TREND RADAR 5 th Edition LOGISTICS THE Delivering insight today, creating value tomorrow. Page 1/84Contents Page 2/84 Preface 4 Logistics in a Transformative Decade 5 Looking Back: Innovations that Defined Logistics in the 21st Century 5 COVID-19: A Rare Catalyst for Logistics Innovation 9 Looking Forward: Building Resilient, Sustainable, and Future-Proof Supply Chains 11 Putting Vision Into Practice 14 Developing the 5th Edition of the Logistics Trend Radar 14 At a Glance: The Logistics Trend Radar 17 In Depth 18 Trend Assessment: What Has Changed Since the Last Logistics Trend Radar 18 Social & Business Trends 23-50 Technology Trends 51-72 References 73 Sources 73 Pictorial Sources 81 Further Information 82 Recommended Reading 83Katja Busch Chief Commercial Officer, DHL “As the world finds itself between transformational decades both behind and ahead of us, trend foresight has never been more important. Many transformational trends are here to stay, while new ones constantly arise. At DHL, we are excited to share this fifth edition of our Logistics Trend Radar with you - our customers and partners - to help jointly shape the future of the logistics industry.” Figure 1: Visitors watch a Covariant robotic arm in action at the grand opening of the DHL Innovation Center in Chicago. Figure 1 Page 3/84The past several years in the logistics industry have featured more transformational change than in perhaps the previous century, and the full effects of this are just beginning. The maturation of globalization, the exponential rise of e-commerce, the constant threat of technology disruption, and, most recently, the coronavirus pandemic have fundamentally shifted the entry costs of doing business in the 21st century. As we sit down to reflect on trends in logistics past, present, and future one truth becomes abundantly clear: Logistics is entering a transformative decade. From cloud computing to collaborative robotics, big data analytics, artificial intelligence, and the Internet of Things, logistics professionals have had to make sense of wave after wave of disruptive technology, driving higher levels of digital maturity. The rapid growth of e-commerce still represents only a fraction of global consumer retail spending. Business-to-business e-commerce is expected to follow suit, and dwarfs the consumer market size by a factor of three. The pandemic has contributed to the acceleration of both e-commerce growth and supply chain innovation agendas. Key digital moves to scale and adopt new technology will ultimately determine industry leadership positions in the future. Looking ahead, increasing digital maturity allows us to focus on social and business trends that will shape the future of the logistics industry. Resilience, sustainability, and future proofing the logistics workforce will take center stage on the strategic agendas of supply chain organizations in the years to come. To stay ahead and actively shape the transformation ahead, logistics professionals need to continuously identify and embrace new trends. This is why DHL Trend Research regularly publishes our Logistics Trend Radar as a key instrument for the global logistics community. By adhering to a philosophy of staying close to customers, close to technology, and close to operations, we are able to produce a dynamic, living tool that captures the development of societal, business, and technology trends. As a team of passionate innovators at DHL, we are thrilled and humbled to learn that our Logistics Trend Radar is, in fact, the most downloaded DHL document after the international Express air waybill. Both within DHL and across the industry, the Logistics Trend Radar has become an acclaimed benchmark for strategy and innovation, as well as a key tool to shape the direction of specific trends, most recently packaging, 5G, robotics, and artificial intelligence. We are excited to now invite you to review our fifth edition of this publication, covering the most pressing trends in the near to far future of the logistics industry. We hope that the insights in this report contribute to innovations in your own supply chain, and help you navigate the transformative changes to come. Please join us on our exciting voyage to deliver insight today and create value for tomorrow! Preface Matthias Heutger Senior Vice President Global Head of Innovation DHL Customer Solutions & Innovation Dr. Markus Kueckelhaus Vice President Innovation and Trend Research DHL Customer Solutions & Innovation Page 4/84Logistics in a Transformative Decade Looking Back: Innovations that Defined Logistics in the 21st Century Over the first two decades of this millennium, advancing technology, new business models, and dramatic shifts in customer behavior have reshaped the logistics industry. Ubiquitous access to information and digital services have produced entirely new industries and reshaped established ones. Page 5/84While technology helps companies to improve the efficiency, flexibility, and