones?

Pol Sweeney, VP Sales and Business Manager UK, Descartes, said: “Consumers will not return to pre-pandemic shopping habits; having become used to the convenience of ecommerce, online purchasing will continue to dominate. Individuals have become far more confident and sophisticated online over the past 18 months and expectations have risen, leading retailers to enhance the online experience, but as this research reveals, the quality of the delivery service is undermining the overall customer perception and leading to lost sales. Retailers that take ownership of the entire end-to-end experience and truly optimise the delivery process have the opportunity to transform customer perceptions, drive additional sales and, critically, entice customers from poorer performing competitors.”

CEOs upbeat but agree supply chain issues major threat to recovery

CEOs of the world’s largest businesses are increasingly optimistic about the outlook for their own business and despite the Delta variant slowing down the ‘return to normal’ – but remain concerned over problem with supply chains slowing recovery.

The KPMG 2021 CEO Outlook, which asked more than 1,300 global CEOs about their strategies and outlook over a 3-year horizon, finds that 60 percent of leaders are confident about the global economy’s growth prospects over the next 3 years (up from 42 percent in the January/February’s pulse survey).

The prospect of a stronger global economy is leading CEOs to invest in expansion and business transformation, with 69 percent of senior executives identifying inorganic methods (e.g. joint ventures, M&A and strategic alliances) as their organization’s main strategy for growth.

A majority (87 percent) of global leaders stated that they are looking to make acquisitions in the next 3 years to help grow and transform their businesses.

The survey found that 30 percent of CEOs plan to invest more than 10 percent of their revenues toward sustainability measures and programs over the next 3 years.

However, when looking at risks for growth over 3 years, senior executives identified three areas they see as top risks: supply chain, cyber security and climate change. Fifty-six percent of global CEOs say that their business’ supply chain has been under increased stress during the pandemic.

Meanwhile, just 21 percent of CEOs now say they are planning to downsize, or have already downsized, their organization’s physical footprint, a dramatic shift from August 2020, with the first wave of the pandemic at its peak, when 69 percent of global leaders said that they planned to downsize their space.

CEOs are focused instead on providing increased flexibility for their workforce with 51 percent (up from 14 percent in the January/February’s pulse survey) looking to invest in shared office spaces. Furthermore, 37 percent of global executives have implemented a hybrid model of working for their staff, where most employees work remotely 2–3 days a week.

Half of UK firms decrease R&D as a result of Covid-19

45% of UK firms have decreased their research and development initiatives during the covid-19 pandemic, with even 18% of firms halting theirs altogether, according to new research from Durham University Business School.

However, 40% of firms have invested in their ICT, likely to be the result of firms having to facilitate working from home and remote engagement with customers, say the researchers.

Conducted by Richard Harris and John Moffat, Professors of Economics at Durham University Business School, the study seeks to understand the impact of the pandemic on UK firms’ research and development plans and whether or not companies had refocused their efforts in terms of investments.

The researchers interviewed over 4500 UK companies during the period between October and November 2020. Questions were centred around the firm size, industry, history of operations, before taking a more specific look at the companies’ previous research and development investment initiatives.

The results of the study suggest that the COVID-19 pandemic will have long-lasting negative effects on productivity and growth for firms, whilst increased ICT investment reflects the necessity for firms to become more digital.

Professor Richard Harris said: “The COVID-19 pandemic has had profound effects on the world economy, and in the UK specifically Bank of England figures suggest that it has led to the largest fall in GDP since 1709. While the short-run effects of the early stages of the pandemic are now well understood, less is known about its implications for growth in the medium to long-term.

“Our research findings clearly show that research and development spending dropped drastically during the covid-19 pandemic, which likely will have a negative impact on productivity and growth in the medium to longer term.”

The research reveals that the fall in intangibles investment is distributed unevenly across firms, with industry playing a major role in predicting the change in investment and internationally-oriented firms experiencing smaller declines in the early stages of the pandemic.

These research findings showcase the huge impact that covid-19 pandemic has had not only in the short-term, but in the long-term too for UK firms, with it likely that firms will have challenges related to productivity and growth in years to come due to the lack of R&D over the last year and a half.

