SHIFTING PATTERNS THE FUTURE OF THE LOGISTICS INDUSTRY - PWC'S FUTURE IN SIGHT SERIES

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SHIFTING PATTERNS THE FUTURE OF THE LOGISTICS INDUSTRY - PWC'S FUTURE IN SIGHT SERIES
Shifting
patterns
The future of
the logistics
industry

PwC’s future
in sight series

                  www.pwc.com/transport
SHIFTING PATTERNS THE FUTURE OF THE LOGISTICS INDUSTRY - PWC'S FUTURE IN SIGHT SERIES
Contents
                                                    Executive summary	                   2
                                                    Introduction	                        3
                                                    Disruption and uncertainty	          5
                                                      Changing customer expectations	    5
                                                      Technological breakthroughs	       6
                                                      New entrants to the industry	      8
                                                      Redefining collaboration	          9
                                                    Logistics scenarios	                11
                                                      1. Sharing the PI(e)	             12
                                                      2. Start-up, shake-up	            13
                                                      3. Complex competition	           14
                                                      4. Scale matters	                 15
                                                    Leading through uncertainty	        16
                                                    Learn more	                         17

           The trick to seeing the future...
           is knowing where to look for it.

           PwC’s future in sight series brings
           together our insights and perspectives
           on the disruptive forces we believe
           will have a transformative impact
           on the future.

           www.pwc.com/futureinsight

2 Shifting patterns
SHIFTING PATTERNS THE FUTURE OF THE LOGISTICS INDUSTRY - PWC'S FUTURE IN SIGHT SERIES
Executive summary
Like most other industries, transportation and logistics (T&L) is
currently confronting immense change; and like all change, this brings
both risk and opportunity. New technology, new market entrants, new
customer expectations, and new business models. There are many ways
the sector could develop to meet these challenges, some evolutionary,
others more revolutionary. In this paper we discuss four key areas of
disruption logistics companies need to focus on now, and explore some
possible futures of the industry.

Four areas of disruption                       ‘Sharing’ is a big story for logistics      Start-up, shake up: in this scenario
                                               now – from Uber-style approaches            new entrants in the form of start-
Customer expectations are increasing           to last-mile delivery, to more formal       ups make a bigger impact. The most
greatly. Both individuals and businesses       JVs and partnerships at corporate           challenging and costly last mile of
expect to get goods faster, more flexibly,     level, the whole sector is redefining       delivery, in particular, becomes more
and – in the case of consumers – at low        collaboration. But much of this             fragmented, exploiting new technologies
or no delivery cost. Manufacturing is          is hampered by inconsistencies              like platform and crowd-sharing
becoming more and more customised,             in everything like shipment sizes,          solutions. These start-ups collaborate
which is good for customers but hard           processes or IT systems. The Physical       with incumbents and complement their
work for the logistics industry. Add it        Internet promises great things for the      service offers.
all up and the sector is under acute and       sector, coming along with increased
growing pressure to deliver a better           standardisation in logistics operations.    Complex competition: here the
service at an ever lower cost.                                                             competitive set evolves in a different
                                               Possible futures                            direction, as large industrial or retail
It can only hope to do this by making                                                      customers and suppliers become players
maximum and intelligent use of                 What will the logistics marketplace look    in the logistics market themselves, not
technology, from data analytics, to            like in five to ten years? That’s still a   just managing their own logistics but
automation, to the ‘Physical Internet’.        very open question. We took a closer        turning that expertise into a profitable
This promises lower costs, improved            look at how some of the key disruptions     business model.
efficiency, and the opportunity to make        facing the industry may interact. The
genuine breakthroughs in the way the           future scenarios we explore involve         Scale matters: and finally, in this
industry works. But ‘digital fitness’          combinations of these four factors,         scenario, the current market leaders
is a challenge for the sector, which is        weighted according to how important         compete for a dominant market position
currently lagging many of its customers        specific trends become:                     by acquiring smaller players, achieving
in this respect. Attracting the right skills                                               scale through consolidation, and
is one issue, but developing the right         Sharing the PI(e): the dominant             innovation through the acquisition of
strategy is even more crucial.                 theme in this scenario is the growth of     smaller entrepreneurial start-ups.
                                               collaborative working, which allows the
An increasingly competitive                    current market leaders to retain their      We hope this paper will help you assess
environment is another big factor in the       dominance. This could for example see       the trends and developments most likely
mix. Some of the sector’s own customers        a greater use of ‘Physical Internet’ (or    to affect your own business, and start to
are starting up logistics operations of        ‘PI’) solutions, based on a move towards    develop a strategy to ensure continued
their own, and new entrants to the             more standardised shipment sizes,           profitability through this time of intense
industry are finding ways to carve out         labelling and systems.                      change.
the more lucrative elements of the value
chain by exploiting digital technology or
new ‘sharing’ business models, and they
don’t have asset-heavy balance sheets or
cumbersome existing systems weighing
them down.

                                                                                                   The future of the logistics industry   3
SHIFTING PATTERNS THE FUTURE OF THE LOGISTICS INDUSTRY - PWC'S FUTURE IN SIGHT SERIES
Introduction
Logistics companies are facing an era of unprecedented change
as digitisation takes hold and customer expectations evolve. New
technologies are enabling greater efficiency and more collaborative
operating models; they’re also re-shaping the marketplace in ways that
are only just beginning to become apparent. New entrants, whether they
be start-ups or the industry’s own customers and suppliers, are also
shaking up the sector.

                                                       The race is on to define the industry’s                For the logistics industry, we start
                                                       future. And with an estimated US$4.6                   by taking a closer look at some of
                                                       trillion1 of revenues at stake, companies              the key disrupting factors: changing
                                                       can’t afford to sit back and watch; they               customer expectations, technological
                                                       need to adapt to changing markets                      breakthroughs, new entrants to the
                                                       proactively.                                           industry, and new ways to compete
                                                                                                              or collaborate. These disruptions
                                                       We’ve developed a transformation                       have very different implications for
                                                       framework to describe how megatrends2                  individual companies, depending on
                                                       affect a given industry, taking into                   which segments they operate in, their
                                                       account the key disrupting forces                      type of ownership, and where they
                                                       that create uncertainties for every                    are located. They also don’t exist in a
                                                       organisation in the sector. Based on                   vacuum: in each case, the interactions
                                                       these uncertainties, we outline distinct               between them are equally, if not more,
                                                       scenarios to explore possible futures                  important. Government intervention
                                                       for the sector. This framework will help               and trade flows between regions and
                                                       you plan for this uncertain and volatile               territories are influencing the industry
                                                       future.3                                               too, but very much depend on national
                                                                                                              politics and geography.

