LOGISTICS, SUPPLY CHAIN AND TRANSPORTATION 2023

1 LOGISTICS, SUPPLY CHAIN . AND TRANSPORTATION 2023: CHANGE AT BREAKNECK SPEED. IN ASSOCIATION WITH: TABLE OF CONTENTS. 4 INTRODUCTION. 5 KEY FINDINGS. 5 THE transformation OF LOGISTICS, SUPPLY CHAIN AND TRANSPORTATION . 6 FOUR KEY FORCES OF CHANGE. 8 TOP FIVE TRANSFORMATIONAL TECHNOLOGIES. 10 TOP BENEFITS OF DISRUPTIVE TECHNOLOGIES. 11 OUTREACH, COLLABORATIONS, ECOSYSTEMS. 13 ACT NOW. 14 METHODOLOGY. 14 ACKNOWLEDGMENTS. 3 | LOGISTICS, SUPPLY CHAIN AND TRANSPORTATION 2023: CHANGE AT BREAKNECK SPEED. INTRODUCTION. Today's consumers expect a seamless, fast and free omnichannel shopping experience. This whatever-whenever expectation means that goods have to travel from multiple pickup locations, including distribution centers, warehouses or stores, to multiple destinations, such as private homes, stores or lockers. Thus, the last mile, traditionally the most expensive part of every product's journey, multiplies as products are ferried to various locations, often back and forth when you factor in free returns and diverting products that are en route.

2 It all happens in record time, often on the same day and most likely for free. Omnichannel delivery is more complex and expensive than traditional delivery. The average profit margin for an apparel retailer on an item bought in-store is around 32%. But today, customer expectation of a range of delivery modality is eroding that traditional buy-in-store margin. The same apparel retailer may realize a profit margin of just 12% on the same item that is bought online and shipped from a E-commerce and same-day shipping mean that B2B buyers are also becoming more demanding. Advanced technologies of Industry , such as artificial intelligence (AI), machine learning (ML) and IoT, help create a digital enterprise in which data collected from physical systems drives intelligent action back in the physical world. Such feedback loops lead to the production of smaller, customized batches and product improvements in real time, often based on customers' feedback.

3 Satisfying a B2B customer today demands a smart, networked SUPPLY CHAIN of which delivery is the last, but integral, link. Today's TRANSPORTATION ecosystem is under pressure to perform. A strong economy means rising demand across nearly all sectors. Freight tonnage moved by trucks is forecast to grow 27% between 2016 and Not surprisingly, the industry is responding by taking steps such as expanding capacity. But even so, demand is rising so fast that, as the industry publication Fleet Owner reports, orders for new vehicles are so large that the OEM production cannot keep up.. These new logistics, delivery and new-equipment demands are happening against the backdrop of a surging economy, along with lower tax rates and actions on import tariffs, further spurring fundamental demand for TRANSPORTATION services, coupled with an acute shortage of drivers and an intense regulatory environment.

4 Measures vary, but conservatively speaking, activities associated with TRANSPORTATION and logistics account for 10% to 12% of global GDP. As such, so much change in TRANSPORTATION translates into massive disruption across the face of the and global economy. And yet, businesses can ill afford to compete on logistics and delivery. Forbes Insights research has shown that customer experience, in which logistics and delivery play a significant role, is among the top drivers of digital transformations. According to Forrester, 72%. of businesses say that improving customer experience is their top priority. The answer lies in the same technologies that have led to heightened customer expectations. Data analytics, artificial intelligence and IoT, to name just a few, allow for dynamic and integrated demand forecast and order fulfillment optimization.

5 By utilizing the same technologies, the logistics, SUPPLY CHAIN and TRANSPORTATION function can create a supplier and carrier connectivity and thus meet customers' expectations. So how are businesses responding? Forbes Insights and Penske conducted a survey of 433 senior industry and functional executives in logistics, SUPPLY CHAIN and TRANSPORTATION to gauge how they are incorporating new technologies in their efforts to address fast- evolving customer needs and interests. The following paper discusses their businesses' current maturity, challenges and solutions, and suggests a way forward for companies that intend to keep their competitive advantage by leading in their logistics, SUPPLY CHAIN and TRANSPORTATION operations. 1 THE OMNICHANNEL FULFILLMENT REPORT: How retailers can overcome challenges to fend off Amazon's threat, BI Intelligence, 2017.

