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Trends and Strategies in Logistics and Supply Chain Management Digital Transformation Opportunities

Trends and strategies in logistics and supply chain management Timeline of the study “Trends and Strategies in Logistics “Trends and Strategies in Logistics and 2000+: A Study of Logistics in Industry, “Trends and Strategies in Logistics: Supply Chain Management - Retail, Logistics-Service and other Agenda for Logistics Management in Embracing Global Logistics Complexity Service provider” 2010” to Drive Market Advantage” 2013 2005 2000 1991 2008 2002 2016 “Trends and Strategies in „ T rends and Strategies in “Trends and Logistics and Supply “Trends and Strategies Logistics – Strategies in Chain Management – in Logistics: Changing Global Networks in an Era Logistics” Digital Transformation Supply Chains” of Change” Opportunities” Trends and Strategies in Logistics and SCM 2

The 2016 edition of the study was compiled by four partners. Study partners lufthansa-industry-solutions.de www.logu.tuhh.de Dr. Gabriele Reich Prof. Dr. Dr. h. c. Wolfgang Kersten www.horvath-partners.com www.ipri-institute.com Dr. Ralf Sauter Prof. Dr. Mischa Seiter Trends and Strategies in Logistics and SCM 3

Business Models Digital transformation  data-based business models China profiles Laces Ltd . requirements CEP requirements Sneaker AG Technologies  predictive analytics Supply Chain Skills  increasing data exchange  IT knowledge Trends and Strategies in Logistics and SCM 4

Digital transformation https://youtu.be/v1_y3mhd1dE Trends and Strategies in Logistics and SCM 5

Methodology Trends and opportunities Innovative technology concepts Changes in the supply chain Changed competence requirements 8,8 x 13,5 New and adjusted business models Strategic Map Trends and Strategies in Logistics and SCM 7

Methodology Research design and thematic focus Trends and Strategies in Logistics and SCM 8

Methodology Sample of the survey interviews Trends and Strategies in Logistics and SCM 9

Methodology Topic areas of the online survey Trends and Strategies in Logistics and SCM 10

Methodology Breakdown of the online survey sample Trends and Strategies in Logistics and SCM 11

Methodology Trends and opportunities Innovative technology concepts Changes in the supply chain Changed competence requirements 8,8 x 13,5 New and adjusted business models Strategic Map Trends and Strategies in Logistics and SCM 12

Trends and opportunities Current trends Cost pressure, individualization and complexity remain top trends , which are carried over 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 of business analytics . Trends and Strategies in Logistics and SCM 13

Trends and opportunities Dealing with exogenous and endogenous trends Companies that acknowledge digitalization as important and push ahead with implementation , also tend to deal better than others with customer-driven requirements . Trends and Strategies in Logistics and SCM 14

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 15

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 or reduce expenditure . In retail , as many as two thirds of the companies expect additional earnings , but only about 40% expect reduced expenditure . Trends and Strategies in Logistics and SCM 16

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 . Trends and Strategies in Logistics and SCM 17

Methodology Trends and opportunities Innovative technology concepts Changes in the supply chain Changed competence requirements 8,8 x 13,5 New and adjusted business models Strategic Map Trends and Strategies in Logistics and SCM 18

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 19

Innovative technology concepts Data as a value – technology as a provider  Mobile devices permit to access data; from everywhere Mobile and at any time.  For costumers they are an essential communication channel, for employees a pocket sized super computer. Analytics  A high quality data basis permits subsequent evaluation.  Based upon this data basis future developments and needs for action can be predicted.  The complete admission of status data will be very Sensor important in future.  This includes not only the recording of the geographical technology position but also of temperatures, videos... Trends and Strategies in Logistics and SCM 20

Innovative technology concepts Use of sensor technology Trends and Strategies in Logistics and SCM 21

Innovative technology concepts Use of predictive analytics Trends and Strategies in Logistics and SCM 22

Innovative technology concepts Use of ERP Trends and Strategies in Logistics and SCM 23

Innovative technology concepts Use of augmented reality Trends and Strategies in Logistics and SCM 24

Innovative technology concepts Use of web based communication Trends and Strategies in Logistics and SCM 25

Innovative technology concepts Top 5 implementation challenges Inkompatibilität mit bestehenden Incompatibility with „ 41% Systemen/Schnittstellenproblematik existing systems Many companies reach their limits, when it is about to dare new things, because the Higher costs than planned Kosten waren höher als geplant 37% IT-Infrastructure is very interwoven. Koordinationsschwierigkeiten Coordination difficulties Everybody‘s task now is to do their 35% between department and IT zwischen Fachbereichen und IT homework. Technologie ist für Anwendung noch Technology is not yet ready for 31% nicht reif genug application - Director Supply Chain Management, Retail - Unklare Use Cases bzw. 29% Unclear use cases Nutzenbewertung „ Trends and Strategies in Logistics and SCM 26

Methodology Trends and opportunities Innovative technology concepts Changes in the supply chain Changed competence requirements 8,8 x 13,5 New and adjusted business models Strategic Map Trends and Strategies in Logistics and SCM 27

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 on fulfilling costumer needs . Reliable and individually designed services at competitive prices become even more important. The resulting complexity is best controlled with (digital) technologies. Trends and Strategies in Logistics and SCM 28

Changes in the supply chain The challenges Individualization of Data driven control Reorganization of value material flows chains  Individualization   Realtime data Online platforms drives complexity availability B2C/B2B   Ongoing integration Better understanding  Changing roles and of supply chains of customers services  Higher willingness to  Dependency vs.  share data 3D-printing replaceability Trends and Strategies in Logistics and SCM 29

Changes in the supply chain Individualization of material flows Products and services demanded generally become more fragmented and customized . 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. Trends and Strategies in Logistics and SCM 30

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 31

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 32