1 https://www.plunkettresearch.com/industries/transportation-supply-chain-logistics-industry-market-research/
  Note: various estimates available, high variance, distinct approaches, difficult to measure given insourced and outsourced portions of the total market
2 https://www.pwc.com/us/en/faculty-resource/assets/symposium/2014-megatrends-overview.pdf
3 At PwC, we are analysing potential futures for various industry sectors and some papers are already published (see list on page 20).

4 Shifting patterns
SHIFTING PATTERNS THE FUTURE OF THE LOGISTICS INDUSTRY - PWC'S FUTURE IN SIGHT SERIES
Defining ‘Logistics’ for this paper
There are a number of distinct business models in the industry, although they can
overlap, and individual companies may operate under more than one model. In this
paper, we consider logistics service providers (LSP), carriers, and courier / express /
parcel (CEP) companies. Postal operators, too, are relevant players in the context of
logistics and CEP.

Not only business models but profitability and margins differ considerably. In
contrast with other industries, profits in logistics are relatively low. Yet, within this
sector, EBIT margins generally range from -1% to 8%. While carriers find themselves
close to zero profit, sometimes even in the red, the large CEP companies end up
being the most profitable group, sometimes reaching double-digit profit margins.4

Customers in the logistics industry comprise of both B2B and B2C segments. The
major part of the total market can be linked to B2B transactions, with LSPs and
carriers accounting for the biggest portion of industry revenue. CEP represents a
smaller, but faster growing segment; and just about a third of CEP revenues can be
attributed to B2C.

 Segment       Business                                                      Customer
               Model
               LSP            Freight forwarders, 3rd and 4th party          Manufacturers,
                              logistics service providers                    wholesalers, and retailers
               Carriers       Trucking, rail freight, sea freight and        LSPs
 B2B                          air freight companies
               CEP            Courier / Express / Parcel companies           Retailers, manufacturers,
                                                                             and other companies

 B2C           CEP            Courier / Express / Parcel companies           Private consumers

Our four logistics scenarios for the                      • Complex competition: here the                           Together these logistics scenarios map
future of the industry are based                            competitive set evolves in a different                  out a range of possibilities for the
primarily on the different ways                             direction, as large industrial or retail                context in which every company will
collaboration and competition could                         customers and suppliers become                          need to compete in the future. That
evolve within the sector:                                   players in the logistics market                         in turn provides a basis for evaluating
                                                            themselves, not just managing                           how resilient and ‘fit for growth’ current
• Sharing the PI(e): the dominant                           their own logistics but turning that                    strategies and plans are.
  theme in this scenario is the growth                      expertise into a profitable business
  of collaborative working, which                           model.                                                  Regardless of whether one logistics
  allows the current market leaders to                                                                              scenario comes closest to the truth
  retain their dominance. This could                      • Scale matters: and finally, in                          for your segment of logistics and
  for example see a greater use of                          this scenario, the current market                       geographical environment, or whether
  ‘Physical Internet’ (or ‘PI’)5 solutions,                 leaders compete for a dominant                          your future combines elements from
  based on a move towards more                              market position by acquiring smaller                    several, each company will need to
  standardised shipment sizes, labelling                    players, achieving scale through                        adapt their current strategy to cope.
  and systems.                                              consolidation, and innovation                           That may mean reassessing business
                                                            through the acquisition of smaller                      models, the operating model and
• Start-up, shake up: in this scenario                      entrepreneurial start-ups.                              capabilities, HR strategies, financial
  new entrants in the form of start-                                                                                performance, and the organisation’s
  ups make a bigger impact. The most                                                                                purpose. We suggest some possible
  challenging and costly ‘last mile’                                                                                directions in our final chapter. More
  of delivery, in particular, becomes                                                                               detailed views on particular regions,
  more fragmented, exploiting new                                                                                   segments and capabilities are still to
  technologies like cloud platforms                                                                                 come in later articles.
  and crowd-sharing. These start-ups
  collaborate with incumbents and
  complement their service offers.

4 Strategy& analysis (peer groups of listed companies in each segment; average EBIT margins of the past 5 financial years)
5 The term ‘PI(e)’ is here built into the phrase ‘Sharing the pie’, but also alludes to the Physical Internet, often referred to as ‘PI’; for more detail see page 9

                                                                                                                               The future of the logistics industry    5
SHIFTING PATTERNS THE FUTURE OF THE LOGISTICS INDUSTRY - PWC'S FUTURE IN SIGHT SERIES
Disruption and uncertainty

Changing customer                                   All this has huge implications for
                                                    transportation and logistics. LSPs – in
                                                                                                Shippers aren’t generally part of a
                                                                                                branded retail experience. Most private
expectations                                        particular 3PLs and 4PLs – need to          end-consumers are what we call
                                                    integrate data analytics and social         ‘shipper-agnostic’: they don’t care who
Like individual consumers,                          supply chains to provide much               delivers their goods, as long as they
industrial customers now                            better traceability and predictability      get them reliably, quickly and cheaply.
expect to get shipments faster,                     (not to mention lower costs); smart         Many want more flexible delivery –
more flexibly, and with more                        warehousing solutions will become           whether in terms of when or where
transparency at a lower price.                      essential. The implications are clear:      they get their goods - and most aren’t
                                                    ‘digital fitness’ is becoming a must for    willing to pay for shipping: they expect
No surprise that across the                         every logistics company.                    it to be free, though they are prepared to
industry, both operating                                                                        pay a premium for additional services,
models and profitability are                        B2C: New shopping patterns                  such as faster delivery for high-value
under strain. And the pace                          Many logistics companies also serve B2C
                                                                                                items. There’s also currently a low
of transformation for large                                                                     acceptance of dynamic pricing for
                                                    customers. Consumers went digital long      parcels; customers expect to pay the
manufacturing and retail                            before many of the retailers, and some      same price for shipping regardless of
customers may turn out to be                        parts of the sector are still struggling    seasonal capacity constraints faced by
even faster than for private                        to keep up. The leading players are         their shipper, with the exception of
final consumers.                                    adopting what we call ‘total retail’,       surcharges for same day, overnight or
                                                    which is an operating model across          expedited service.
                                                    bricks and mortar, online mobile and
B2B: Striving for efficiency and
                                                    other retail channels.6 Total retail is
transparency                                        complemented by ‘connected retail’,
Manufacturing industries are facing far             where retailers aim to create a seamless
greater expectations around efficiency              brand experience for the customer
and performance than ever before. Their             across personalised marketing, the
customers expect faster time-to-market,             physical store, the digital experience,
reduced defect rates and customised                 and the payment options, all of it driven
products. Ultimately, the result may                by a strong coherent brand.7 What
be a goal that was once impossible: a               are the consequences for the logistics
‘lot size of one’, where each product is            industry?
manufactured to the specifications of a
specific end-customer. The advent of the
industrial Internet of Things and what
other research refers to as ‘Industry 4.0’
is allowing manufacturing companies,
whether they make industrial
equipment, cars, planes, or consumer
goods, to redefine everything from the
way they interact with customers to how
they structure supply chains.

