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TABLE OF CONTENTS
4 INTRODUCTION
5 KEY FINDINGS
13 ACT NOW
14 METHODOLOGY
14 ACKNOWLEDGMENTS
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.
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 store.1
E-commerce and same-day shipping mean that B2B buyers are also becoming more demanding. Advanced technologies of Industry
4.0, 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. 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 2027.2 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 U.S. 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.
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 U.S. 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. 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
2 American Trucking Association, “Latest U.S. Freight Transportation Forecast shows continued growth for trucking.”
• N EARLY TWO-THIRDS OF RESPONDENTS anticipate significant productivity benefits with the help of
technology. 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.
•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. Other factors of change include advances in drones, driver safety technology, driverless vehicles and
blockchain.
“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.
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?”
On top of this, today’s transport vehicles are also being outfitted with all manner of advanced safety equipment
such as lane controls and safety braking. Respondents are also likely considering the coming impacts of drones
and driverless vehicles on their fleets and strategies as well as the arrival of blockchain. All told, says Langley,
“technology is transforming [logistics, supply chain and transportation].”
Half of respondents also say a resurgence in U.S. manufacturing is having an impact on their logistics, supply chain
and transportation operations. Just under half, 45%, say the imposition of tariffs is proving to be a significant factor
in shifting demand and therefore transportation patterns. Another 44% say lower U.S. taxes and related reforms,
such as accelerated depreciation and incentives to move offshore cash home, are driving demand.
This resonates with the CEO of a major trucking carrier, who says, “We see it daily, the economy is rolling.” But this
is both a blessing and a curse. Indeed, “there’s heightened demand for our services.” At the same time, however,
“capacity is extremely tight, so the industry doesn’t always have the trucks it needs right where and when they’re
needed.” Piling on, the industry for some time now has been experiencing a driver shortage—an issue that’s only
exacerbated by a strong U.S. economy. Overall, says the CEO, “there’s more freight and more trucks than there
are drivers to drive them.”
3. SHIFTING WAREHOUSE
POINTS AND THE “AMAZON EFFECT”
But the Amazon effect runs even deeper. “Loads used to see two, three,
maybe four touches before the goods were in the hands of the end-
consumer,” explains an earlier-mentioned CEO. But today, getting goods to consumers faster means “seven,
eight or nine touches [moving] the freight to a network of warehouses and forward positions.” In short, says the
executive, “that final mile is being redefined almost every day.”
In particular, says the University of San Diego’s Long, companies refocusing their competitive mindset on the
needs of end-consumers is “becoming a principal driver of competition, innovation and change.” Consumers
weaned on e-commerce and instantaneous gratification want things
“
“now,” says Long. Moreover, competition between brick-and-mortar
businesses and their internet-based adversaries greatly rewards
innovation, accelerates advances in customer service and fulfillment,
and generally raises the stakes.
Using the traditional paper-based system, drivers had a degree of flexibility. But with ELDs, that loss of flexibility
can lead to higher prices. For example, as reported in the Chicago Tribune: “For Pete’s Fresh Market, a 12-store
grocery chain in the Chicago area, truckloads of produce from Mexico have roughly doubled in cost since the new
[ELD] devices were mandated—from about $2,400 for 40,000 pounds of produce to more than $5,000.” 3
Having committed to such a large role for data, carriers could find it more and more necessary to maintain the ability to
collect and make sense of it.5 If yesterday’s version of digitization measured route efficiency and increased preventative
maintenance effectiveness, today’s version is beginning to monitor individual operators’ driving styles and the way they
contribute to things such as tire wear.67
2. ARTIFICIAL
INTELLIGENCE/
MACHINE
LEARNING:
But what to do with so much IoT
data? That’s where AI and its close
associate, ML, promise to enable
leaders in logistics, supply chain
3 “Why a new trucking regulation is driving up the cost of produce,” Chicago Tribune, Greg Totter, January 28, 2018
4 Schiller, Maier, and Büchle, Global Truck Study 2016
5 The Future of Freight, Deloitte, 2017
6 Schiller, Maier, and Büchle, Global Truck Study 2016
7 Ibid.
The bad news is that in order for these, and other related benefits, to be realized, standards that can apply across
the entire spectrum of logistics, supply chain and transportation participants—many thousands—must be built.
But the good news, says Fuller, is that “we’re now well along in our efforts to engage the various participants to
build a sound foundation.”
5. AUTONOMOUS VEHICLES AND DRONES: New market entrants are testing long-haul
robotic trucks in states like Arizona, California, Florida and Texas. Meanwhile, Amazon has already
demonstrated its first actual drone delivery. According to the Washington Post, CEO Jeff Bezos
“tweeted that the box arrived 13 minutes after the order was placed.” As these technological marvels evolve,
their developers insist they carry the potential to broadly automate transportation in the very near future.
VISIBILITY/ACCURACY: Technologies like blockchain and IoT/telematics, used in concert, can mean
instantaneous tracking of any shipment right down to its SKU level. With blockchain, it is also possible to see
any handoffs that have taken place, or even the condition of the goods at any time or the temperatures at which
they were warehoused or transported for what period. A related benefit, accuracy (cited as a significant driver of
value by 57% of respondents), will also be fueled by greater visibility afforded by blockchain as well as by other
evolving technologies.
