Digital operations transformation in consumer markets: PwC

Insights from PwC's 2024 Digital Trends in Operations Survey

The consumer markets industry is undergoing many significant changes as companies respond to evolving consumer preferences, channel proliferation, disruptive technologies and economic pressures. To adapt and grow in this dynamic environment consumer markets operations and supply chain professionals are digitizing their operations to build trust, nurture loyalty, boost innovation and implement new business models.

Industry results from PwC’s 2024 Digital Trends in Operations Survey show that many consumer-facing companies are making progress, although challenges remain.

80%

of consumer markets operations and supply chain officers say they have already implemented changes to their operating model or plan to do so in the next 12 months

37%

say their companies expect to invest more in tech talent in the next 12 months

62%

say their operations technology investments have not fully delivered expected results

Accelerating transformation efforts

Catering to consumers has always required innovation and agility, and companies that quickly adapted to recent turbulence were more likely to grow more profitably. It’s no surprise that 38% of operations and supply chain officers at consumer-facing companies have already changed their operating model, and 42% expect to do so within the next 12 months.

The need for ongoing operational transformation is clear — and timely. Today’s CEOs know this: Recent PwC research shows that 76% of CEOs have taken at least one action within the last five years that had a large or very large impact on their business model. Hotels and airlines faced with heightened competition for fewer travelers, for example, redesigned loyalty programs and back-end technologies even as they automated booking and check-in processes to meet consumer preferences for self-service. In addition, some large brick-and-mortar retailer chains opened new distribution hubs after recognizing increased consumer expectations for next-day delivery. Meanwhile, digitally native retailers and brands continued to open physical stores to gain mindshare among shoppers.

As for the consumer markets respondents to our recent survey, 39% have restructured supply chains — by expanding their manufacturing footprint and distribution centers and diversifying sourcing — and reconfigured existing technology. Notably, 51% of consumer-facing companies reported that they strengthened their resiliency and risk management and 47% increased their investment in tech talent in the past 12 months.

How are companies adapting to today’s business conditions?

Implemented in past 12 months

CM

All industries

Changing our operating model

%

Restructuring supply chain networks

%

Increasing investment in tech talent

%

Increasing overall technology budget

%

Reconfiguring existing technology

%

Strengthening resiliency and risk management

%

Q: To what extent is your operations function currently doing each of the following?(Response to “Implemented past 12 months”.)
Source: PwC’s Digital Trends in Operations Survey; base of 600, CM base of 120

Why it matters

Transformation is not just about using new technologies — it’s a fundamental shift in how consumer markets businesses work and create value. It’s critical to have a coherent vision, strategy and roadmap, as well as the abilities and governance to implement them effectively. Successful, continuous transformation can result in improved customer loyalty, enhanced operational efficiency and the generation of new revenue streams, giving businesses a significant competitive advantage.

Balancing competing objectives

More than half (52%) of consumer-facing companies understandably see supply chain disruption posing a major risk to their operations. Operations and supply chain officers in this sector also consider high interest rates as a major risk, which is significantly higher than their peers (43% versus 35% of all respondents). This affects their own cost of capital as well as consumers’ ability and willingness to spend. Our research shows that, as prices for essentials rise, consumers tend to cut back on discretionary spending, such as entertainment, eating out and buying new clothes. They also may shift to store brands, purchase upcycled goods or turn to new financing options. This may help explain why leaders of consumer markets operations and supply chain functions are focused on short-term priorities, even as they work to transform their businesses. Nearly six in ten respondents rank reducing costs and driving growth among their top three objectives when digitizing operations.

Consumer markets operations and supply chain professionals are more likely (56% versus 49% of all respondents) to invest in operational visibility and analytics. This suggests they recognize that end-to-end visibility provides the essential foundation to build supply chain resiliency and weather the next disruption. How are they doing this? A global apparel retailer, for example, reduced its inventory costs by using advanced analytics and machine learning to forecast demand, improve assortment and allocation, and manage markdowns.

Consumer markets companies’ main objectives when digitizing their operations

CM

All industries

Reducing costs

%

Driving growth

%

Improving the speed and quality of decision-making

%

Exploring and piloting innovations

%

Increasing resiliency

%

Implementing different business models

%

Simplifying legacy technology

%

Q: Which of the following are your most important objectives when digitizing your operations? (Rank up to 3, with 1 being most important.)
Source: PwC’s 2024 Digital Trends in Operations Survey; base of 600, CM base of 120

Why it matters

Balancing competing objectives is not easy, especially when resources are limited and uncertainty is high. While reducing costs and driving growth are top priorities, it is important to align immediate solutions with long-term benefits. Building a sustainable advantage requires considering the longer-term implications of decisions and continuously assessing trade-offs on cost, quality and service to make decisions that benefit the business — now and in the future. By doing so, investments in digital operations are more likely to be more effective and help solve for short- and long-term gains.

Addressing skills gaps

Among consumer markets companies, 45% plan to increase their technology budget for the next 12 months. While 38% say their operations technology investments delivered expected results, there are still challenges to overcome. When tech investments didn’t deliver expected results, respondents cited an average of two or three barriers to success. The main reasons were integration complexity (32%) and lack of digital talent (28%).

