Consumer product firms turn to regional sourcing amid global woes

Bengaluru: Compelled by last mile delivery challenges, quick commerce expectations and fear of stockouts during the holiday season, consumer product companies and retailers are increasingly turning to local supply chain networks as global chains continue to be impacted by a host of factors, including inflation, geopolitical tensions, fluctuating freight rates, port congestions and so on. 

In a survey conducted by global think tank Capgemini Research Institute, about 86% of Indian consumer product companies and retailers attested to actively diversifying their supplier base. 

“As supply chain disruptions continue to pose new challenges for retail and consumer product organisations, they are pivoting their sourcing strategies to build resilience,” Capgemini’s Global Retail Lead  Lindsey Mazza underscored.

According to the Paris-headquartered Institute’s report released on Wednesday, by 2025, offshore procurement globally is expected to decline by 7%, with nearshoring and domestic sourcing set to rise by 4% and 3%, respectively. In this, North America is leading the nearshoring trend, with a 9% projected increase in nearshore procurement in the same period.

About 48% of Indian respondents affirmed that geopolitical issues are impacting costs and efficiency of supply chains. About 90% said that supply chain cost efficiency tops their agenda over the next 12-18 months.

While 71% of domestic organisations are optimising costs through better planning and improved fulfilment, 67% are prioritising automation and other process improvements.

In the ongoing holiday season, 57% of companies at home anticipate product shortages, as 43% expect late deliveries caused by import delays and 48% foresee labour shortages.

The Research Institute surveyed 300 organisations and interviewed senior industry executives between August-September 2023 to arrive at the details.