speed of their supply chains, social, political, and economic changes have constantly tested those capabilities, with economic shocks and political tensions forcing continual and rapid adaptation. Tech mega-platforms and the age of e-commerce The defining business trend of recent years has been the emergence of a new generation of giant technology platforms which can count their users in the billions. US players such as Amazon, Apple, Facebook, Google, and Microsoft, as well as Chinas Alibaba, Baidu, and Tencent, have become central to the lives of many citizens. Their offerings, based largely on free access, social connectivity, and almost limitless volumes of informative and entertaining content, have dramatically changed the way people use and appreciate technology. For many, the services of these organizations have become an indispensable part of their lives. These attitudes towards technology also carry over from personal life into business, setting the expectations of executives and IT decision makers in business-to-business activity. Technology is reshaping the way we consume physical goods as well as digital services. Global e-commerce continues to grow at around 20% every year and sales, which passed the USD $3 trillion mark in 2019, are expected to exceed $4 trillion this year. The wide choice, competitive prices, and convenience offered by online commerce are transforming the retail industry at an accelerating rate and making a mark on business-to-business purchasing too. Today, e-commerce is dominated by a handful of very large players such as Alibaba, Amazon, and Mercado Libre. As sales and user numbers grow, these companies continue to expand and diversify their offerings. They are also continually evolving their operating models, in some cases vertically integrating their logistics operations. Non-traditional players are entering the e-commerce space too. Instagram, the image sharing platform owned by Facebook, for example, now allows its billion users to order products by clicking on advertisements displayed within the app. The technology-driven revolution has plenty more room to run. E-commerce still accounts for only a sixth of total retail sales. There are many sectors that are only beginning to embrace online commerce. The same experiences that consumers have of e-commerce are carrying over to businesses transactions. In the next decade, business-to-business e-commerce may transform the procurement of industrial equipment, automotive spare parts, and many other goods. The barriers that prevent companies from moving online are rapidly falling. And the emergence of a new generation of third-party vendor (3PV) solutions makes it much easier for even small organizations to add sophisticated e-commerce offerings to their existing business models, for example. The increasing prevalence of and familiarity with application programming interfaces (or APIs) in the logistics industry allows organizations of all sizes to connect core supply chain IT platforms with virtually any other system. For example, an API can connect inventory and order management systems with web shops and external fulfillment and logistics services. Figure 2: Singles Day in China epitomizes the size and continued growth of e-commerce, with Alibaba alone reporting in 2019 almost $40 billion in sales in 24 hours, a 26% increase from the previous year. Figure 2 Page 6/84Investors pour capital into disruptive logistics technologies Away from the interface between companies and their customers, technology is also disrupting the business of logistics. Since 2012, venture capitalists have poured almost $30 billion into the logistics sector. Today around 3,000 startups are working to develop new products, services, and business models in the logistics space. Innovation in logistics covers a broad range of technologies and activities, with four areas attracting particular interest and investment: 1. Big data and advanced analytics Data is claimed to have taken the place of oil as the worlds most valuable commodity, and logistics players operate in a particularly data-rich environment, handling millions of pieces of information about customer orders, shipment movements, and the location and condition of assets. Many supply chain organizations have put data analytics at the top of their strategic priorities, yet many still struggle to systematically and effectively make use of that data. This is driving interest in smart analytics techniques designed to help diagnose operational issues, optimize network planning, and predict future scenarios. 