6   http://www.pwc.com/totalretail
7   PwC, Connected Retail: Reshaping tomorrow’s operating model and metrics, 2015

6 Shifting patterns
SHIFTING PATTERNS THE FUTURE OF THE LOGISTICS INDUSTRY - PWC'S FUTURE IN SIGHT SERIES
Technological                                        Cloud technology can enable platform
                                                     solutions, which in turns makes it
                                                                                                                                              themselves as ‘advanced’ on digitisation
                                                                                                                                              was just 28%. Some of the industry’s
breakthroughs                                        possible to use new business models,                                                     customers are already well ahead of
                                                     such as ‘virtual freight forwarding’.                                                    this – 41% of automotive companies and
Technology is changing                               It can also provide flexibility and                                                      45% of electronics companies already
every aspect of how logistics                        scalability, as well as standardised                                                     see themselves as advanced. The lack of
companies operate. ‘Digital                          and harmonised processes across the                                                      a ‘digital culture’ and training is thus the
fitness’ will be a prerequisite                      whole organisation. That’s especially                                                    biggest challenge for transportation and
for success: the winners will                        important for those LSPs or carriers who                                                 logistics companies. T&L firms are in
                                                     have grown through acquisitions, and                                                     line with other industries in planning to
be those who understand how                          currently rely on a patchwork of legacy                                                  invest 5%9 of their revenues per annum
to exploit a whole range of                          systems.                                                                                 until 2020, but the next few years will
new technologies, from data                                                                                                                   be critical: companies that don’t start
analytics to automation and                          The potential is huge, but the industry                                                  soon risk being left behind permanently.
platform solutions. Those who                        has thus far been slow to seize it. In
                                                     our recent Industry 4.0 study, the
don’t, risk obsolescence. But                        percentage of T&L companies that rated
with so many technologies
competing for management
attention and investment,
defining a clear digital
strategy that’s integrated
                                                    Figure 1: L
                                                               ack of digital culture and training is the biggest
into business strategy will be                                challenge facing transportation and logistics companies
critical.
Digital is still a challenge for the
sector
                                                                                                                           cs as core
                                                                                                                     alyti
There is no other industry where so                                                                          &
                                                                                                                 An
                                                                                                                          ion and i
                                                                                                                                      cap
                                                                                                                                          ab
                                                                                                                                            il
                                                                                                        ta            isat and h ntegra
many industry experts ascribe a high                                                             Da
                                                                                                                   git     l      o
                                                                                                                 Di ertica e cha rizon ti

                                                                                                                                                             ity
                                                                                                                   v valu        ins t

                                                                                                                                                   on l
                                                                                                      1.
importance to data and analytics in                                                                        of

                                                                                                                                                     a
                                                                                                  m od . D i d cus

                                                                                                                                                          e offerings
the next five years than transportation
                                                                                                      2
                                                                                                      e ls a n

                                                                                                                                                 se i o n o f
and logistics – 90% in T&L compared
                                                                                                            g it a to

                                                                                                   50%                                              r vic
                                                                                                                                                d tis a t
                                                                                                                  lb m

                                                                                                                  si
to an average of 83%.8 The sector has                                                                                n                          Di
                                                                                                                    u

                                                                                                                                                 gi
                                                                                                                 er e s s                    3. t an
                                                                                                                     acc                        c
                                                                                                                         ess             pro du
never had access to more data. There                                                                 ta
                                                                                                 Da

                                                                                                                                                             it y
                                                                                                                                                           l
                                                                                                          &                                             bi
                                                                                                               An                                    pa
                                                                                                                         alyt                     ca
                                                                                                                                ic s a   s c ore
are vast opportunities here to improve
performance and serve customers better,
                                                                                           Lack of digital culture and training
and LSPs who are part of a digitally
integrated value chain can benefit from
                                                       Unresolved questions around data security and data
significantly improved forecasting to                   privacy in connection with the use of external data
                                                                                                                                                                                          38%
scale capacity up or down and plan
                                                                    High financial investment requirements                                                                                38%
routes. Adding machine learning and
artificial intelligence techniques to data                      Lack of a clear digital operations vision and
                                                                                                                                                                                      33%
                                                                support / leadership from top management
analytics can deliver truly dynamic
routing.                                                                                   Insufficient talent                                                                  26%

                                                        Slow expansion of basic infrastructure technologies                                                                    23%
                                                                          Business partners are not able to
                                                                        collaborate around digital solutions                                                                  22%

                                                            Unclear economic benefit of digital investments                                                                   21%

                                                          Lack of digital standards, norms and certification                                                             17%

                                                                 Concerns around loss of control over your
                                                                          company’s intellectual property                                                               15%

                                                           Note: Included as one of three possible responses

                                                    Q: Where are the biggest challenges or inhibitors for building digital operations
                                                    capabilities in your company?

                                                    Source: http://www.pwc.com/gx/en/transportation-logistics/pdf/transportation-logistics-
                                                    key-findings.pdf

8   https://www.pwc.com/gx/en/industries/industries-4.0/landing-page/industry-4.0-building-your-digital-enterprise-april-2016.pdf
9   Ibid.

