News / Consumer products and logistics firms struggling with digitisation

Photo: © Olivier Le Moal

Companies in the consumer products, retail and logistics arena are struggling to make digitisation investments pay, and lag other sectors, putting them behind in the quest for AI-driven solutions.

A study by Forrester Research found that progress appears to be further threatened by cost-cutting efforts targeting supply chains.

Forrester conducted an online survey of 106 decision-makers from these areas and interviewed executives in the US, Germany and New Zealand to evaluate digital transformation objectives and outcomes.

Nearly half the respondents (46%) considered digitisation crucial to enabling an insights-driven culture and 59% viewed a lack of it as a major challenge for their business. To that end, a key objective was the transformation into a connected enterprise with connectivity across back-end systems, operations and external partners.

The results of their endeavours were sobering: only 38% reported that their initiatives had fully achieved the desired outcomes; 83% translated less than 50% of their digitisation investments into tangible business value; and 47% were not able to measure a positive ROI.

The study identified operational inefficiencies and siloed company structures as the biggest obstacles companies faced, with 73% reporting challenges from process inefficiencies and 57% experiencing constraints from persistent silos across their organisation. And companies reported “a gamut of challenges across technology skill sets, data, talent, transformation strategy, change management and compliance”.

In many cases, the challenges outweighed the desired outcomes, Forrester observed.

These struggles have left consumer product, retail and logistics firms behind the curve in digitisation. Forrester describes them as being mired in the early stages of digital maturity and enterprise connectivity, a handicap on the way to leveraging emerging technologies, like artificial intelligence.

Compared with other industries, they are more likely to lack quality data to train AI systems (41% versus an overall average of 34%), and to lack skills to develop, implement and operate AI solutions (38% versus 31% average). Among their executives, only 49% think AI is likely to play a significant role for their company, versus a 63% average across all industries.

While this paints a rather gloomy picture for these firms, there appears to be a fairly broad agreement about a viable way forward for them. More than two-thirds of survey respondents (69%) expressed belief that a platform-based strategy, which unifies and orchestrates the business and technology, offers a route to success, and 81% were looking to leverage platforms for intelligent automation to drive growth, Forrester reports.

The idea is that, with a platform at the core, companies would be enabled to connect business, IT and partner ecosystems.

Forrester’s analysts lean towards that conclusion. They wrote: “A platform-first mindset could possibly outpace the pack with its modularity, ecosystem connectivity and an AI-driven approach, allowing businesses to adapt to customer needs with creativity and resilience.”

However, according to a new report from Boston Consulting, based input from 600+ global executives from various industries, the  road to a brighter, better digitised future has turned bumpier. These researchers found 65% of respondents were prioritising supply chain and manufacturing expenditure as the biggest levers to bring down costs.

They observed that this trumped traditional prime targets for cost-cutting, notably labour.

Moreover, past successes in cost reduction appear to have suffered setbacks. According to the survey, 83% of respondents met initial cost=saving targets, but 43% subsequently saw those costs creep up again.

Boston Consulting also heard that the areas in the crosshairs as key targets for cuts include procurement, logistics networks, distribution and warehousing.

Unless demand shows strength, going forward, this would translate into more cost pressure for logistics firms, leaving them with less money to spend on digitisation and emerging technologies.