2. Artificial intelligence (AI) AI lies behind a host of consumer-focused innovations, from targeted advertising to voice-activated virtual assistants. Beyond consumers, machine learning is becoming increasingly common in the business world. For logistics, artificial intelligence is critical to solve the most complex operational challenges like dynamic route optimization and precise capacity and demand prediction, as well as intelligent physical automation. The logistics industry is also embracing the arrival of workflow automation software commonly known as robotic process automation (RPA). Artificial intelligence will continue to play a vital role in the development of RPA, allowing these tools to address more complex, unstructured data formats and processes. According to research by the logistics industry trade association MHI, 79% of supply chain professionals now expect AI to become a core competence in their organization by 2022 and 88% believe it will help to improve risk management and predictability in operations. Figure 3 Figure 3: Advancements in AI have refined computer vision so that tens of thousands of various objects can be accurately identified and tracked, even on busy facility floors. PALLET JACK - 98% PALLET JACK - 95% TOOLS - 97% ENGINE - 96% TOOLS - 93% TOOLS - 94% GEARBOX - 99% PERSON - 99% PERSON - 94% PERSON - 98% PERSON - 97% ENGINE - 97% Page 7/843. Robotics and automation Once the preserve of manufacturing operations, advanced robotics and automation technologies are becoming increasingly commonplace thanks to lower costs, improved capabilities, and the availability of products tailored to the unique needs of the industry. Among the key innovations behind this trend are autonomous driving technologies for both indoor and outdoor mobile assets and new flexible picking and manipulation systems. Robots are becoming easier to integrate too, powered by machine learning and powerful sensors that allow them to adapt rapidly to changing environments and work safely alongside logistics personnel. 4. The Internet of Things (IoT) IoT has already had a profound impact on the world. Half the Earths population can already access the internet through smartphones, and the rapid growth of IoT technologies has linked billions of objects. Now, a new generation of communications technologies promises to close the remaining connectivity gaps. 5G data networks offer higher speeds, vastly increased capacity, and greater flexibility for the connection of people and things alike. In addition, a host of other next-generation wireless technologies are emerging to bring everyone and everything online, everywhere. The development of IoT and these next- generation wireless technologies will bring total visibility to supply chains, greatly increasing transparency and service quality for operators and customers. Beyond these trends, a host of other technologies has arrived on the market showing great potential, but these have yet to reach widespread use in logistics. Blockchain, the underlying protocol behind cryptocurrencies, has potentially game-changing benefits for leaner, faster, and more transparent and secure supply chains. However significant cultural and technical hurdles need to be overcome for broad deployment in logistics. Unmanned aerial vehicles (UAVs) and drone deliveries have captured the imagination of the industry for many years. Today niche players are realizing this vision, although regulatory frameworks may fail to keep pace with technical developments. Self-driving vehicles herald immense leaps forward in the efficiency and safety of logistics transport and so a number of players in the industry are actively exploring this space. For many new technologies, their time is still to come. Volatility creates challenges and opportunities for logistics Globalization is another dominant 21st- century theme with supply chains and distribution networks stretching out across the world. Today globalization is entering a new phase as emerging economies consume more of what they produce and countries in mature markets seek to improve the security of critical supply chains and the sustainability of their economies. By 2025, it is expected the global economy will be dominated by three major centers of gravity: North America, the European Economic Area, and Greater China. Truly worldwide trade intensity has already declined as more commerce takes place within these blocs and less between them. And as global trade growth slows, regional trade is on the rise, giving new dynamism to globalization. In the e-commerce sector, for example, cross-border transactions are increasing at twice the rate of domestic counterparts. A fifth of all e-commerce shipments already require cross-border fulfillment. While supply chains adapt to these long- term changes in demand, they must also cope with increasingly frequent storms. The UKs departure from the European Union in February 2020 created uncertainty over the future of supply chains between Britain and mainland Europe, for example. Meanwhile, the escalating trade war between the US and China has significantly impacted global supply chains, with new tariffs and counter-tariffs increasing the cost of some categories of goods by 15% or more almost overnight. With geopolitical uncertainty higher than it has been for many years, companies are continually revi