o9, a leading enterprise AI software platform provider for transforming planning and decision-making, shares key insights from its supply chain experts and leaders, highlighting interesting trends that will redefine Supply Chain Management (SCM) across the Grocery, Retail sectors and Top Sustainability Priorities for 2026.
Top Grocery Supply Chain Trends & Challenges in 2026:
- Legacy Systems Slowing Progress: Grocery supply chains continue to grapple with outdated, siloed legacy systems that limit visibility, slow decision-making, and hinder the adoption of modern AI-based capabilities. This technology debt is becoming one of the biggest obstacles to agility. As a result, grocers will prioritize end-to-end integrated planning platforms that unify SNOP, category planning, and supply chain execution to enable faster, more informed responses.
- AI Becomes Core to Grocery Planning: Generative AI and machine learning forecasting are emerging as foundational tools across grocery operations. With demand volatility and fresh complexity rising, grocers are turning to AI to improve forecast accuracy, reduce spoilage, enhance in-stock levels, and automate purchasing and labour planning. AI agents are also helping democratize insights, enabling teams to surface and resolve bottlenecks quickly.
- Cost-to-Serve Pressures & Omnichannel Profitability Challenges: As omnichannel becomes permanent but remains margin-dilutive, retailers are feeling intensified cost-to-serve pressures, especially in logistics and fresh categories. In 2026, grocers will focus heavily on precision commerce: optimizing assortment, sharpening pricing effectiveness, improving fresh leadership, and developing more profitable omnichannel operating models to protect margins.
- Consumer Volatility Driving the Need for Agility: Rapidly shifting consumer preferences from plant-based to global flavours and the inefficiencies of manual forecasting are pushing grocers to adopt more agile, scenario-driven planning processes. Automated, real-time planning capabilities will become a competitive advantage, enabling retailers to react faster to demand shifts and model multiple decision pathways before execution.
- Market Turbulence Reshaping Assortment & Private Label Strategy: Tariffs, trade disruptions, and ongoing CPG price hikes are forcing grocers to rethink assortment strategies. Many are expanding private label and value-tier offerings to mitigate price shocks while still catering to premium shoppers. While food waste reduction remains a priority due to its direct impact on margins, broader sustainability conversations remain muted amid economic uncertainty.
Top challenges and SCM trends in Retail industry for 2026:
1. Flexibility as the Defining Priority Amid Extreme Volatility: Retail leaders are entering 2026 with an unpredictable macro environment, shaky consumer confidence, tariff fluctuations, geopolitical tensions, and widening demand variability. This volatility is pushing flexibility to the top of every supply chain agenda. However, heavy tech debt and legacy or manual systems continue to slow transformation, making even basic reporting a multi-hour exercise. To stay ahead, companies need to think in three- to five-year horizons and ground their decisions in fast, accurate data, otherwise they risk falling back into the same non-strategic “rinse and repeat” cycle that has held them back.
2. Efficiency and Revenue Growth Through Smarter Inventory and Omnichannel Operations: Inventory optimization stands out as one of the largest value levers for 2026, particularly as buy-online-pick-up-in-store becomes more dominant. Retailers need to place inventory closer to the true demand signal and streamline omnichannel fulfillment across increasingly complex marketplace models. The questions around who owns inventory and who fulfills orders are now complicating operations. Companies will realise that the biggest opportunities lie in doing more with trimming excess stock, improving logistics decisions, and using integrated dashboards to replace the fragmented, hours-long process of creating executive-level reports.
3. AI and Predictive Technologies Moving from Curiosity to Real Deployment: Emerging technologies like Agentic AI and predictive analytics are shifting from broad interest to practical, measurable use cases. Early adopters already enjoy a clear competitive advantage.
For many retailers, 2026 will be the year of strengthening data quality so AI can deliver accurate insights. Companies will need to integrate specific applications such as automated reporting, root-cause diagnostics, exception-based planning, and rapid scenario modelling. As teams grow familiar with tools like ChatGPT and Gemini, comfort levels are increasing, which will boost the adoption of more advanced AI-powered planning systems.