                                                                                                                                                                         The future of the logistics industry   7
Automation could reshape the                           processing and optics now allow tasks to        We’ve mapped out some of the most
workforce                                              be automated which were once thought            important technologies in the table
                                                       too complex – like trailer loading and          facing this page. The rate of adoption
Labour is a critical element of any                    offloading at acceptable speeds.                of any of the technology opportunities
logistics operating model, and up till                                                                 discussed here will not be limited by
now there’s always been a trade-off                    Package delivery could also make more           technical advancement rate. Instead it
between service levels and costs. But                  use of automation, through innovations          will be driven by the rates of regulatory
automation breaks down this equation,                  like autonomous vehicles or delivery            and customer acceptance.
allowing firms to offer better service                 drones. Google has already started
and save money at the same time.                       working on self-driving lockers and
Some of the industry’s most labour-                    the trucking industry is partnering
intensive processes are on the way to                  with OEMs on partially automated
being fully or partially automated, from               truck convoys. Even if more radical
warehousing to last-mile delivery.                     solutions are a long time coming, other
                                                       technologies which could make drivers
Automated solutions in the warehouse                   more efficient are in the offing too, like
are already being implemented and                      augmented reality solutions that give
their level of sophistication is increasing.           drivers more information about their
For example, automated loading and                     environment and the packages still on
unloading systems are already available,               board.
but in the future these are likely to be
able to bypass obstacles and adjust
routes automatically. Advances in data

  The technology10                                 The impact                                               The uncertainties

                                                                                      • Social expectations around data privacy and security may
                          • Improved supply chain transparency, safety and              change
 Physical Internet          efficiency                                                • Regulation around data security and privacy may increase
 (based on the IoT)       • Improved environmental sustainability (more efficient       or be enforced more stringently
                            resource planning)                                        • The sector’s willingness and ability to invest in collaboration
                                                                                      • Whether international bodies will drive standardisation

                          • Enabling collaboration horizontally                       • Companies’ willingness to adopt is uncertain due to data
 IT standards
                          • More efficiency and transparency                            security concerns

                                                                                      • Rate of development of data processing capacity is unclear
                          • Improvements in customer experience and                   • Question marks around data security
                            operational efficiency in operations                      • Social expectations around data privacy and security may
 Data analytics
                          • Greater inventory visibility and management                 change
                          • Improved ‘predictive maintenance’                         • Regulation of data security and privacy may increase or be
                                                                                        enforced more stringently
                                                                                      • Development of costs unclear (once a certain scale is
                          • Enabling new platform-based business models and
 Cloud                                                                                  reached physical data centres still tend to be cheaper)
                            increasing efficiency
                                                                                      • Uncertainties around data security
                          • Enhanced supply chain security (reduction of fraud)
                          • Reduction in bottlenecks (certification by 3rd parties)   • Rate of adoption uncertain
 Blockchain               • Reduction of errors (no more paper-based                  • Unclear whether one or two dominant solutions will emerge
                            documentation)                                              or multiple competing solutions
                          • Increased efficiency
                          • Reduction in human workforce and increased
 Robotics &                 efficiency in delivery and warehousing (including
                                                                                      • Speed of technology development unclear
 automation                 sorting and distribution centres)
                          • Lower costs
                                                                                      • Regulatory environments not currently in place in most
                                                                                        countries
 Autonomous               • Reduction in human workforce
                                                                                      • Liability issues not yet clear
 vehicles                 • Increased efficiency in delivery processes
                                                                                      • Ethical questions remain especially in relation to emergency
                                                                                        situations
                                                                                      • Regulation in most countries not sufficient for commercial
                          • Increased cost efficiency (use cases: inventory,
                                                                                        use in public areas like delivery
 UAVs / Drones              surveillance, delivery)
                                                                                      • Safety and privacy concerns may hamper market
                          • Workforce reduction
                                                                                        acceptance

                          • Lower transportation demand                               • Speed, scale, and scope of uptake by customer industries
 3-d printing
                          • Transported goods would mostly be raw materials             still unclear

10 For a list of PwC publications on these technologies please refer to page 18

8 Shifting patterns
New entrants to the                                    approach and helps people to get
                                                       things transported within their city
                                                                                                               The industry’s own customers may
                                                                                                               also become significant new entrants.
industry                                               by connecting them with registered                      Amazon is an obvious example: it’s
                                                       drivers.13 Norwegian start-up Nimber                    looking to expand its in-house expertise
Platform technology has given                          matches commuters and travellers with                   in warehousing as well as develop its
rise to new business models,                           consumers looking to ship something,                    own delivery capabilities. Hence its
often driven by start-ups that                         whether it be a piano across the country                acquisition of a warehouse automation
enter the logistics industry.                          or a skateboard or document across                      specialist, now part of its Amazon
New ‘sharing’ business models                          town.14                                                 Robotics business unit. The company has
                                                                                                               leased 20 aircrafts to handle more of its
could have as much of an                               How are traditional logistics companies                 own shipments15, and is piloting a ‘Prime
impact on the sector as new                            countering these developments? They                     Air’ 30-minute delivery offering using
technology. And the industry’s                         know they need to explore opportunities                 drones.16 Bloomberg has also reported
current customers and                                  for new products and services – a field                 that Amazon has plans to launch its own
suppliers may end up being the                         where start-ups have a clear advantage                  logistics offerings, a project, allegedly
                                                       given their freedom from outmoded                       referred to as ‘Dragon Boat’.
biggest new entrants.                                  processes and hierarchical structures.
                                                       Yet investments by traditional LSPs in                  In Asia, Alibaba is trying to improve
Start-ups drive new business                           digital logistics start-ups only constitute             delivery services for its sellers by
models                                                 around 6% of overall venture capital                    setting up Cainiao, a JV with several
Most of the new entrants to the                        flows.                                                  logistics companies, a department store,
logistics sector are start-ups, and                                                                            an investment firm and a company
many of these are looking to use new                   Start-ups aren’t the only new                           with port logistics operations.17 The
technology to enter the industry. To                   entrants                                                main advantage for network members
date most of these are in ‘asset light’                                                                        constitutes the access to a logistics
                                                       Major players from other industries may                 data platform, which helps them to
parts of the value chain; for example,
                                                       have even more potential to shake up                    achieve efficiencies in order fulfilment
virtual freight forwarders. These asset-
                                                       the industry’s competitive dynamics.                    by leveraging their capacity and
less or asset-light businesses exploit
                                                       Autonomous vehicles are one possible                    capabilities at a large scale.18 And the
digital technology to offer interactive
                                                       example: technology players, or                         company is trying out new ideas too,
benchmarking of freight rates, or match
                                                       technology-automotive collaborations                    like an app that allows consumers to
shippers with available capacity.
                                                       may enter the industry, especially                      request a pick-up of a return or package
                                                       with ideas like self-driving lockers, or                from delivery personnel in the area.19
Many of the new entrants in freight
                                                       machine-to-machine parcel-station
forwarding are basing their offering
                                                       loading for last-mile delivery. Crowd-
on more agile pricing. Some enable
                                                       sharing platforms may also emerge from
carriers to bid on loads, allowing them
                                                       autonomous vehicle development, or
to lower their bids in order to fill up
                                                       independently. As car-sharing increases,
capacity. They’re also providing quotes
                                                       so may the use of the storage space
more quickly and increasing price
                                                       available in these vehicles as a flexible
transparency – for example, by linking
                                                       way to expand capacity.
via API directly to a large number of
carriers, and providing customers with
their negotiated rates for each of the                                   Figure 2: Venture capital flows into digital logistics startups
carriers they use so they can compare                                              since 2011*
directly.

