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Trends and Strategies in Logistics and Supply Chain Management

Digital Transformation Opportunities

Trends and Strategies in Logistics and SCM 2

Trends and strategies in logistics and supply chain management

Timeline of the study

“Trends and Strategies in Logistics 2000+: A Study of Logistics in Industry, Retail, Logistics-Service and other Service provider” “Trends and Strategies in Logistics: Agenda for Logistics Management in 2010” “Trends and Strategies in Logistics and Supply Chain Management - Embracing Global Logistics Complexity to Drive Market Advantage” “Trends and Strategies in Logistics” “Trends and Strategies in Logistics: Changing Supply Chains” „Trends and Strategies in Logistics – Global Networks in an Era

• f Change”

“Trends and Strategies in Logistics and Supply Chain Management – Digital Transformation Opportunities” 1991 2000 2005 2013 2002 2008 2016

Trends and Strategies in Logistics and SCM 3

The 2016 edition of the study was compiled by four partners.

Study partners

www.logu.tuhh.de www.ipri-institute.com www.horvath-partners.com lufthansa-industry-solutions.de

• Prof. Dr. Dr. h. c. Wolfgang Kersten
• Dr. Gabriele Reich
• Prof. Dr. Mischa Seiter
• Dr. Ralf Sauter

Trends and Strategies in Logistics and SCM 4

Supply Chain  increasing data exchange

Technologies  predictive analytics

requirements

profiles

requirements Business Models  data-based business models Skills  IT knowledge

Sneaker AG

China Laces Ltd.

Digital transformation

CEP

Trends and Strategies in Logistics and SCM 5

Digital transformation https://youtu.be/v1_y3mhd1dE

8,8 x 13,5

Trends and Strategies in Logistics and SCM

New and adjusted business models Changes in the supply chain Innovative technology concepts Trends and opportunities Changed competence requirements

Methodology

Strategic Map

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Trends and Strategies in Logistics and SCM 8

Methodology

Research design and thematic focus

Trends and Strategies in Logistics and SCM 9

Methodology

Sample of the survey interviews

Trends and Strategies in Logistics and SCM 10

Methodology

Topic areas of the online survey

Trends and Strategies in Logistics and SCM 11

Methodology

Breakdown of the online survey sample

8,8 x 13,5

Trends and Strategies in Logistics and SCM

New and adjusted business models Changes in the supply chain Innovative technology concepts

Trends and opportunities

Changed competence requirements Methodology

12

Strategic Map

Trends and Strategies in Logistics and SCM 13

Trends and opportunities

Current trends

Cost pressure, individualization and complexity remain top trends, which are carried

• ver to the companies from external sources.

Digitalization and transparency in the supply

chain are the most important trends, and ones that companies will need to develop considerably in

the future.

Compared to 2012, the importance of sustainability has markedly increased. The most urgent action required relates to the growing staff shortage and upcoming applications

• f business analytics.

Trends and Strategies in Logistics and SCM 14

Companies that acknowledge

digitalization as important and push ahead with implementation,

also tend to deal better than others

with customer-driven requirements.

Trends and opportunities

Dealing with exogenous and endogenous trends

Trends and Strategies in Logistics and SCM 15

Trends and opportunities

Comparison of the estimated opportunities and risks

73% rate the opportunities that digital

transformation holds for their companies as

high to very high…

…however, more than half of the

companies take a wait-and-see position, until tried and tested solutions

become available. At the same time, one third of those surveyed, observe high to very high risks.

Trends and Strategies in Logistics and SCM 16

Trends and opportunities

Expected impact on the cost situation

In the sectors of manufacturing and logistics services, more than half of the companies expect to either gain revenue

• r reduce expenditure.

In retail, as many as two thirds of the companies expect additional earnings, but only about 40% expect reduced

expenditure.

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Trends and opportunities

Top 3 drivers of digital transformation

The most important driver of

digitalization is the end costumer. Digitalization is driven from the

end of the supply chain.