6 2 American Trucking Association, Latest Freight TRANSPORTATION Forecast shows continued growth for trucking.. COPYRIGHT 2018 FORBES INSIGHTS | 4. KEY FINDINGS. S IXT Y-FIVE. PERCENT OF LOGISTICS, SUPPLY CHAIN AND TRANSPORTATION . EXECUTIVES from across all major industries recognize that there are tectonic shifts in logistics, SUPPLY CHAIN and TRANSPORTATION processes. Just under two-thirds, 62%, say their own companies are already undergoing profound transformation . C HANGE IS BEING DRIVEN BY FOUR FUNDAMENTAL FORCES, leading with advances in technology, a surging economy, the Amazon effect and the intense regulatory environment. Among the top technologies transforming the logistics, SUPPLY CHAIN and TRANSPORTATION function are IoT/telematics, AI/ML and blockchain. N EARLY TWO-THIRDS OF RESPONDENTS anticipate significant productivity benefits with the help of technology.

7 For example, AI, ML and blockchain give logistics teams greater visibility into actual assets in use as well as upcoming or expected demands, which allows them to better optimize routes and equipment. The resulting customer and worker satisfaction are among the top technology-enabled benefits. S IXTY-ONE PERCENT OF EXECUTIVES recognize they can't do this alone: Responding to change and achieving key logistics, SUPPLY CHAIN and TRANSPORTATION objectives will require a significantly stronger reliance on outsourcing, fleet leasing and related externally provided services. The industry is heading toward unprecedented levels of cooperation and outreach as participants expand collaboration with suppliers, customers, partners and others playing key roles across the logistics, SUPPLY CHAIN and TRANSPORTATION value CHAIN . THE transformation OF LOGISTICS, SUPPLY CHAIN AND TRANSPORTATION .

8 For logistics, SUPPLY CHAIN and TRANSPORTATION , it is an era of profound transformation . Those who are active in the field are taking notice. For starters: T. wo-thirds, 65%, say that there are tectonic shifts in logistics, SUPPLY CHAIN and TRANSPORTATION processes throughout their industries a figure reaching 76% among those surveyed with the largest fleets (20 vehicles or more). Just under two-thirds, 62%, say their own companies are experiencing profound transformation . We're at a point where there's more change taking place in this instant than what I've seen in 25 years on the front lines, says the president and CEO of a major TRANSPORTATION and logistics provider. This transformation stems from the massive proliferation of business data being extracted from telematics and IoT and further enhanced by the increase in computing power and storage as well as by the use of machine learning and artificial intelligence for analysis.

9 Other factors of change include advances in drones, driver safety technology, driverless vehicles and blockchain. 5 | LOGISTICS, SUPPLY CHAIN AND TRANSPORTATION 2023: CHANGE AT BREAKNECK SPEED. Having a SUPPLY CHAIN enabled by advanced technologies is key for competitive advantage across industries. Fifty- eight percent of executives from industries like retail, industrials, materials, consumer goods and others recognize that SUPPLY CHAIN , TRANSPORTATION and logistics are crucial to their company's performance. Anyone whose success depends on their ability to fulfill orders of physical goods for customers is now caught up in this whirlwind of change, says Mary Long, managing director of the SUPPLY CHAIN Management Institute at the University of San Diego School of Business. FOUR KEY FORCES OF CHANGE. The views of Long and others interviewed for this report are borne out by our quantitative findings.

10 Survey respondents point to four main transformative forces: 1. ADVANCES IN TECHNOLOGY. Fifty percent of respondents say advancements in technologies are exerting a strong impact on their company's logistics, SUPPLY CHAIN and TRANSPORTATION operations. Key among these are: IoT/telematics, artificial intelligence/. machine learning, blockchain, safety enhancements (lane control, automatic braking, etc.), drones and driverless vehicles. C. John Langley is a clinical professor of SUPPLY CHAIN management as well as the director of development for the Center for SUPPLY CHAIN Research at Penn State's Smeal College of Business. According to Langley, though the transport industry has always been data-focused, today we see all of this added computing power IoT/telematic data collection, data mining, AI and ML that can be focused on making better decisions, not only from an overall strategic and resource planning basis but in real-time decisions: which routes, which carriers?