Reusing 10% will stop 50% of plastic waste from entering the ocean

It is possible to prevent almost half of annual plastic ocean waste by reusing just 10% of our plastics products – just one of the key findings of The Future of Reusable Consumption Models Report.

The report is a collaboration between the World Economic Forum and Kearney and suggests that shifting from single use towards a ‘reuse’ model of consumption can help society regain ground in the fight against plastic waste. Currently, 50% of global plastic production is for single use and only 14% of global plastic packaging is collected for recycling. The report outlines the urgent need to drive a systemic shift towards reuse models as an integral part of the reduce-reuse-recycle agenda.

‘Reuse’ is a production and consumption model gaining ground around the world as an alternative to single-use. In this model, consumer items are designed to be used several times, generating added value across the economy.

The findings are based on proposals by governments and NGOs around the world and research conducted with senior leaders from private and public sectors. The team conducted in-depth interviews, data analysis and scenario modelling to create first of its kind framework that can be applied across consumer product categories and geographies.

Three scenarios show how much plastic waste could be reduced from ocean and landfills if a reuse model is used:

Scenario One: Between 10 and 20% of plastic packaging could be reusable by 2030. This equates to 7-13 million tonnes of plastic packaging, representing 45-90% of annual plastic ocean waste.

Scenario Two Reusables make up between 20% and 40% of packaging, equivalent to 90–185% of annual plastic ocean waste or 25–50% of plastic landfill waste.

Scenario Three If between 40-70% of all packaging is reusable, it would equal anywhere from 185% to 320% of annual plastic ocean waste or 50–85% of plastic landfill waste.

Zara Ingilizian, Head of Consumer Industries and Consumption at World Economic Forum, said: “The shift from disposable consumer goods to reusables is still in its early stages, but there are already signs of progress. Just as recycling and composting were once considered eccentric and electric cars were written off as science fiction, when it comes to sustainability, attitudes about just what is viable are changing rapidly. Reuse may well prove to be among the most potent manifestations of that shift.”

Beth Bovis, Project Leader, Partner, Leader of Global Social Impact & Sustainability at Kearney, said: “We need to shift from merely “treating” or “handling” waste to simply never creating it in the first place. But any shift towards reusable consumer goods will depend on the choices and actions of the three driving forces of our economy: consumers, the private sector and the public sector. Each of these groups has a unique role to play in making reuse a reality. The need for a more reuse-centred economic model is urgent and grows more so with each passing year. It is up to all stakeholders to answer the call.”

Mayuri Ghosh, Head of Consumers Beyond Disposability initiative, Future of Consumption Platform at World Economic Forum, said: “When we talk of the three scenarios, it is worth emphasizing that any of these scenarios would represent extremely valuable progress over the present status quo. The plastic waste challenge has grown too large for us to simply recycle our way out of. With no global agreement over an ambition level to target plastic waste, the sooner we can make systemic and meaningful advance towards reuse, the better.”

The report goes into these scenarios in depth and provides detailed information on the methodology. It addresses some of the key challenges businesses and the public sector have faced about reuse, namely, how to make reuse scalable and viable.

The report aims to give leaders in business, government, civil society a clear picture of an alternative plastic waste-reduction model. The first half of the report discusses the three primary actors of systems change required. The second half presents the Reuse Viability Framework to help leaders make reuse scaleable and viable.

It calls for the public and the private sectors to collaborate on the development of reuse systems to meet the needs of our economy and the environment. It is part of the World Economic Forum‘s Consumers Beyond Disposability initiative, which focuses on innovative reuse solutions, and has been working to test and scale such solutions.

71% of supply chain IoT projects only ‘somewhat successful’

UK organisations are being challenged with connectivity, device deployment and rollout to a greater extent than their US counterparts, according to a new State of IoT Adoption Study published by global IoT connectivity specialist Eseye.

41% of UK respondents said connectivity was a top challenge compared to 29% in the US. Likewise, 36% of UK respondents said device deployment and rollout was also a key issue, compared to only 28% of US respondents. This is likely because UK survey respondents have more multi-region deployments than those in the USA.

As a result, IoT projects have failed to reach their full potential according to three quarters of UK enterprises who have embarked upon an IoT initiative in the last 12 months.