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New and adjusted business models Changes in the supply chain

Innovative technology concepts

Trends and opportunities Changed competence requirements Methodology

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Strategic Map

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Innovative technology concepts

Relevance and implementation

Predictive analytics and the

application of artificial intelligence hold enormous potential for optimizing

logistics processes. Access to data via mobile devices is highly relevant and

will be extended consid-

erably in the future. Sensor technologies are set

to become substantial data

sources for monitoring and

improving.

Trends and Strategies in Logistics and SCM

Mobile

• Mobile devices permit to access data; from everywhere

and at any time.

• For costumers they are an essential communication

channel, for employees a pocket sized super computer. Innovative technology concepts

Data as a value – technology as a provider

20

Sensor technology

• The complete admission of status data will be very

important in future.

• This includes not only the recording of the geographical

position but also of temperatures, videos...

Analytics

• A high quality data basis permits subsequent evaluation.
• Based upon this data basis future developments and needs

for action can be predicted.

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Innovative technology concepts

Use of sensor technology

Trends and Strategies in Logistics and SCM 22

Innovative technology concepts

Use of predictive analytics

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Innovative technology concepts

Use of ERP

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Innovative technology concepts

Use of augmented reality

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Innovative technology concepts

Use of web based communication

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41% 37% 35% 31% 29% Inkompatibilität mit bestehenden Systemen/Schnittstellenproblematik Kosten waren höher als geplant Koordinationsschwierigkeiten zwischen Fachbereichen und IT Technologie ist für Anwendung noch nicht reif genug Unklare Use Cases bzw. Nutzenbewertung Innovative technology concepts

Top 5 implementation challenges

Many companies reach their limits, when it is about to dare new things, because the

IT-Infrastructure is very interwoven.

Everybody‘s task now is to do their

homework.

• Director Supply Chain Management, Retail -

„ „

Incompatibility with existing systems Higher costs than planned Coordination difficulties between department and IT Technology is not yet ready for application Unclear use cases

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New and adjusted business models

Changes in the supply chain

Innovative technology concepts Trends and opportunities Changed competence requirements Methodology

27

Strategic Map

Trends and Strategies in Logistics and SCM 28

Changes in the supply chain

Logistics goal with highest priority

Primary logistics goal in retail and in

manufacturing is delivery reliability.

The logistics service sector rather focuses

• n fulfilling costumer needs.

Reliable and individually designed services at competitive prices become even

more important. The resulting complexity is best controlled with (digital)

technologies.

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• Individualization

drives complexity

• Ongoing integration
• f supply chains
• Dependency vs.

replaceability

• Realtime data

availability

• Better understanding
• f customers
• Higher willingness to

share data

• Online platforms

B2C/B2B

• Changing roles and

services

• 3D-printing

Individualization of material flows Data driven control Reorganization of value chains

Changes in the supply chain

The challenges

Trends and Strategies in Logistics and SCM 30

Changes in the supply chain

Individualization of material flows

Omni-channel solutions are of great

relevance in retail and drive change in distribution logistics. The customer’s request for short delivery times and individually configured products follow decentralized

storage concepts and associated

infrastructural changes.

Mass customization solutions and

an adoption of existing processes, which allow a production in batch size 1 are requested.

Products and services demanded generally

become more fragmented and customized.

Trends and Strategies in Logistics and SCM 31

Changes in the supply chain

Identified data groups and their classification

79% of the

respondents regard a transparent

supply chain as

important,

implementation difficulties remain

existent.

Trends and Strategies in Logistics and SCM 32

Changes in the supply chain

Data types with potential for exchange expansion

Companies increasingly part

from a strict security attitude.

However, companies often have to learn that the desired data is

not available, interfaces are not defined or the quality and the integrity of the

data is insufficient.