Last-mile delivery has also seen a wave                                                                                                       Flows from
                                                                                          Private equity flows                              legacy logistics
of start-ups in recent years. Some of                                                                                                         companies
these companies are using technology                                                          > US$150m
Redefining                                         Collaboration and
                                                   standardisation would increase
                                                                                                     Other new types of collaboration

collaboration                                      efficiency
                                                                                                     There are many other less radical ways
                                                                                                     for logistics companies to use assets
Horizontal collaboration is                        For many industries, the standard                 more efficiently by collaborating.
already happening, especially                      assumption is that a larger number of             For example, by sharing fleets and
                                                   competitors is beneficial for customers.          networks, and establishing agreements
in last-mile delivery, but it’s                                                                      similar to the airlift purchased by postal
                                                   However, in certain logistics sectors,
hampered by inconsistencies.                       there are substantial benefits in having          agencies from commercial couriers, or
Higher levels of efficiency                        more consolidation, not less. According           the code-sharing used by airlines. DB
could be achieved by more                          to one estimate, a 10% to 30% increase            Schenker, for example, recently signed a
consistent standards, defined                      in efficiency in the EU logistics sector          five-year contract with the online freight
through the Physical Internet                      would translate into €100-300 billion             exchange provider uShip, to develop a
                                                   in cost savings for European industry.20          platform to connect truck drivers and
and increased collaboration,                                                                         shipments more efficiently.21
                                                   The Physical Internet could help address
whether in the form of                             this ‘grand challenge’ by drastically
alliances, joint ventures or                       increasing co-operation between                   Many companies in the sector are
M&A.                                               companies and across transport modes              also turning to M&A, joint ventures,
                                                   through greater standardisation (see              and alliances as a way to achieve
Building on last-mile partnerships                 info box ‘From manifesto to reality’).            collaboration. In 2015, M&A deal value
                                                                                                     nearly doubled compared to 2014,
There are already notable examples of              For the Physical Internet to work in              with much of this activity driven by
market players operating collaboratively.          practice, though, companies would need            large players looking to expand their
Companies like FedEx and DHL have                  to be willing to collaborate far more             international operations and service
been partnering with national postal               extensively than they do today. Most of           offerings. But with disruption on the
companies and small local players for              the 535,000 distribution centres in the           horizon, there may be opportunities to
many years. But with the advent of new             US are standalone operations owned                use deals to enhance capabilities in key
technology, collaboration can become               by different companies; imagine the               areas too; digital is a good example.
much more dynamic.                                 savings if they were all connected, and
                                                   physical workflows were standardised
However, fragmentation, accountability,            for maximum efficiency.
and a lack of consistency make
collaboration more difficult. For
example, each company has its own
labelling system, and some companies
are wary of farming out the crucial
last mile of the journey to an operator
that may not reflect its own brand and
service levels. And aside from the last
                                                                                          From manifesto to reality: defining the
mile, partnering agreements are the                                                       Physical Internet
exception, rather than the rule. Take
freight forwarding. While containers are                                                  The term ‘Physical Internet’ (PI or π); was first
a standard size, the packages that go                                                     coined by Professor Benoit Montreuil of the
into them aren’t. Nor are the forms and                                                   Georgia Technology Institute in 2011. It’s based
digital entries used to clear customs.                                                    on the idea that physical objects can be more
Contract logistics companies co-operate                                                   efficiently moved around if they become more
extensively with shippers, but often                                                      standardised and share common channels,
don’t share resources with competitors.                                                   like data packets on the internet. That requires
                                                                                          modularisation and standard interfaces and
                                                                                          protocols. In addition, hubs and networks
                                                                                          across transport modes will need to be better
                                                                                          synchronised, and IT applications and networks
                                                                                          will also need to operate together. Montreuil’s
                                                                                          manifesto proposes π containers in standard
                                                                                          dimensions that can be efficiently stacked together,
                                                                                          potentially with sensors if appropriate, and sealable
                                                                                          for security purposes. To make the most of these,
                                                                                          π movers and π loading systems will need to be
                                                                                          developed too, as well as more efficient transport
                                                                                          models.

20 http://ec.europa.eu/research/transport/news/items/alice_lauch_en.htm
21 http://www.wsj.com/articles/db-schenker-signs-on-with-uship-online-freight-platform-1467235737

10 Shifting patterns
Logistics scenarios
What will the logistics marketplace look like in five to ten years? That’s
still an open question. In this chapter we take a closer look at how some of
the key disruptions facing the industry may interact. We have done this
by describing four logistics scenarios. In each of these, technology plays
a key role, but affects the market in different ways. In two of the models,
new entrants are the primary drivers of change, while incumbents retain
a dominant position in the other two. The nature of market dynamics,
especially the level of collaboration versus competition, also varies
between the scenarios.
                                                                                             2. Start-up, shake-up

1. Sharing the PI(e)                                                                         New entrants become significant
                                                                                             players and take market share from
Incumbents increase their efficiency                                                         the incumbents through new business
and reduce their environmental                                                               models based on data analytics,
impact by collaborating more, and                                                            blockchain, or other technologies.
developing new business models,                                                              One or two become dominant in
such as sharing networks. Research                                                           specific segments. Last-mile delivery
around the ‘Physical Internet‘                                                               becomes more fragmented, with
(PI) leads to shared standards                                                               crowd-delivery solutions gaining
for shipment sizes, greater modal                                                            ground. These start-ups collaborate
                                                      Data analytics
connectivity, and IT requirements                                                            with incumbents and complement
across carriers.                                                                             their service offers.
                               Physical Internet
                                                                             Cloud
                               standards
                                                                             Logistics

                                                                                         Blockchain
                         IT
                         standards                    Logistics
                                                      scenarios

                                                                                    Robotics and
                                 3-d                                                automation
                                 printing
4. Scale matters
Incumbents increase efficiency                                                               3. Complex competition
by streamlining their operations                                       Autonomous            Big retail players expand their
and taking full advantage of new             Drones                                          logistics offerings to fill their own
                                                                       vehicles
technology. They fund promising                                                              needs and beyond, effectively moving
new technologies with venture                                                                from customers to competitors. They
capital cash, and attract new staff                                                          purchase small logistics players
with critical skills and expertise in                                                        to help cover major markets, and
competition to create a dominant                                                             draw on their deep understanding
market position. Major players merge                                                         of customer behaviour to optimise
to extend their geographical scale and                                                       supply chains. Technology firms who
enhance their cross-modal coverage.                                                          used to be suppliers to the industry
Access to capital to fund these                                                              enter the logistics arena too, offering
investments becomes increasingly                                                             logistics services and turning into
important.                                                                                   competitors.