The Study was undertaken by independent research organisation, Opinion Matters, among 250 UK and 250 USA-based senior decision makers and implementers of IoT strategy within five vertical markets. It explores the current state of IoT adoption; the challenges, opportunities and untapped potential of IoT; the impact of COVID-19 and how this has accelerated adoption; and the criticality of intelligent connectivity to fuel future growth.

Key UK IoT adoption findings:

  • 85% of UK respondents said IoT is a priority for their business.
  • 54% of respondents are planning further projects in the next two to three years.
  • 91% are planning budget increases for IoT initiatives; 41% plan to boost spending by between 51 and 100%.
  • 99% said that COVID-19 has impacted their IoT plans; for 28% it has accelerated development of their IoT initiative and 30% said they had increased investment plans. Only 19% of UK respondents had cancelled IoT initiatives owing to the pandemic, compared to 33% in the USA.
  • However, 76% of UK respondents said that their IoT project was at best only somewhat successful in meeting expectations and realising benefits.
  • Connectivity, device deployment and security were cited as top challenges; 41% said cellular connectivity was their biggest hurdle, while for 36% device deployment and rollout, and security had proved difficult.
  • Cellular IoT deployments have still not reached anywhere near critical mass; most UK respondents (90%) had deployed fewer than 10,000 devices.

IoT at a tipping point

The Study found the larger the project, the faster the acceleration as organisations embrace IoT. The more devices respondents have in the field, the more they are planning to deploy in the coming twelve months. This indicates a tipping point in IoT projects in terms of scale. However, of 250 UK respondents only 8% had deployed between 10,001 devices and 100,000 in the field and only 2% had deployed more than 100,000 devices.

Increasing profit, reducing costs, disrupting markets and business models

IoT projects are undertaken by innovative organisations to disrupt traditional business models and deliver tangible business benefits. When asked about the benefits their IoT initiative has or is predicted to deliver 36% of UK respondents said it increased profit, 34% said it enabled the business to enter new markets, 34% said it helped to reduce costs and 29% of respondents said their initiative was aimed at delivering new lines of business.

Nick Earle, CEO, Eseye, said: “Is IoT finally coming of age here in the UK? Certainly, our results indicate that there is a level of maturity and an eagerness to fuel adoption plans here in the UK. Surveyed UK companies see IoT as a way to increase profit and reduce costs as well as disrupt business models and introduce new product lines. However, adoption is not without its challenges. We know security and connectivity have been an issue for businesses rolling out large-scale IoT projects. To this point cellular connectivity was a far bigger challenge for UK respondents than USA, with 41% saying it was the biggest hurdle they had to overcome versus 29% in the US. This is likely down to the fact that UK respondents are more multi-region with deployments than the USA, where deployments still tend to be national and focused on the domestic market.”

Technology drivers

Cloud and remote access were cited as the top technology drivers by 48% of UK respondents which, given the events of the past year, is not surprising, as many businesses look to accelerate their digital transformation plans with IoT initiatives. 5G was the second highest technology driver for UK respondents with 42% compared to 35% in the USA where respondents rated LPWAN technologies (45%) and Intelligent Edge hardware (44%) higher.

Intelligent connectivity

As the UK market matures and more organisations embark on multi-region rollouts, the importance of intelligent connectivity is growing. UK respondents were asked to what extent they agreed or disagreed with the statement, “I think the evolution of intelligent connectivity is going to be critical to continue to fuel adoption of IoT?” Overall, 81% of all UK respondents either somewhat or strongly agree with this statement. 33% strongly agree with this statement compared to 21% of respondents in the USA. In fact, nearly one-quarter of USA (23%) of respondents were ambivalent towards this statement, neither agreeing nor disagreeing.

Earle continued: “UK organisations are clearly determined to overcome the challenges they’ve identified, with 91% planning to increase budget, more than eight out of ten stating that IoT is a priority for the business, and over half of UK respondents planning future IoT projects. Therefore, IoT adoption is well under way and the pandemic has negatively impacted plans less here in the UK, with only 19% cancelling projects compared to nearly a third in the US. With that maturity comes challenges and certainly device onboarding and rollouts was cited as more of a challenge by UK respondents than USA. Likewise, 5G is definitely more on the radar here in the UK than the USA, which isn’t surprising as the UK was one of the earliest countries to officially commercialise 5G.”