Trends and Strategies in Logistics and SCM

Changes in the supply chain

Reorganization of supply chains

33

Every single company needs to reevaluate and find

its new role within the supply chain.

The companies largely expect a reduction in

inventory, warehousing, and administrative costs as a result of digitalization. Retail, however, expects this to cause increased costs in packaging and returning goods. Material flows are increasingly re-regionalized,

production plants are build closer to the markets.

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New and adjusted business models Changes in the supply chain Innovative technology concepts Trends and opportunities

Changed competence requirements

Methodology

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Strategic Map

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Changed competence requirements

Existing skills

Trends and Strategies in Logistics and SCM 36

Changed competence requirements

Development of data analysis

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Changed competence requirements

Future development of skills

An intuitive use of IT will be required even more by skilled workers and managers. To keep up with the speed of

digitalization the implementation of a fast failure culture can be helpful.

This requires the willingness to experiment

and innovate and a positive handling of mistakes on all levels.

Trends and Strategies in Logistics and SCM 38

Changed competence requirements

Challenges of further qualification

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Changed competence requirements

Data scientist skills

One possible orientation concerning the major skill requirements of the future (especially considering the increasing use of big data sets) would be for companies to take a look at the skillset of a data scientist. The task of the data scientist is the structured

identification and analysis of data. Data analysis

focuses on gaining insight into commercial and business management issues, aiming to derive impacts on the company and ultimately finding solutions. To some extent the different skill areas of the data scientist

• verlap.

Trends and Strategies in Logistics and SCM 40

Changed competence requirements

Actions in digital competence screening*

* Source: cf. Bayrle, C. (2017): Digital Competence Screening: Kompetenzen für datenbasierte Dienstleistungen identifizieren – Ein Handlungsleitfaden. IPRI Praxis Nr. 25, Stuttgart. In press.

Trends and Strategies in Logistics and SCM 41

Changed competence requirements

Overview of measures to integrate necessary skills

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New and adjusted business models

Changes in the supply chain Innovative technology concepts Trends and opportunities Changed competence requirements Methodology

42

Strategic Map

Trends and Strategies in Logistics and SCM 43

New and adjusted business models

Relevant competitive advantages in the next five years

Asked about major competitive advantages in five years’

time, the survey participants named those factors which are already important today (e.g. flexibility regarding customer demands, quality of services/products, adaptability to changing market

conditions, prompt service fulfillment, as well as value for inexpensive products and services.

Flexibility regarding customer demands is seen as the most important factor. 44.4% of the logistics service providers in the survey

regard the competitive advantage of flexibility as relevant for the future.

In relative terms, the aspect of data (end-to-end data transparency

and owner-ship of end-customer data) is the most important to

retail companies, while manufacturers rank the ability to innovate as the most important.

Trends and Strategies in Logistics and SCM 44

New and adjusted business models

Business models – how to describe them? Business Model Canvas*

Key partners Key activities Value proposition Customer relationships Customer segments Key resources Channels Cost structure Revenue streams

HOW? WHAT? WHO? VALUE?

* Source: Osterwalder, Alexander; Papadakos, Trish (2015): Value Proposition Design. Entwickeln Sie Produkte und Services, die Ihre Kunden wirklich

• wollen. Beginnen Sie mit…[Die Fortsetzung des Bestsellers Business Model Generation!]. Frankfurt am Main: Campus.

Trends and Strategies in Logistics and SCM 45

New and adjusted business models

Digitalization of business models

Trends and Strategies in Logistics and SCM 46

New and adjusted business models

Business model innovation

Analytics-driven: The starting point for this method are the findings generated from data.

