Retail and consumer packaged goods (CPG) companies in the U.S. increasingly rely on IT services to enhance customer experience and improve supply chain performance, according to a new research report published by Information Services Group (ISG)a leading global technology research and advisory firm.
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“ESG is becoming a critical consideration for companies to understand and act on”
The 2023 ISG Provider Lens Retail & CPG Services report for the U.S. finds that the COVID-19 pandemic forced many retail and CPG companies to increase their use of e-commerce, omnichannel customer engagement and other digital technologies to satisfy changing consumer demands. Inflation and other economic issues have continued to shake up these industries. In the new consumer landscape, retail and CPG strategies have begun to overlap, with CPG companies launching direct-to-consumer operations while retail chains develop private-label brands to sell directly in-store and online. Both trends are driving rapid digital transformation.
“Consumer behavior continues to evolve, so the retail and CPG sectors need constant innovation,” said Sunder Pillai, ISG Retail & CPG practice leader. “Especially in the U.S., markets are changing quickly and companies are willing and able to make big bets on technology.”
The pandemic revealed that decision-making processes at many U.S. retail and CPG companies were inflexible, leading many firms to launch retooling projects, the report says. Investments in AI and ML have helped companies analyze large volumes of data for more personalization and to forecast demand and design store layouts. Data-driven supply chain management, along with automated processes, blockchain technology and IoT sensors, is improving inventory tracking and traceability to make supply chains more reliable and predictable.
To make these advances, retail and CPG enterprises in the U.S. have migrated much of their IT infrastructure and business applications to the cloud, ISG says. This gives them the scalability and agility to handle more online traffic, process more data and use cloud-based services for functions such as CRM and inventory management. Most organizations are using a mix of public, private and hybrid cloud environments, a practice that is likely to continue for the foreseeable future.
Environmental, social and governance (ESG) concerns have become a high priority for U.S. retail and CPG firms, under pressure from both consumers looking for sustainable and ethical company practices and regulators imposing greater compliance burdens, the report says. IT systems are central to many ESG initiatives, which require new technologies for functions such as reporting and supply chain monitoring.
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“ESG is becoming a critical consideration for companies to understand and act on,” said Jan Erik Aase, partner and global leader, ISG Provider Lens Research. “Leading IT service providers offer the advice and solutions clients need to navigate this area.”
The report also examines other U.S. trends in these sectors, including the growing importance of automation and heightened cybersecurity and privacy threats.
For more insights into the challenges facing U.S. retail and CPG companies and advice on overcoming them, including how to move from just-in-time inventory practices to more resilient systems, see the ISG Provider Lens™ Focal Points briefing here.
The 2023 ISG Provider Lens™ Retail & CPG Services report for the U.S. evaluates the capabilities of 28 providers across four quadrants: Business Transformation Services, Digital Innovation Services, Platform Modernization Services and Managed Services.
The report names Accenture, Capgemini, Cognizant, HCLTech, Infosys, TCS and Wipro as Leaders in all four quadrants. It names IBM as a Leader in two quadrants and Kyndryl and LTIMindtree as Leaders in one quadrant each.
In addition, LTIMindtree, Sutherland, Tech Mahindra and UST are named as Rising Stars — companies with a “promising portfolio” and “high future potential” by ISG’s definition — in one quadrant each.
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