Eseye’s State of IoT Adoption Report offers detailed analysis of the IoT challenges and trends affecting businesses in the UK and USA, and examines the variation between vertical markets including: Smart Vending; Supply Chain and Logistics; EV Charging and Smart Grid; Manufacturing; and Healthcare and Medical Devices.

Download the full report here.

Early preparation ‘remains key’ to avoid Brexit & COVID supply chain disruption

43% of businesses have been impacted negatively by Brexit in 2021 – but 19% of businesses are thriving in a post-Brexit world.

That’s one of the conclusions of Descartes Systems Group’s latest Brexit research report: Beyond Brexit: The Realities of Brexit for UK-EU Cross Border Trade.

Following its 2020 research on Brexit preparedness of UK companies, this latest report analyses how business has been affected by both Brexit and the COVID-19 pandemic and the level of uncertainty around the future.

Undertaken by SAPIO Research during March 2021, the interviews with supply chain managers assessed the specific elements of EU trade that have been affected, the resulting disruption and the expected performance of supply chains in 2021.

Key findings include:

  • Mixed performance: 43% of businesses have been impacted negatively by Brexit in 2021 – but 19% of businesses are thriving in a post-Brexit world.
  • Disruption reality: 90% of businesses have faced disruption since the end of the Brexit transition period.
  • Economic impact of Brexit: 53% expect their 2021 turnover to be lower than if the UK had remained in the EU – and the average reduction is 29%.
  • Pandemic impact: 76% had their Brexit response disrupted by COVID-19.
  • Early preparation has proven key to success, with those businesses that started their customs filing preparations in 2019 (24%) and early 2020 (33%) thriving most.

As predicted in Descartes’ 2020 research, Brexit has had a negative impact on both business and the economy. Of the companies surveyed, 90% have experienced disruption in their ability to trade in and out of the EU in 2021 – with 20% experiencing significant disruption since the transition period ended. Despite the high level of concern revealed in the 2020 survey, 40% of companies have actually experienced worse-than-expected EU supply chain performance, according to Descartes’ latest report. Additional key findings include:  

  • 80% of businesses reported disruption to their cross-border trade with the EU or Northern Ireland (NI), rising to 93% for medium and large enterprises 
  • 40% have experienced delays in their supply chains 
  • 37% have experienced increased cost of imports
  • 36% have had to manage customs declarations 

The combination of COVID-19 on top of Brexit created unprecedented challenges for businesses of every size, in every market. Confidence has been affected. Three quarters (76%) of companies confirm that COVID-19 disrupted their Brexit response. 

However, a significant finding is that almost one fifth (19%) are actually thriving in a post-Brexit economy, with 35% of electronics, computer and telecommunications companies enjoying a positive outcome. Preparing early proved essential, allowing these companies to take a holistic approach by working closely with experts who understand the complexities of global trade and by putting solutions in place for customs declarations.

The research findings underline that with the next phase of Brexit changes – an end to deferred import declarations from July 2021, and safety and security filings required from 1st January 2022 — there are lessons to learn about the value of preparation and acting ahead of deadlines. When it comes to successful global trade, planning is not just essential for compliance – it makes a tangible difference to successful business operations. 

“Brexit has thrown many businesses into a spin, but the companies that prioritised Brexit preparation are thriving and provide a best practice blueprint that the rest of the market can now follow,” said Pol Sweeney, VP Sales and Business Manager UK, Descartes. “Our research highlights that with the changes due from July through to January 2022, early preparation is, once again, crucial to avoiding expensive disruption.”

For the full research findings, see Descartes’ Brexit Realities Report and for additional Brexit resources visit Descartes’ Brexit Resource Centre.

Consumer brands and retail preparing to overhaul supply chains to counter future disruption

66% of organizations say their supply chain strategy will change significantly in the next three years, as they adapt to the pandemic and embed resiliency into their operations.