An analytics-driven business model innovation can be based on the business analytics

process (see fig.). Model example: Analytics for optimization Customer-driven: In contrast to analytics-driven business model innovations, these are

driven by customer needs. The business analytics process can then be used to satisfy specific

customer needs. Model example: Object-Self-Service Payment-driven: The starting point here is the data itself, which serves as the means of

• payment. The business model is adapted in terms of the way in which income is generated

(e.g. data as a payment). One possible example in the B2B field in logistics is a shipper that sends its own data (e.g. loading frequencies, loading times) to the logistics service provider, who can then use this data to optimize its own order planning as it improves its ability to predict and satisfy demand. In return, the shipper receives a price reduction. Primarily, this changes the way in which income is generated but it also affects the customer relationship, core activities and key resources.

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Strategic Map

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Trends and Strategies in Logistics and SCM 48

Strategic Map

Map for a digitally transformed logistics and supply chain management

Trends and Strategies in Logistics and SCM

Strategic Map

Focus: Company transformation

49

• Monitor current future development paths in a structured way
• Initialize the adoption of relevant technology concepts
• Consider the impact on the whole value chain
• Define pilot projects that allow the learning experiences to be

transferred to a wide range of follow-up projects

• Consider the end-customers as driver of the digitalization in all

projects

• Identify the future needs of the (end-)customers and the

respective impact on the supply chain

• Modularize production and logistics systems to ensure flexibility
• Create own, internally aligned understanding of digitalization
• A holistic digitalization strategy helps to avoid inefficiencies due

to selective, individual efforts

• The company transformation should be rigorously and actively

pursued

• A comparison between the actual and the future target state is

essential(e. g. digital competence screening)

• Determine already existing skills and develop new competences

in a structured way

• Equally involve skilled workers and managers

Digital transformation anchored in the strategy Structured determining of skill requirements Consistent focus on the (end-) costumer Developing a digital technology calendar New and adapted business models Changed competence requirements Innovativ technology concepts

Goal: Digital transformaton is an integral part of the strategy

Changes in the supply chain

Trends and Strategies in Logistics and SCM

Strategic Map

Focus: IT and data

50

• Consistent expansion and use of existing sensor technology
• Support efforts to make data available on mobile
• Provide employees, partners and customers with aggregated data

according tot heir choices and authorization

• Identify the advantages for each stakeholder and make these a

top priority during the change process

• Clean up the IT-systems by defining standards and interfaces that

allow for a continuous data exchange

• Check all elements of the business model concerning the

digitalization potential

• Optimize internal company processes, services and products;
• ffer newly created services or products
• Promote the acquisition of programming skills, data analysis skills

and the intuitive use of IT for both, skilled workers and managers

• Use resource-saving measures to integrate competences (e.g.

acquire them "as a service" or initiate pilot projects first) Active and purposeful use of available data Targeted development of IT skills Ensure continuous data exchange Using sensor technology for data collection and enabling mobile access New and adapted business models Changed competence requirements Innovativ technology concepts

Goal: Digital Transparency is guaranteed across the whole supply chain

Changes in the supply chain

Trends and Strategies in Logistics and SCM

Strategic Map

Focus: Innovations

51

• Use intelligent, data based analysis as an idea generator for

innovations

• Prioritize the innovation projects
• Accelerate innovations within small projects
• Use of versatile, flexible logistic concepts
• Take new, courageous paths quickly and manage the risk by

predefining exit paths

• ldentify and integrate new partners and future stakeholders for a

flexible collaboration

• Develop new business models based on available and analyzed

data

• Accelerate customer-driven business model innovations
• Use of test fields for digital business model innovations
• Create small innovation sites for digitalization
• Allow employees to freely create and prototype innovations
• Decentralize decision-making-authority
• Analyze the effects of speed vs. perfection for the own company

Driving business model innovations Developing fast failure culture Fast development of flexible networks Using predictive analytics as an impulse New and adapted business models Changed competence requirements Innovativ technology concepts

Goal: Competitiveness is ensured

Changes in the supply chain

Trends and Strategies in Logistics and SCM

Thank You.

52

A full appendix featuring results detailed by sectors, branches and company sizes can be found on the homepage

• f the study!

Please use the following link for more information:

logistiktrends.bvl.de/en

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