12 Shifting patterns
1. Sharing the PI(e)
Incumbents increase their efficiency and reduce their
environmental impact by collaborating more, and developing
newbusiness models, such as sharing networks. Research
around the ‘Physical Internet’ (PI) leads to shared standards for
shipment sizes, greater modal connectivity and IT requirements
across carriers.

What’s driving this scenario?
Several forces converge in this
scenario. With customers demanding                                           ‘Sharing the PI(e)’
cheap, green and fast supply chains,
the incumbent logistics companies                       Customer expectations               New entrants
look for ways to create unique value                       • More sustainable                  • Incumbents play a
propositions. Some major industrial                          supply chains                       dominant role in directing
customers still want the comfort of                        • Willingness to explore              and using shared
dealing with one logistics partner, yet                      new kinds of collaboration          networks
they look at new ways of partnering.                         with their LSP                    • Minor role of new entrants

At the same time, new physical
                                                        Technology                          Collaboration vs. competition
and digital standards emerge, most
significantly in relation to the ‘Physical                 • ‘PI’ standards lead to new        • Increase in collaboration,
                                                             solutions for loading and           based on consistent
Internet’, making it easier for companies
                                                             packing                             physical standards
to share space within one container and
                                                           • Consistent, shared                • Incumbents focus on
to connect across transport networks.                        communications standards            defining unique value
This is supported by more consistent                         and data exchange                   propositions
standards for communication and data
exchange. Governments also encourage
greater vertical collaboration across
the industry and fund initiatives such
as EU-driven programmes to increase
‘synchromodality’ (connectivity between      ownership of some fleet assets. Sea           B2B customers may consider investing
shipping modes and across shippers).22       freight and trucking companies are            in transportation assets, and thereby
                                             likely to benefit the most from the           secure superior service and rates from
What are the implications for                new ‘PI’ standards, which make it             a trusted long-term partnership with
logistics companies?                         easier to fully use their capacity, and       their LSP. Usually, service levels and
                                             increased profitability is likely to reduce   efficiency are higher in urban areas.
As networks become more fully                the pressure for consolidation in this        Isolated rural communities are often
shared, CEP companies will focus             sector. Warehousing will benefit from         served only by national posts with
their competitive edge on customer           cost efficiencies too, as automated           universal service obligations. The
expectations. Companies which can            loading and picking systems based             regional focus of CEP providers will
build on a strong brand profit from          on ‘PI’ standards are implemented.            enhance the service level for customers,
improved margins, by partnering with         Cybersecurity will be a crucial issue         especially in isolated areas along less
other firms to cover less profitable         for companies that shift to new data          profitable routes.
delivery routes. National posts, on the      standards and greater data sharing.
other hand, may struggle as they are
forced to cover these routes and lose
                                             What are the implications for
volume in more profitable regions.
                                             customers?
3PLs, 4PLs and freight forwarders begin      Increased efficiency leads to lower costs
to establish collaborative partnerships      for LSPs, and they have to decide how
with major customers, who take over          much of this benefit gets passed to their
                                             customers.

22 http://www.etp-logistics.eu/?page_id=79

                                                                                                  The future of the logistics industry   13
2. Start-up, shake-up
New entrants become significant players and take market
share from the incumbents through new business models based
on data analytics, blockchain, or other technologies. One or
two become dominant in specific segments. Last-mile delivery
becomes more fragmented, with crowd-delivery solutions
gaining ground. These start-ups collaborate with incumbents
and complement their service offers.

What’s driving this scenario?
Technological innovation and changing
customer behaviour are key here. In                                         ‘Start-up, shake-up’
the CEP space, start-ups take advantage
of consumers’ growing interest in the                  Customer expectations                     New entrants
sharing economy to develop new crowd-                     • Low-cost personalised                   • Start-ups drive technology
sharing solutions, sometimes linked                         service with real-time visibility         development and
with car-sharing. E-marketplaces for                      • Choice of delivery channels               innovation
transportation and logistics services                     • Participation in sharing                • App developers become
emerge, targeting specific industry                         economy                                   full-on integrators
sectors with great success. Start-ups
which began by offering individual apps
                                                       Technology                                Collaboration vs. competition
in the freight, parcel or last-mile space
also expand to become independent                         • Crowd-sharing platforms                 • Collaboration between
                                                            increase                                  start-ups and incumbents
platforms, aggregating access to
                                                          • Blockchain technology                   • Start-ups complement
shippers and carriers. Logistics solutions                  gains ground and facilitates              incumbents’ service offers,
based on blockchain technology                              collaboration                             particularly around
are developed by start-ups and gain                                                                   last-mile delivery and
momentum in areas such as digitised                                                                   supporting functions
trade documents, chain of custody,
customs clearance, and trade finance.

What are the implications for                its trustless peer-to-peer network,                costs as well as lower service levels,
logistics companies?                         thereby reducing delays, human error,              though the idea is more likely to be
                                             and transaction costs for interactions             accepted by B2C than B2B customers.
Forwarding becomes more fragmented,          between supply chain partners –                    Consumers who participate in crowd-
as newly emerging ‘hub specialists’ begin    for example, in the processing of                  sharing solutions earn extra cash for
to dominate specific legs of trade routes.   international trade documents.                     trips they take anyway. They have a high
In the contract logistics space, start-ups                                                      flexibility in how they can contribute to
(including 4PL start-ups) complement                                                            platform-based logistics solutions – with
                                             What are the implications for
and enhance the services provided by                                                            opportunities from a temporary part-
3PLs, focusing on their most profitable      customers?
                                                                                                time role all the way to a full-time job.
customer segments. Operators in              Industrial customers benefit from                  Supply chains become more transparent,
CEP have to compete with start-ups           advanced logistics services based on               with blockchain-backed services offering
which may have a clear cost advantage        high-end technology, provided by                   easy authentication of shipments.
if their people are independent              collaborating incumbent 3PLs and start-
contractors rather than employees.           ups. Retail customers enjoy greater
Transportation and logistics is among        choice of last-mile providers, and
the top industries to replace labour         lower delivery costs as a result. At the
with automation – but the time frames        same time, service offers based on the
for implementation vary. Sortation and       sharing economy might result in lower
picking, for example, will be automated
much quicker than last-mile delivery.
Blockchain technology also fosters
automation and efficiency through

14 Shifting patterns
3. Complex competition
Big retail players expand their logistics offerings to fill their
own needs and beyond, effectively moving from customers
to competitors. They purchase small logistics players to help
cover major markets, and draw on their deep understanding
of customer behaviour to optimise supply chains. Technology
firms who used to be suppliers to the industry enter the
logistics arena too, offering logistics services and turning into
competitors.