According to a report from the Capgemini Research Institute examining the impact of the past year’s disruption on consumer products and retail (CP&R) supply chains, just 23% of consumer product organisations and 28% of retailers believe that their supply chain is agile enough to support evolving business needs.

COVID-19 was a wakeup call for CP&R companies: 85% of consumer products organizations and 88% of retailers say they faced disruption, while 63% of consumer products organizations and 71% of retailers say it took at least three months for their supply chains to recover from the disruptions.

As a result, the report says organisations are realigning their strategies to focus on three critical areas:-

The move to demand sensing

Over two-thirds of organizations (68%) say they faced difficulties in demand planning due to a lack of accurate and up-to-date information on fluctuating customer demand during the pandemic. To improve forecasting, 66% of organizations plan to segment supply chains according to demand patterns, product value and regional dimensions post pandemic, while 54% say they will use analytics/AI-machine learning for demand forecasting to cope with the impact of COVID-19. 

Visibility becomes critical – 75% of consumer product companies faced difficulties when they needed to quickly increase or decrease production capacity due to COVID-19. To create the agility to respond to sudden shifts in demand, manufacturers can identify opportunities to improve visibility, cites the report. This can help deal with the challenge of strategic, tactical, and real-time operational decisions.

Organisations understand the significance of digital investments in improving visibility. 58% of retailers and 61% of consumer product organisations are planning to increase investments in digitisation of supply chains. In particular, 47% of organisations are planning to invest in automation, 42% are planning to invest in robotics and 42% in artificial intelligence. 64% and 63% of organizations are also planning to make extensive use of artificial intelligence and machine learning across transportation and pricing optimization respectively. 

From globalisation to localisation – To prevent future disruption, organisations are recognising the importance of localisation and are actively investing. CP&R organisations are shifting from globalisation to localisation of the supplier and manufacturing base. 72% of consumer product organisations and 58% of retailers say they are actively investing in regionalising or localising their manufacturing base or nearshoring production.

65% of CP&R companies are also investing in regionalising and localising their supplier base, rising to 83% in the UK and 73% in India. In line with these strategies, global suppliers will represent just 25% of retailers’ capacity in three years’ time, down from 36% today. In consumer products, global manufacturers will represent just 17%, down from 26% today.

In line with the move to localisation, dark stores, which have independent operations and are closer to the delivery locations, are becoming an increasingly useful alternative for fulfilling online orders as physical footfall decreases.

Earlier Capgemini research showed that if deliveries from dark stores increase by 50%, profit margins could grow by 7% as a result of lower delivery costs and higher delivery throughput compared to stores (while also not affecting store operations).

“CPGs and retailers recognize the great risk of future disruption, and they have an opportunity to be in front of creating agility and resilience to adapt their supply chain networks,” said Lindsey Mazza, Global Retail Supply Chain Leader at Capgemini. “The pandemic was an accelerated learning event. Organizations realize that new technologies can enable much-needed agility – from improving demand predictions, to boosting fulfilment to quicker, cost-effective last mile deliveries. By investing now, organizations put themselves in good stead to safely support consumers in their time of need – whenever the next industry disruption may be.”

Petrostates ‘need to bridge $9 trillion gap’ in energy transition

Oil and gas producing countries face a multi-trillion dollar hole in government revenues over the next 20 years as the world decarbonises, with some needing strong international support to diversify their economies and avoid social and political instability.

That’s according to a report from Carbon Tracker, which calculates that 40 petrostates could face an average 46% drop in expected revenues from oil and gas if demand falls in line with tightening global climate policy and technological advances – a shortfall of $9 trillion.

Over 400 million people live in the 19 worst affected countries where declining fossil fuel revenues could see total government income fall by at least 20%, leading to cuts in public services and job losses. Half live in Nigeria, where a 70% drop in oil revenues would cut total government income by a third. Angola, home to 33 million, could lose over 40% of government income.

Many of the world’s biggest oil and gas producers including the US, UK, Netherlands, China, India and Brazil also face major falls in revenues but they are not a focus of the analysis because their economies are less dependent on oil and gas. Worldwide, all oil producing countries risk collectively losing $13 trillion by 2040 compared with industry expectations, a 51% drop.