4. Evolving Consumer Behaviour and a Deepening Polarization Across Retail: Consumer behaviour is changing rapidly across categories. In food and beverage, customers are trading down and buying more private label, while apparel and footwear shoppers continue to demand speed, personalization, and instant fulfilment. AI-powered chatbots are being adopted widely for product discovery and transactions as consumers expect faster answers and frictionless experiences. The retail landscape is becoming increasingly polarized, with value-focused and bulk-oriented formats seeing stronger momentum while many mid-market retailers experience softer traffic. With tariff and interest rate volatility expected to continue, retailers will need more agile planning and diversified sourcing strategies to “read and react” quickly to shifting conditions.
5. ESG, Sustainability, and the Shift in Ethical Sourcing Priorities: Sustainability continues to have an uneven presence across regions. While ESG remains highly visible in AMIA, it is far less of a market differentiator in North America, often folded into broader corporate responsibility or DEI frameworks. Still, some companies maintain programs like recycling initiatives or the use of recycled materials. Tariff shifts and trade agreement uncertainty heavily influence sourcing decisions. These cost pressures filter down from CPG manufacturers to retailers, who must then revisit assortment choices, balancing premium lines, value-driven categories, and private label options depending on consumer response.
- Sector Vulnerabilities, Tech Prioritization, and the Strategic Reset for 2026: Luxury department stores and mid-market retailers are among the most vulnerable heading into 2026. Middle-income consumers are cutting back, waiting for discounts, or delaying purchases altogether, which may trigger more aggressive promotions. Discretionary grocery segments could also feel pressure as private-label adoption climbs. On the technology side, retailers understand the need to move away from spreadsheets and legacy tools, but severe tech debt forces them to prioritize core customer-facing systems before investing in supply chain planning technology. The overarching lesson from 2025 is that companies must think long-term. Breaking silos, strengthening cross-team collaboration, and building system capabilities that model tariff impacts quickly are becoming essential to future-proof the enterprise.
Top Sustainability and ESG Priorities for 2026:
- Top Priorities for companies in 2026: Companies will sharpen their focus on risk, resilience, and regulatory compliance, driven largely by new European regulations. Frameworks such as the EUDR, which targets deforestation and due diligence in sourcing, and CBAM (the carbon border adjustment mechanism), are prompting organizations to reassess exposure across global supply chains. At the same time, sustainability teams are under increasing pressure to demonstrate clear business value and ROI for their initiatives, a demand intensified by ongoing macroeconomic uncertainty.
- Standardization and AI in Sustainability: A major theme in 2026 will be the push toward standardization, supported by stronger collaboration across industry bodies. Efforts such as the alignment of the GHG Protocol and ISO to standardize product-level carbon emissions calculations reflect this shift. Alongside these initiatives, AI will become a central enabler of sustainability objectives. Companies are exploring how AI can help reduce data-center decarbonization loads, democratize sustainability information across teams, and strengthen management of Scope 3 emissions and supplier relationships that sit outside direct operational control.
- Ongoing Challenges in ESG: Despite growing momentum, organizations continue to face substantial challenges in meeting ESG expectations. Many struggle to secure adequate budgets due to inconsistent measurement frameworks and the difficulty of articulating a clear commercial rationale for sustainability work. AI introduces its own set of hurdles, including the risk of poor-quality data compromising outputs and the limitations of its “black box” nature, which complicates verification and may introduce bias. Rising energy consumption from AI systems and limited visibility into Tier 2 and Tier 3 suppliers further hinder compliance with evolving regulations such as CSRD and CSDDD.
- The Action–Priority Gap: A significant disconnect remains between stated sustainability ambitions and actual progress. Even though a large share of companies reports that their ESG priorities have stayed the same or increased, many have yet to embed these commitments into day-to-day operations or accelerate the work needed to meet their targets. The consequences of inaction are becoming more apparent, often outweighing the costs associated with proactive investment in sustainability.
- Opportunities Shaping ESG in 2026: Many of the challenges ahead also open pathways for progress. AI stands out as one of the most impactful enablers, with the potential to enhance productivity, improve data reliability, and simplify reporting. Cross-industry collaboration is gaining momentum as well, with Scope 3 peer groups exploring new approaches to supplier engagement, procurement models, and financial incentives or co-investment frameworks to improve visibility and performance. While “green hushing” has become more common, internal ESG programs continue to advance as companies recognize their longer-term strategic importance.