As consumer markets companies digitize their operations and adopt new business models, they recognize that tech and talent go hand in hand. PwC research shows that specially trained workers tend to be satisfied with their jobs. A commitment to upskilling employee capabilities may address current challenges and strengthen companies’ ability to attract and retain talent. And it seems that employees are receptive: PwC's 2023 global workforce survey found that 52% of workers felt that AI would increase their efficiency at work, create chances to learn new skills or create new job opportunities. An industry leading toy manufacturer, for example, launched a gamified learning platform to encourage its employees to learn new skills such as design thinking, storytelling and coding. In turn, this enables employees to create engaging products, collaborate effectively, enhance career prospects and achieve personal growth.

Some consumer markets companies aren’t getting what they expect from tech, and here’s why

CM

All industries

Integration complexity

%

People capabilities

%

Vendor capabilities

%

Data issues

%

Technology didn’t meet expectations

%

Program leadership

%

Business case

%

Q: If your investments in operations technology have not fully delivered the expected results, which of the following are the reasons why? (Select all that apply.)
Source: PwC’s 2024 Digital Trends in Operations Survey; base of 600, CM base of 120

Why it matters

Addressing skills gaps is crucial for consumer markets companies in their digital transformation journey. While increasing technology budgets and adopting new business models are important, it is also critical to bring existing talent along for the ride. Position technology as a tool that unlocks new opportunities rather than diminishing or threatening jobs. The journey of change needs to start with effort. Address concerns and earn employee buy-in in increments rather than relying on the more typical wholesale change management events.

Getting a lift from GenAI and other emerging technologies

Consumer markets companies are investing in an array of technologies to support every phase of operations and supply chain activity — such as process automations that help manage costs and build resilience. The areas where these companies are actively investing include cloud-based technologies (65%), operational visibility and analytics (56%), AI and machine learning (47%), intelligent automation (43%) and the Internet of Things (40%). When integrated across the business, these technologies enable and enhance each other. Machine learning algorithms, for example, can analyze data from the Internet of Things (IoT) to generate insights for automated operational reports or ad hoc inquiries enabled by generative AI (GenAI) — with all technologies, ideally, supported by an efficient, cloud-based infrastructure.

GenAI has the ability to improve operations and supply chain performance, but its use in consumer markets is behind other sectors. Our survey shows only 25% of these companies have bought GenAI tools from third-party vendors in the past 12 months, compared to 34% across all sectors. Over the same period, they also invested less in data modernization, governance around the responsible use of GenAI, training existing employees to use GenAI tools, cybersecurity and privacy enhancements, and integrating GenAI with other technologies. To close this gap, these companies need a strategic approach, aligned with business goals and customer needs. Seen in practice, one major retailer is looking to utilize GenAI to quickly determine the cost-benefit of expediting purchase orders and predicting the impact of large system maintenance on inbound volumes at its facilities.

These technologies can provide valuable assistance in operations and in each phase of supply chain management: planning, procurement, manufacturing and distribution. Nearly half of executives responding to PwC's 2023 Emerging Technology Survey reported measurable benefits from emerging technologies like GenAI and IoT: improved products and services, faster time to market, improved decision-making and higher profits. Thirty-three percent of consumer markets operations and supply chain officers say their companies have already benefited from GenAI and 45% expect to see benefits in the next 12 months — as there are still plenty of opportunities to scale.

Consumer markets companies are investing in GenAI, but opportunities for widespread use remain

CM

All industries

Buying specific GenAI tools from a third-party vendor

%

Data modernization

%

Adding governance around responsible use of GenAI

%

Hiring new GenAI talent

%

Training existing employees to use GenAI tools

%

Cybersecurity and privacy enhancements for GenAI

%

Hiring a service provider to help us with GenAI

%

Integrating GenAI with other technologies

%

Q: Which, if any, of the following GenAI-related activities is your company implementing or planning to implement? (Response to “Implemented past 12 months”.)
Source: PwC’s 2024 Digital Trends in Operations Survey; base of 600, CM base of 120

Why it matters

In the face of disruption, the companies that not only lean into GenAI but scale it across their business are positioning themselves ahead of the curve. GenAI can automate tasks or drive individual use cases, but it's true potential is in transforming entire functions and industries. It can power workforce transformation at scale, democratize access to digital capabilities and skills, and free up time for workers to focus on more strategic tasks. When building an approach, consider the business value, the customer impact and the implications of these innovations.

Key takeaways

Operations and supply chain officers play central roles in their company’s efforts to successfully sustain growth. Here are some tips that can help you guide your teams and lead others through a period of disruptive change.

Lead disruption or get left behind. Operational transformation should be an ongoing practice, as businesses need to constantly evolve to survive and stay relevant. By digitizing their operations, companies can strengthen their supply chains, adapt to changing consumer preferences, create new value and help future-proof their businesses.
Prioritize strategic digital investments for operational efficiency. Utilize end-to-end visibility and analytics to build a resilient supply chain. Balance short-term fixes with future gains by considering the long-term implications of decisions.
Invest in talent and technology for the digital age. Recognize employees’ willingness to adopt technologies that make their work more efficient and meaningful. Make space for testing and learning to build trust as employees identify the many ways emerging technology can augment their skills.
Be bold about implementing emerging technologies such as GenAI. But do so in ways that are responsible and that scale to effectively meet business needs. This and other emerging technologies are already too valuable to treat as isolated experiments or pilots. Digitized operations are now table stakes. Determine what works to deliver the outcomes you seek, then roll out applications at scale.