Report author Mike Coffin, senior analyst oil, gas & mining said: “It’s in the interests of all nations to minimise global temperature rise and this means rapidly reducing our use of fossil fuels. But many countries are heavily reliant on oil revenues – the time to act on rebalancing their economies is now. Waiting for demand to fall will be leaving it far too late.”

Andrew Grant, head of climate, energy & industry and co-author said: “Government oil revenues will shift dramatically as the market shakes out during the energy transition. Understanding the scale of the challenge and which nations are most vulnerable will help policymakers focus their efforts. Cushioning the landing for hundreds of millions will deliver better outcomes for both climate and human development.”

Beyond Petrostates: The burning need to cut oil dependence in the energy transition calls on petrostates to act now to reduce their dependence on oil and gas revenues, by cutting public spending, raising new taxes, and restructuring their economies. It warns that continuing to invest in new oil and gas projects risks creating stranded assets and wasting capital that would be better spent on developing sustainable new industries.

Environmental supply chain risks to cost companies $120 billion by 2026

Companies face up to $120 billion in costs from environmental risks in their supply chains by 2026, according to new research released today by CDP.

The report, Transparency to Transformation: A Chain Reaction, analyses data from 8,000+ supplier companies disclosing to their corporate customers via CDP in 2020 and finds a combined $120 billion of increased costs among those companies alone within the next five years from environmental risks.

The sectors that report the most potential cost increase are manufacturing (US$64 billion), food, beverage & agriculture (US$17 billion), and power generation (US$11 billion).  

Due to most supply chains running on very tight profit margins, increased costs are expected to be passed up the chain in a domino effect to their buyers. In turn, these companies are likely to pass the cost onto consumers. 

Sonya Bhonsle, Global Head of Value Chains at CDP, said: “With US$120 billion at stake, addressing environmental risks through supply chain engagement is vital for companies to be competitive and resilient in the changing market. Leading companies that address these risks will benefit from lower costs and better reputations. This gives them a more competitive edge today and helps them become more resilient for the economy of tomorrow. Meanwhile, laggard companies risk being left behind. As the climate and ecological crisis worsens and the economy shifts, it’s essential for both business and society that we have a Green Recovery from COVID-19 and build back better. Smart business procurement is key to that transition.”

The environmental risks causing cost increases stem from climate change, deforestation and water-related impacts. These cover physical impacts, for example increased severity and frequency of cyclones and floods, increased cost of raw materials; and regulatory and market changes as the world addresses environmental crises, such as carbon pricing and increased spending on product innovation due to changing customer demands.

Corporate buyers could be impacted by this looming cost increase. To address this risk, increasingly buyers are demanding transparency and action from their suppliers to tackle environmental impacts in their supply chains. These include 150+ major buyers with over US$4.3 trillion in purchasing spend, such as Google, L’Oréal, Walmart, Braskem and Toyota. As CDP supply chain members, they request thousands of their key suppliers to disclose their environmental data through CDP each year and use this data in their procurement decisions and supplier engagement.

Other key findings from the report include:

  • Supply chain GHG emissions are 11.4 times as high as operational emissions on average. This is over twice as high as previous estimates, due to more comprehensive emissions data. 
  • The ratio varies drastically by sector: E.g., in retail, supply chain emissions are 28 times as high as operational emissions.
  • The number of supplier companies disclosing data has increased from almost 7,000 to over 8,000 in 2020, despite the disruption from COVID-19 (a 16% increase) 
  • Suppliers undertook activities that cut emissions by 619 million metric tons of C02e in the last year and saved US$33.7 billionin the process. This is equivalent to emissions from 159 coal power plants running for a year [1]
  • However, climate action is not yet cascading through the supply chain as needed: only 37% of suppliers are engaging their own suppliers to cut emissions. 

The demand from big corporate buyers for their suppliers to be transparent on environmental impacts and take action to address them is growing, despite the pressures from COVID-19. In 2020, the number of buyers requesting disclosure through CDP’s system grew by 24% and they collectively requested data from 15,600+ suppliers, a 19% increase on the last year. In part this increase in market demand has been driven by the large companies increasingly setting science-based targets, which usually require them to cut their supply chain (Scope 3) emissions. Achieving their targets depends on engaging their suppliers.