What’s driving this scenario?
The competitive landscape changes
markedly here. Online retailers expand                                    ‘Complex competition’
their own logistics offerings. In some
cases, this reduces their use of external               Customer expectations              New entrants
providers, but doesn’t replace it entirely.                • Customers rapidly digitise       • New entrants are
Others use their own sophisticated                           supply chains                      predominantly major
analysis of customer data to increase                      • Autonomous vehicles                players from online retail,
logistics efficiency substantially. In                       become accepted by                 and technology-based
order to fully use their capacity, players                   customers                          industries
like the large grocery chains and big-
box retailers begin offering their own
                                                        Technology                         Collaboration vs. competition
logistics services, and look to combine
their bricks-and-mortar and online                         • Warehouse robotic              • Major retail and logistics
                                                             solutions increase in            platforms compete for
supply chains.
                                                             sophistication                   dominance
                                                           • Autonomous vehicles            • Retailers initially develop
Suppliers to the industry may also enter                     achieve market maturity          logistics capability to support
the business of logistics operations.                      • 3-d printing-based               own operations, but gradually
If warehousing solutions – using                             manufacturing gains scale        move into 3rd party provision
advanced robotics, drones and self-
driving repositories – become more
sophisticated, logistics service providers
may no longer be able to provide staff
with the right skills to operate these        What are the implications for               What are the implications for
assets. Technology suppliers may offer        logistics companies?                        customers?
logistics services based on their own         CEP companies face decreasing volumes,      Online retailers that start their own
particular expertise.                         making it more difficult to fully use       logistics operations reduce their
                                              capacity. They also struggle to keep        dependence on LSPs, and gain a
Manufacturing based on 3-d printing           up with rapid advances from industry        competitive edge over retailers that
gains momentum and lowers the                 ‘disruptors’ operating primarily in the     don’t manage to do this. Further
overall demand for transportation. To         last mile. 3PLs may need to consider        improvements in warehouse robotics
compensate, LSPs experiment with new          partnering with robotics companies          and automation drive down logistics
business models, like developing 3-d          to improve warehouse services. Some         costs for industrial customers. Fierce
printing hubs, 3-d printing capabilities      carriers shift from working with current    competition among incumbents and new
at customers’ sites, or offering platforms    incumbent CEP companies to emerging         entrants drive down costs. Consumers
with 3-d blueprints. LSPs will thus           new competitors, but the net impact is      will benefit by getting a better service
become competitors to some of their           essentially neutral.                        from big online retailers who integrate
customers.                                                                                their logistics activities.

                                                                                                 The future of the logistics industry   15
4. Scale matters
Incumbents increase efficiency by streamlining their
operations and taking full advantage of new technology.
They fund promising new technologies with venture capital
cash, and attract new staff with critical skills and expertise
in competition to create a dominant market position. Major
players merge to extend their geographical scale and enhance
their cross-modal coverage. Access to capital to fund these
investments becomes increasingly important.

What’s driving this scenario?
Technology continues to improve,
but its development is dominated                                     ‘Scale matters’
by incumbents’ own research and
their acquisitions of new entrants in        Customer expectations               New entrants
specific technology areas. Network             • Customers expect                  • New entrants are acquired
size and efficiency continue to be key           efficiency, speed, and              by incumbents as soon as
sources of competitive advantage, and            digital fitness                     they develop promising
consolidation accelerates. The key to          • They want higher levels of          technologies or business
success in this model is buying the right        user friendliness and               models
start-ups at the right time: too early and       comfort
they will be too speculative, too late and
                                             Technology                          Collaboration vs. competition
the price will be too high.
                                               • Technologies such as data        • Competition heats up
                                                 analytics enhance                  between incumbents,
What are the implications for                    efficiency in large logistics      putting pressure on margins
logistics companies?                             networks                         • Scale is a necessary
                                               • Corporate-led incubators           condition to achieve the
Access to capital becomes a key                  and venture arms drive             efficiency to remain
differentiating factor, both to drive            technology development             competitive
in-house R&D and to fund efficiency-
enhancing technologies such as data
analytics, blockchain, and automation.
Carriers look to establish dominant
positions, accelerating M&A in the
trucking and sea freight segments. CEP
companies increase efficiency in the last
mile by introducing new technologies
like drones (for remote markets) serving
both their B2B and B2C customers,
striving for unique selling points in a
highly competitive market.

What are the implications for
customers?
Customers benefit from the growing
network size of LSPs, and gain better
delivery speeds and efficiency,
supported by new and more
sophisticated technologies in delivery
and customer interaction, thereby
enhancing their user-friendliness and
level of comfort.

16 Shifting patterns
Leading through
uncertainty
The basis for competitive advantage
in the logistics industry is changing
fundamentally. An established network
may become a hindrance rather than
an advantage. New technologies will
change the industry’s cost model and
call existing business models into
question. And there may well be new            Change in the competitive environment
approaches to dynamic pricing that             puts a company’s culture to the test
take capacity utilisation more fully into      – especially in a mature industry like
account.                                       logistics, where it can be tough to
                                               change, even when traditional ‘ways to
Although the core needs of most                play’ are being fundamentally changed
customers have changed very little,            or even replaced. T&L companies need
customer expectations are increasing           to be ready for this change, and the
greatly, whether those customers               successful companies will be those with
are consumers shipping packages or             agile and flexible cultures that make it
OEMs partnering with an LSP on the             easier for people to work together across
production line.                               internal boundaries. You need to put
                                               your culture to work.
In the futures we have described, can
a logistics company meet the growing           Logistics companies also need to bring
expectations of customers, remain              costs down; but not only for the sake
profitable and generate growth? The            of efficiency. They also need to prune
short answer is yes. But it’s not going to     what doesn’t matter and thus free up
be simple or easy.                             resources for the key areas of focus –
                                               such as digitisation, asset productivity,
Whatever industry segment a T&L                and innovation – and invest more to
company operates in, it will be crucial        support the company’s key capabilities
to commit to an identity and develop           and value propositions. So, ’cutting
a clear strategy to fulfil this, focusing      costs to grow stronger’ should be seen
only on markets where they believe they        as something closely related to strategy.
have a ‘right to win’. Companies need
to ask themselves whether they have            Finally, with more disruption ahead,
the distinctive capabilities they need         companies need to anticipate how their
to compete. If not, can they develop           capabilities will need to evolve. The
these capabilities, use collaboration to       best will develop services and solutions
succeed, or should they withdraw from          that will create demand instead of just
certain elements of their business?            following it. To do this, T&L companies
                                               need to establish strong relationships
Logistics companies will need to focus         with key customers, have an ear on the
on ‘digital fitness’, cost efficiency, asset   markets they target, and actively shape
productivity, and innovation if they           the future.
want to meet changing expectations.
Building and refining these and other          The above describes our concept of ‘five
capabilities, and then bringing them to        key acts of unconventional leadership’
scale across the enterprise, will be key       that drive success by aligning distinctive
as they translate the strategic into the       capabilities with business strategy,
everyday.                                      and applying them consistently. This
                                               approach, defined in our recent book,
                                               Strategy that Works, spans the entire
                                               business, from developing the business
                                               model through to daily operations.

