Innovation Ramps Up as Firms Invest in Supply Chain

Companies have significantly increased investment in supply chain innovation in 2023, nearly doubling the average spend compared to 2022, according to research from Catena Solutions.

According to a recently released report, Supply Chain Trends & Insights: Innovation, the average investment in supply chain innovation increased to just over $20 million this year, up from slightly more than $10 million a year ago. It was under $10 million in 2021.

“Disruption and innovation go hand in hand. While these seemingly black swan events transform into regular occurrences, companies will invest more time, money, and resources into innovation to minimize the impact of disruption,” the report noted.

Catena offers supply chain consulting services.

Probably not-so surprising is the fact that the COVID-19 pandemic accelerated digital transformation, with 64% of supply chain executives saying it did, and 60% saying the pandemic increased their supply chain’s important.

The research found 67% of CEOs plan on increasing investments in disruption detection and innovation processes.

The major events trigging this wave of investment includes the pandemic, the Russia-Ukraine war, U.S.-China trade tensions, labor strikes and increased shipping costs, which increased 86% during the pandemic and continue to impact the supply chain.

Additional causes cited include climate events, material shortages, inflation, increasing consumer demand, and the push to digitize.

“When thinking about the heightened supply chain focus in recent years, it’s impossible to pinpoint one cause. Rather, these disruptive events together have shed light on the importance of transforming supply chain operations and driving innovation forward,” said Geoff Coltman, vice president at Catena Solutions.

Sustainable products

Catena identified a few areas that are seeing innovations drive new opportunities, including sustainable products and retailers investing heavily in private-label products to compete with and offer alternatives to higher-priced national brands.

“From the supply chain side, expanding supplier diversity to support sustainability helps companies avoid labor conflict, materials shortages, and logistical disruptions,” the report noted. “A key trend we’re seeing are products that can be repaired, reused, or refurbished at the end of their life. This is especially important for the retail industry, which is no stranger to criticism for its negative environmental impact. In the CPG and food and beverage industry, trends include ethical sourcing, regenerative agriculture, and supply chain transparency.”

Private label dollar value in the U.S. grocery sector increased 10.3% in Q1 of this year compared to 5.6% for national brands, and it is growing at twice the rate of national brands in 2023 compared to 2022.

“A few years ago, consumers gravitated towards trusted CPG brands more than anything. Now, as consumers prioritize health, transparency, and cost, private label brands are taking advantage of these preferences and giving CPG brands a run for their money,” said Rich Medrano, leader of financial transformation at Catena Solutions.

Packaging innovations

Innovation is also taking place at the packaging level, Catena said. A recent survey shows that among U.S. consumers who shop for more sustainable products, 72% use labels or third-party certifications to confirm a company or product’s sustainability credentials.

“Specific packaging innovation our clients are focusing on include waste reduction, alternatives for nonbiodegradable plastic, packaging that can be repurposed, compostable packaging, and packaging that reduces emissions in transit,” Catena wrote.

It noted that “personalized packaging” is growing in popularity in the CPG and retail sectors with demand for interactive packaging that leverages technology such as QR codes rising. The company estimates that the personalized packaging market will grow from $34.5 billion in 2022 to $60 billion in 2032.

Automating manual tasks

One of the big trends that has been written about extensively is the use of automation to eliminate manual or redundant tasks in the supply chain.

Catena is seeing growth in this area as well, including the use of robotic arms, automated storage and retrieval systems, and repack automation. The company also noted that firms are looking to convert traditional manual maintenance, repair and operations (MRO) tasks to automated tasks.

“While companies are implementing solutions and technology that reduces human workers on certain tasks, skilled talent is still vital to the supply chain. Workers who have the skills to lead supply chain technology innovation are becoming priceless,” said Geoff Olsen, leader of supply chain transformation at Catena Solutions.

Other areas will Catena is seeing supply chain trends change include the growth of supply chain-as-a-service offerings, customer enablement tasks, circularity, and the ability monetize operational processes.

Keys to success

Citing studies that show 60% to 90% of strategic plans never fully launch, Catena offers up five suggestions to ensure a successful deployment.

1. Create a culture of innovation

2. Don’t skimp on change management

3. Get your data right

4. Prioritize customer centricity

5. Develop and hire the right skills

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