Trending in CPG: How Generative AI is Redefining Procurement

CPG and retail procurement face a constant challenge to boost productivity and drive growth in a difficult marketplace. The fact they need to do this while also preserving margins, managing supply chain disruptions and balancing changing consumer expectations makes achieving those goals like hitting moving targets.

So, what trends should CPG and retail procurement teams keep on the radar to stay on top of industry trends to remain competitive?

GEP industry expert Todd Bremer highlight four key trends that are reshaping the sector in a recent podcast.

1. Strategic Cost Management to Improve Margins

For years, the CPG and retail industry had focused primarily on growth but have made a distinct shift toward cost management to improve margins. However, strategic cost management requires a nuanced approach. Take for example Chipotle. Thanks to their focus on improving margins, they’re enjoying a record-high stock price. However, they’ve recently received consumer complaints about both price increases and portion sizes, highlighting the balance organizations must strike between customer satisfaction and maintaining profitability.

Artificial Intelligence (AI) is increasingly crucial in this balancing act.

Using advanced data analytics, powered by AI, enables companies to make more informed, strategic decisions. For instance, chief procurement officers can now use voice-activated assistants to instantly access spend data and visual insights, which is facilitated by compiling procurement and finance data to create one unified data source. Such integration marks a significant evolution in the relationship between procurement and finance departments, fostering improved collaboration and strategic alignment.

2. Legislation and Supply Chain Disruption

Given global geopolitical events and evolving trade dynamics, CPG companies must continually re-evaluate their supply chain strategies. The "China plus one" approach has emerged as a risk mitigation strategy, with companies like Nike and Apple exploring production alternatives beyond China. India, in particular, has emerged as a favored alternative manufacturing hub.

"Friend-shoring," which involves partnering with geopolitical allies to reduce supply chain risks, is also gaining traction. Implementing these approaches requires sophisticated forecasting models and agile supply route optimization capabilities. AI-powered tools can help manage these complex supply chain challenges effectively.

3. Strengthening Customer Trust

Environmental, Social, and Governance (ESG) considerations aren’t just buzzwords but have become main drivers of brand trust. Procurement and supply chain teams are at the forefront of building and maintaining customer confidence, as their roles have expanded beyond cost reduction to include identifying ESG-compliant products and quantifying their impact.

That's where advanced AI tools come into play, as procurement and supply chain teams can identify how well a product is working as well as track the value a supplier is bringing to the table and the impact that it's having on the environment or other factors. Overall, the trend represents a paradigm shift in the role of procurement and supply chain management, emphasizing the strategic importance of these departments within organizational structures.

4. Personalized Shopping

The CPG and retail landscape is constantly evolving, and consumers are now prioritizing convenience over price.

However, companies just entering the market are disrupting this model by offering significantly lower prices at the cost of longer delivery times, leading established players across the industry to re-evaluate traditional supply chain models.

AI plays a pivotal role, as companies can leverage it for insight to appeal to consumers in targeted ways, with personalized product recommendations. It’s reshaping the entire customer journey and thus causing companies to rethink how they approach consumer engagement. They now need to navigate rapidly changing consumer expectations and adapt their supply chains accordingly to meet these evolving demands.

Conclusion

The CPG and retail industries are undergoing significant transformation. Success hinges on companies' ability to leverage AI effectively, prioritize trust and build strong, personalized relationships with consumers, and stay agile in the face of disruption.

If you’re interested in learning more, please check out the podcast, The 4 Trends Reshaping CPG Amid the AI Revolution , which explores challenges facing the CPG and retail industry as well as the opportunities AI and other emerging technologies present to increase efficiency and drive strategic growth