                                               In this paper we’ve taken a broad
                                               perspective. It gives hints on some
                                               ways the industry might develop, but
                                               you will want to consider the detailed
                                               implications for your specific business
                                               and operating model. Going forward,
                                               we will reflect further on how these
                                               scenarios may play out differently
                                               around the world as well as up, down
                                               and across the value chain, and
                                               supplement this broad overview with
                                               deep-dive perspectives in specific areas.

                                                                                            The future of the logistics industry   17
Learn more
Authors                                          Further reading on the transportation and
                                                 logistics sector
Andrew Tipping, Strategy& US
andrew.tipping@strategyand.pwc.com               2016 Commercial Transportation Trends – Strategies
                                                 freight carriers can use to defeat disruptors
Peter Kauschke, PwC Germany
peter.kauschke@de.pwc.com                        19th Annual Global CEO Survey: Transportation and
                                                 logistics industry key findings
Contributors                                     Industry 4.0: Building the Digital Enterprise –
Andrew Schmahl, Strategy& US                     Transportation and logistics key findings
andrew.schmahl@strategyand.pwc.com               Intersections: Quarterly analysis of M&A in the global
Dietmar Prümm, PwC Germany                       transportation & logistics industry
dietmar.pruemm@de.pwc.com                        Transformation & logistics 2030 – A series of Delphi
Dominik Baumeister, Strategy& Australia/Asia     studies
dominik.baumeister@strategyand.pwc.com
                                                 Further reading on industry transformation
Euan Cameron, PwC UK
euan.cameron@uk.pwc.com                          Strategy that works – How winning companies close
                                                 the strategy-to-execution gap?
Jan Willem Velthuijsen, PwC Netherlands
jan.willem.velthuijsen@nl.pwc.com                New energy futures: perspectives on the
                                                 transformation of the oil and gas sector
Julian Smith, PwC Indonesia
julian.smith@id.pwc.com                          The road ahead: gaining momentum from energy
                                                 transformation
Marc Engel, PwC Netherlands
marc.engel@nl.pwc.com                            Re-inventing the wheel: scenarios for the
                                                 transformation of the automotive industry
Michal Mazur, PwC Central and Eastern Europe
michal.mazur@pl.pwc.com                          Glimpsing the future(s): Transformation in the
                                                 chemicals industry
Nigel Cinnamon, PwC UK
nigel.cinnamon@uk.pwc.com
                                                 Further reading on technologies
Stefan Stroh, Strategy& Germany
stefan.stroh@stragegyand.pwc.com                 Clarity from above – PwC global report on the
                                                 commercial applications of drone technology
Ulrich Koegler, Strategy& United Arab Emirates
ulrich.koegler@strategyand.pwc.com               PwC’s Global Data and Analytics Survey 2016:
                                                 Big Decisions
Editorial and research team                      Navigating cloud management
Anita Hagen, PwC Netherlands                     Organize your future with robotics process
anita.hagen@nl.pwc.com                           automation
Elizabeth Montgomery, PwC Germany                Blockchain and smart contract automation: Why are
elizabeth.montgomery@de.pwc.com                  blockchains important?
Hendrik Lemke, PwC Germany                       2015 Commercial Transportation Trends – Things are
hendrik.lemke@de.pwc.com                         going so well for freight firms that it’s time to start
                                                 worrying about the next real danger to the industry:
                                                 3D printing.
                                                 Connected Car Study 2015: Racing ahead with
                                                 autonomous cars and digital innovation

18 Shifting patterns
When we look into the future, we see
disruption, we see collisions, we see
transformation, but most of all we see
opportunities.
What do you see when you look to the
future?

       Global automotive

        Re-inventing                                                   PwC global chemicals

        the wheel                Glimpsing the
        Scenarios for the
                                 future(s):
        transformation of           the
                                 Transformation in the    Tech breakthroughs megatrend:
                                                          how to prepare for its impact
        automotive         industry
                                 chem
Other titles available in the future           indu
                                         icalsseries
                                     in sight        stry
                            Global megatrends and disruptions
                            are shaking up nearly every aspect of
                            the automotive industry. This paper
                            addresses possible impacts of two of the
                            industry’s key uncertainties.

                            The future of personal mobility is
                            no longer clear – will individual use
                            or shared mobility shape the future
                            automotive market?

                            Regulation and politics could have
                            a profound impact on the industry’s
                            direction – but which way will it go?
                                                                       Customer needs drive a
                                                                       new innovation age
                                                                       where chemical supply chains
                                                                       and materials respond to
                                                                       downstream developments

                                                                       Feedstock playing fields
                                                                       level out, and regional
                                                                       production hubs proliferate

                                                                                                            How to prepare for the technological
 Re-inventing the wheel        Glimpsing the future(s)                             Tech breakthroughs
                                                                        www.pwc.com/chemicals        breakthroughs megatrend, and the
                                                                                                     eight technologies to start with
 Scenarios for the             Transformation in the                               megatrend
 transformation of the         chemicals    industry
                                  www.pwc.com/auto                                 How to prepare for
 automotive industry                                                               the technological                     www.pwc.com/techmegatrend
                                                                                   breakthroughs megatrend,
                                                                                   and the eight technologies
                                                                                   to start with

www.pwc.com/futureinsight
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