Science fiction technologies or verdue industrialization? How to ride the wave.

1. Science fiction technologies or overdue
industrialization? How to ride the wave?
Transport of the Future
October 2019

2. PwC
0.1 We advise transport and logistics in Europe, Central Asia and Africa
2
158 Countries
721 Locations
US$13.8 bn Advisory revenues ‘18
+250,000 People
Led by Michal Mazur
with >30 people
regional team
Work in Western,
Central, Eastern
Europe, Africa, Central
Asia
Strategy and
operations projects for
logistics businesses
Clients in T&L
segments, logistics
function of trade and
production companies
Senior Manager at PwC
Strategy with over 11 years
of experience in strategy for:
• transport and logistics
companies,
• manufacturing and tech
companies,
• e-businesses.
PwC in numbers
The CEE & CIS Transport & Logistics Advisory HUB About me

3. PwC
0.2 Looking at “transport of the future”, we analyzed emerging transport tech and
concluded that…
3
Transport
matters
Transport is
changing
The digital / industrial
revolution in transport
is an opportunity
I II III

4. PwC
1.1 Transport has a big footprint as share of GDP and in terms of CO2 emissions
4
20152011
26%
2010 2012 20162013 2014
27%
26% 26%
27% 27%
28%
6%
Contribution of transport
industry to Poland’s real GDP
in 2017
Contribution of Transport to GHG emissions in EU-28
I Transport matters
GHG = Greenhouse Gas

5. PwC
1.2 Poland’s road transport companies play a major role in EU’s transport
5
9
11
12 12
13
14
15 15
16
18
10%
0%
2%
4%
6%
14%
18%
8%
12%
16%
20132008 2009 2010 2011 2012 2014 2015 2016 2017
36%
64%
Transport
performance of
Polish carriers
in 2017
Domestic International
Share of Polish carriers in transport performance in EU
I Transport matters

6. PwC
2.01 Transport is expecting breakthrough changes
6
Source: PwC Analysis
68%
Global T&L
CEOs expect
changes in core
technologies
of svc provision
to be disruptive
to their business
20%
Driver workforce
gap experienced
by Polish carriers
in 2019
7-15%
Expected growth
of costs 2018-20
in Poland’s road
transport
Mobility
package
Regulations
impacting road
transport
II Transport is changing

7. PwC
2.02 Transport is growing in Poland, reorganizing internationally and facing staff shortages
7
Employee shortageGrowth in domestic
and import/export
volumes
Reorganization of
international freight
(due to EU law changes)
Source: PwC Analysis
II Transport is changing

8. PwC
1 170,0
1 436,0
250,0
275,0
0,1366,0
2018
0,1473,0
2022
8
RoadRiver Air Sea Rail
3,7
4,0
Expected growth of Transport Segments in Poland [million tons]
2.11 Transport is expected to grow in Poland in the coming years
II Transport is changing

9. PwC
2.12 This growth is the result of economic progress, lack of substitutes
75%
2013
79%
2014 20172015 2016
75% 76%
80%
202220202018 2019 2021
4.4%
3.5%
3.0%
2.8% 2.8%
9
Real GDP growth forecasts for Poland Share of road transport in transport performance
in Poland
II Transport is changing

10. PwC
Bucharest
Tbilisi
Teheran
Ankara
Prague
Sofia
Berlin
Bratislava
Budapest
Belgrade Aktau
Duisburg
Piraeus
Thessaloniki
3
3
2
2
2
2
1
2
2
1
Riga
Moscow
Minsk
Malaszewicze
Baku
Aktobe
Kandyagash
Warsaw
Lodz
Istanbul
Yekaterinburg
A1
A3
A2
B1
B2
1
2 Connections
3 Logistics Centers
1 Terminals
InvestmentsExisting corridors
A1 China-Russia
A2 China-Kazakhstan-
Russia
A3 Russia-Mongolia-China
B South (numerous)
New corridors
2 Vilnius
2.13 … as well as emergence of new trade routes, esp. for road and rail transport
10
17in 2011
3673in 2017
II Transport is changing
Number of China - EU train trips Investments in Europe related to the Belt and
Road Initiative

11. PwC
13% drop of transport
performance of Polish carriers
if Mobility Package
regulations reduce
international transport by 20%
11
2.21 Changes of “mobility package” may significantly change EU international shipping
Reorganization in international transport
II Transport is changing

12. PwC
2.22 But law will also enforce technological changes, such as further reductions in
emissions of CO2 and pollutants
12

13. PwC
2.23 Law (or its lack) may slow down emerging tech
13

14. PwC
2015 2017 20192016 2018 2020 2021 2022
0
650
700
750
800
850
900
950
2.24 Large-scale staff shortages, meanwhile, create the pressure on automation
14
200k
Driver gap in Poland if
current level of 20%
gap is maintained
Employment demand for professional drivers in PL Supply of professional drivers on the labor market PL
II Transport is changing

15. PwC
3.01 The technological transformation in transport can be viewed in two
perspectives: (1) the ongoing digitalization and (2) industrialization which is yet
to come
15
Digitalization
(process automation,
platforms, digital giants,
advanced digital tech)
Industrialization
(autonomous vehicles,
alternative drives,
robotization)
III Digital & industrial revolution opportunities

16. PwC
3.11 Transport has a serious gap in digitalization
16
33%
28%
Average Transport and logistics
% global companies reporting advanced level of digitalization in 2016 (PwC Industry 4.0 Survey)
III Digital & industrial revolution opportunities

17. PwC
3.12 At the same time, transport puts high hopes in digitalization
17
Create better customer experiences
16%
Grow revenue Increase profits
54%
11%
“Expectations of T&L companies towards Digitalization from 2017 Digital IQ ® Survey"
III Digital & industrial revolution opportunities

