Andrew Tipping PwC Strategy&

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2 Andrew Tipping PwC Strategy& Robert Reisner PwC Public Sector The Future of the Logistics Industry and the Implications for the Postal Community 2

3 We have identified four sources of emerging disruption 1 4 Changing customer expectations Changing customer expectations put both operating models and profitability under strain E.g., location flexibility, same day delivery Redefining collaboration Uncertainty and Opportunity Technological breakthroughs Technology is reshaping logistics making digital fitness a prerequisite for success E.g., unmanned automated vehicles New entrants to the industry 2 3 Redefining collaboration through consistent standards around the Physical Internet would increase efficiency E.g., crowdsourced delivery models New entrants to the industry may arise in the form of start-ups as well as the industry s current customers and suppliers E.g., Amazon, XPO Source: PwC Strategy& Global Expert Study 3

4 Disruption 1 : Changing customer expectations E-Commerce Logistics Customer Demands Same day delivery Delivery 2 days Endless aisle assortment Free shipping Consumer Goods Fresh/ Grocery Personal/ Care Beauty Apparel Electronics Home & Furniture Logistics Network Complexity Green delivery option Daily replenishment One-size fits all transportation and delivery networks no longer fulfill the needs of shippers Subscription Recommendations Click & Collect Services Returns Weekend/ evening delivery Managing the complexity increases opportunity for new business models to emerge Less important More important Source: Strategy& analysis 4

5 Disruption 2 : Technology breakthroughs Potential Technology Disruptions in Logistics and Associated Opportunities Cloud logistics Network integration Data safety Robotics & automation Manpower shortage Package touch efficiency Internet of Things Real-time information Asset effectiveness UAVs/Drones Challenging terrain (rural) Congested streets (urban) 3D printing Proliferation of production origins Supply material management Blockchain technology Fewer intermediaries Custodial control Historically, technology has taken a back seat for many transportation and logistics companies New technologies have potential to reconfigure traditional supply chains and drive step-changes in operational performance Source: Strategy& analysis 5

6 Disruption 3 : New entrants to the logistics industry E-Commerce Logistics Start-Up Models US Examples Start-ups drive new business models Most new entrants are non-traditional logistics companies The majority is in asset light parts of the value chain Last-mile delivery sees an increasing amount of sharing solutions But there are other new entrants too Customers (e.g. big online retailers) may become significant new entrants Existing T&L players are emerging to challenge the UPS/FedEx network and service coverage Source: Strategy& analysis 6

7 Disruption 4 : Redefining Collaboration Postal Consolidator Partnerships Traditional Mail consolidators Offering: Core business is consolidate mass mailings for delivery, offer parcel as incremental service Approved USPS Consolidators: Evolving USPS Collaboration Models Logistics/eCommerce Players Offering: Economical last-mile delivery and first mile pick-up as part of full set of transportation services Offering: Leveraging USPS network for all last-mile delivery and first mile pick-up, includes strong fulfillment offerings Emerging Int l/po Box Parcels Offering: International parcel send/delivery and PO Box delivery to offset UPS and FedEx deliver restriction Industry collaboration has historically centered around network expansion Peak capacity Last mile scale As industry evolves, new forms of collaboration are occurring Services Digital integration Shipper/provider partnerships Source: Industry interviews, Strategy& analysis 7

8 We believe there are four most likely scenarios for logistics providers 1. Sharing the PI(e) Growth of collaborative working for market leaders to remain dominant Greater use of Physical Internet solutions Increased standardisation 2. Start-up, shake-up New entrants in the form of start-ups Last mile of delivery becomes more fragmented Start-ups collaborate with incumbents Logistics Scenarios 4. Scale matters The current market leaders compete for a dominant market position They achieve scale through consolidation and innovation through the acquisition 3. Complex competition Large industrial or retail customers and suppliers become players in the logistics market They turn their logistics expertise in into a profitable business model Source: Strategy& analysis 8

9 Each scenario implies opportunities for the postal communities 1. Sharing the PI(e) 2. Start-up, shake-up Control Solution for Blockchain Integrated Cross-Border Partnerships Postal + Start-up Investments Data Monetization Partners Where should postal community place its bets? 4. Scale matters 3. Complex competition Parcel Network Entry Point Investment Last Mile Innovations E-Commerce Fulfillment Capabilities Expand Returns Services 9