WORKFORCE SATISFACTION: Competition for drivers and warehouse workers is intensifying, with nearly
half of survey respondents saying they are already experiencing significant shortages. Meanwhile, workers tend
to experience greater satisfaction when they are given the right tools to enable optimum job performance. Not
surprisingly, workforce satisfaction, aiding retention and recruitment, is another area where leaders will be able
to harness technology to drive innovation and competitive advantage.
CUSTOMER SATISFACTION: Fifty-three percent of respondents believe technology will deliver significant
benefits across the whole of the customer experience. This starts with customer “intimacy,” where 55% of
executives believe dramatic improvements are forthcoming. Using AI and ML, for example, says the CEO of a
major carrier, “we will be able to better understand customer needs, shifting from a reactive to a more proactive
relationship.” Those successful in this regard are likely to experience significant first-mover advantage.
UPTIME/FLEXIBILITY: Over half of survey respondents anticipate significant improvements in both uptime
(53%) and flexibility (53%). Key uptime benefits will derive from technologies such as IoT, supplemented by AI
and human intuition. By having a clearer window into vehicle usage and performance, fleet managers will be
better able to use preventive maintenance to avoid potential breakdowns.
61%
Nearly two-thirds of logistics, supply chain and
transportation executives say it is becoming
increasingly difficult to keep up with changes in
Going forward we
technology, demographics and the competitive will be relying
environment. Just over half, in fact, fear their significantly more on
competitors are already moving significantly faster external providers for our
a mi d d i sr up t i o n i n l o g i s t i c s , s u p p l y c h a in a nd
logistics, supply chain and
transportation.
transportation needs
One proven means to more rapidly reap the benefits
of any fast-evolving set of technologies or business
practices is to engage experienced third parties.
Today only about one-third of companies say they
outsource a significant degree of their logistics,
supply chain and transportation operations/needs.
But going forward, 61% say they will be relying
significantly more on external sources—outsourcers,
service, leasing and technology providers—to meet
their fast-evolving supply chain, transportation and
logistics needs.
One key area of outsourcing deserves added focus. Implementing new technologies can seem bewildering.
Consequently, 58% of executives say that when it comes to pursuit of logistics, supply chain and transportation
technologies, they plan to “rely on” (23%) or at least “heavily lean on” (35%) external partners. Only one-third
(32%) plan to go it alone; a mere 11% say they will not be pursuing new technologies.
A s o u t s o u rc i n g o f l o g i s t i c s , s u p p l y c h a i n a n d
transportation becomes more prominent, one area
likely to experience significant growth is fleet leasing.
With technology changing so fast and more areas of
the business to manage, you can make a case that
58%
companies should focus on what they do best and
outsource anything that isn’t mission-critical. “It
seems very likely that fleet leasing is going to become
more attractive as a result of so much change. It’s a
reasonable approach to keeping pace,” says Long.
plan to either rely on or lean on
external partners when implementing
logistics, supply chain and
transportation technologies
Benefits rated as valuable—or extremely valuable—by survey respondents in descending order of frequency
Beyond expanding the range of commercial Top five actions companies plan to
relationships with outsourcers and consultants, the take to address evolving needs
trend in logistics, supply chain and transportation
today in general is greater outreach and Closer collaboration with suppliers
collaboration across the ecosystem—suppliers 60%
working with intermediate customers, shippers Expanded partnership with vehicle manufacturers
and 3PLs, end-customers, technology providers 60%
and so on. Certainly, if the goals are greater Greater outsourcing of transportation processes/
fleet leasing/maintenance
efficiency, speed and accuracy, it pays to forge
59%
closer ties with others with shared interests
Closer collaboration with partners/distributors
and needs. Here, the survey shows that this
57%
sort of outreach is gaining traction, with half
Greater outsourcing of logistics processes
or significantly more of executives saying their
(warehousing as a service/scheduling/carrier management)
companies are pursuing the following strategies. 57%
The research conducted by Forbes Insights points to the following key action points:
• S TEPBACK AND REEVALUATE THE WHOLE OF THE LOGISTICS, SUPPLY CHAIN AND
TRANSPORTATION ECOSYSTEM: What is your role, what are your needs, what are your customers’ needs,
and how might things be changing?
• L OOK AT YOUR OWN SKILL SETS AND THEN DEVELOP A PLAN TO ADDRESS ESSENTIAL
TECHNOLOGY TALENT GAPS —being sure to look at outsourcing, fleet leasing, M&A and other key tools.
TITLE INDUSTRY
3% Transportation 17%
16%
Retail 12%
20%
Industrial/manufacturing 10%
20% Automotive 5%
Durable goods 5%
Other 8%
ACKNOWLEDGMENTS
Forbes Insights and Penske would like to thank the following individuals for their time and expertise.
• C. John Langley, Clinical Professor of Supply Chain Management; Director of Development for the Center for
Supply Chain Research, Penn State Smeal College of Business
• Mary Long, Managing Director, Supply Chain Management Institute, University of San Diego School of Business
Forbes Insights is the strategic research and thought leadership practice of Forbes Media, a global
media, branding and technology company whose combined platforms reach nearly 94 million
business decision makers worldwide on a monthly basis. By leveraging proprietary databases of
senior-level executives in the Forbes community, Forbes Insights conducts research on a wide
range of topics to position brands as thought leaders and drive stakeholder engagement. Research
findings are delivered through a variety of digital, print and live executions, and amplified across
Forbes’ social and media platforms.
Brian Lee
PROJECT MANAGER