18. PwC
3.13 … online platforms are facilitating the growth of sharing economy …
$15 bn
2013
$240 bn
$335 bn
2025
$335 bn
Sharing economy
Accommodation P2P
Crowdfunding and P2P lending
Sharing music and movies
Transport sharing
Online employee management
Car rental
DVD rental
Rental economy
Borrowing books
Rental of equipment
B&B and hotels
18
III
Platforms accelerating the growth of sharing economy
Digital & industrial revolution opportunities

19. PwC
3.14 And the activities of digital giants are putting pressure on transport
2013
Alibaba establishes Cainiao
Network
(a logistics platform,
developed successively in
the following years)
2014
Zara introduces
RFID tech in its
supply chain 2017
Zalando launches “Zalando
Fulfillment Solutions”
2017
Uber launches
Uber Freight,
a digital platform
for freight transport
services, which
later enters
Europe in 2019
2018
Amazon opting
out of
third party
logistics
services, instead
launching its
own
2019
Diverse ecosystems of digital
giants' transport services are
ready for dynamic growth
19
Digital Giants – large digital companies creating pressure on industries
III Digital & industrial revolution opportunities

20. PwC
3.15 More advanced digitalization includes some market-ready technologies, like RPA…
20
Artificial
Intelligence
Robotic
Process
Automation
Customer service1
Complaints handling2
Finance, administration and
other repetitive tasks
3
Applications of Robotic Process Automation
III Digital & industrial revolution opportunities

21. PwC
70%
68%
3%
BlockchainArtificial
Intelligence
Internet of Things
(IoT)
3.16 …as well as the more advanced technologies based on Blockchain, AI, IoT
21
% global T&L firms investing in tech (2017 Digital IQ® survey)
III Digital & industrial revolution opportunities

22. PwC
3.17 ITS are key from perspective of not just systems but also digital infrastructure
22
III
Digital
Infrastructure
Traffic
management
systems
Toll collection
systems
Freight
management
Data collection
(V2I, V2V, GPS)
Parking
guidance
Public
transportation
Digital & industrial revolution opportunities

23. PwC
3.21 The real revolution will come with transport industrialization
23
Around 2030
Full autonomy
Electric drive
LNG/CNG drive
Hydrogen drive, alternative
fuels
Development of automation in road transport Popularization of alternative drives
Around 2025
Partial autonomy
Around 2020
Process automation
5%costs savings vs 2016
15%costs savings vs 2016
28%costs savings vs 2016
III Digital & industrial revolution opportunities

24. PwC
3.22 Autonomy may be seen as a song of the future…
24
Autonomous trucks may be far ahead…
Autonomous vehicles1
Specially designed lanes2
Real-time route optimization
powered by Artificial Intelligence
3
III Digital & industrial revolution opportunities

25. PwC
1
2
3
5
4
3.23 But even today, automation is already progressing in ports…
25
STS
Cranes
Automated Stacking
Cranes
Automated
Gate Facilities
Automated Guided
Vehicles
Terminal Operating
System (TOS)
1
2
3
4
5
… but port automation is already progressing…
III Digital & industrial revolution opportunities

26. PwC
Sorting conveyors
Pick-up and
transport
robots
Sorting robots
Scanners
Pick-up and
transport
robots
3.24 ….warehousing and sorting centers…
26
III Digital & industrial revolution opportunities
Inventory
drones
… as it is in warehouses and sorting centers…

27. PwC
UAV drones
UGV drones
Autonomous
Vehicles Parcel
Lockers
… and last mile delivery.
3.25 …as well as last mile delivery….
27
III Digital & industrial revolution opportunities

28. PwC
3.26 …and multiple sides are working on autonomy in roads, seas, railways, as
well as outside standard routes, like e.g. in agriculture
28
• By deploying
Kiva robots
Amazon was
able to cut its
operating
expenses by
20%
• Has several
automated plants
in China
• Increase
productivity
• Safe to work with
people
• Filled by pickers
and
automatically
move
• Used for
eCommerce
warehouse
optimization
• Can bring a
package from
the shelf straight
to the employee
• Helps remove
pain points from
warehousing
fulfilment
processes
• Works together
with staff to
optimize
repetitive tasks
• Locates boxes
and containers
on storage racks
• Picks packages
to a mobile
trolley
• Delivers
packages to the
next stages of
the process
• Conducting
second testing
phase of an
automatic
electric cart
• The robot can
carry up to 150
kg of mail
• It follows the
mailman by
using sensors
LOCUS
ROBOTICS
EXOTEC FETCH VECNA JD.COM AMAZON DHL
III Digital & industrial revolution opportunities
EXAMPLES OF WH AUTOMATION PROVIDERS EXAMPLES OF WH AUTOMATION APPLIERS

29. PwC
4.1 these changes will not progress quick without support of multiple sides: governments,
transport businesses, start-ups, OEMS – everyone has a role here
29
Regulators T&L
Businesses
Tech Companies
& Startups
OEMs
PARTIES PLAYING KEY ROLES IN TRANSPORT DIGITALIZATION AND INDUSTRIALIZATION

30. PwC
4.2 So to summarize, transport is important, it’s changing and the tech changes create a lot
of space for tailored tech solutions
30
Transport
matters because it’s
big and lagging on
digitalization
Changes (growth,
staff shortages, law)
will create pressure
on automation
There are
opportunities in both
digitalization
(ongoing) and
automation (future)
I II III
>>> PwC T&L Trend Book 2019 <<< >>> Transport of the Future Report <<<

31. pwc.com
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Maciej Starzyk
Senior Manager
PwC Poland
Mobile: +48 502 354 543
maciej.starzyk@pwc.com