Logistics and Supply Chain Technology Report 2021

Understanding where the technology applications in your industry are going is important for any business. For logistics and supply chain operators, this is even more important. Reuters Event Supply Chain conducted a survey of senior leaders in the industry to understand their key considerations around geographic footprint and technology usage. This report would be helpful for anyone in the logistics and supply chain industry in determining their operational strategy in the near term.

Logistics and Supply Chain Technology Report 2021 In Partnership with China Telecom Europe

中国电信（欧洲）有限公司 C h i n a T e l e c o m ( E u r o p e ) L t d .

Contents

Foreword Executive Insight Chapter 1: Operations in APAC and Challenges in China

3 4 5

Chapter 2: Technology Strategy Chapter 3: Cloud Technologies Chapter 4: Internet of Things Chapter 5: Cybersecurity Chapter 6: Disruptive Technologies Conclusion About China Telecom Europe

10 18 23 28 32 35 36

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中国电信（欧洲）有限公司 C h i n a T e l e c o m ( E u r o p e ) L t d .

Logistics and Supply Chain Technology Report 2021

Foreword

Choices in the location of your global supply chain and the technology that you use to connect it all are critical to the success of your business. In today’s environment, these decisions aren’t always simply influenced by only your own business, but by everyone else in your industry. Being physically close to your upstream and downstream suppliers and having matching technological capabilities will result in better coordination and stronger efficiency in your supply chain.

With this report, we hope to provide a snapshot of what others in the supply chain industry are thinking and acting upon when it comes to both geographic footprint and technology adoption.

These decisions are never easy, so it is essential to have partners that have the capabilities to advise your business in the regions that are important to your operations.

China Telecom (Europe) has been helping businesses with large supply chain requirements for years, with a particular focus on helping European businesses with their regional operations in the China – Asia Pacific region. From cross border telecommunications, technology and related regulatory requirements, we are well placed to provide bespoke solutions. We provide businesses with the latest infrastructure they need to keep pace with the rest of the industry and to run what tech experts often refer to as “Killer apps”. Ultimately, you cannot capitalise on the value of these innovative apps without the right connectivity infrastructure needed for them to run.

Marko Cakalic Head of Enterprise Sales DACH

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中国电信（欧洲）有限公司 C h i n a T e l e c o m ( E u r o p e ) L t d .

Logistics and Supply Chain Technology Report 2021

Introduction: Executive Insights

Supply chain operations continue to evolve from both a geographic and technology perspective. In this report, we explore these two aspects to understand what strategic imperatives are being addressed by businesses with global supply chains. A survey was conducted to understand what leaders in the supply chain industry are focusing on when it comes to the China – Asia Pacific (APAC) market along with the technology shifts that are occurring as a results of ever expanding distances for the movement of goods. As a key insight into the China – APAC market, supply chain businesses continue to see this region of the world as one that is crucial for their success. For example, we found that 95% of the supply chain businesses surveyed have their supply chain operations influenced by China in some degree. The data also showed that upwards of 79% had operations in some part of the China – APAC region with a majority showing they have presence in either China or Southeast Asia. Beyond geographic spread of supply chain, the survey results have shown a growing trend in increasing IT budgets and attention on digital transformation projects such as cloud, IoT, cybersecurity and AI. More and more supply chain operators are moving towards technology that builds a greater competitive advantage in cross border collaboration and leads to efficiency gains. This aligns with many of the trends we reported about in our Cloud Computing in Supply Chain Management report. These technology gains needs to be supported by an infrastructure foundation that is fast, flexible and secure. Without the network connectivity required by these new technology innovations, the supply chain operators will find it difficult to realise the value of these IT projects.

Global supply chain businesses will need to analyse where the industry is heading and plan where and how they can keep pace in order to achieve better integration in their operations.

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Chapter 1: Operations in APAC and Challenges in China

From global shifts in trade patterns to depressed economic activity and radical shifts in the ways we live and work, the impact of COVID-19 has caused many across Asia-Pacific (APAC) to re-evaluate their supply chain operations and place greater emphasis upon a global value chain. Though it still remains to be seen whether recent changes in consumption and travel will result in a sustained cultural shift in business operations, it has become abundantly clear to those operating across APAC that building greater flexibility into strategy is imperative if they are to absorb future shocks and keep pace with competitors. Extreme weather conditions, technical system disruption, and renewed COVID-19 cases tied to the Delta variant across the region continue to stoke persistent fears around the centrality of a single country to global logistics operations. Even limited disruption in service time can have wide-ranging impacts downstream, stalling deliveries and leading to ballooning transport costs amid production delays and containers full of back-ordered goods. Indeed, due to lockdown decisions made at the onset of the COVID-19 pandemic, the world faces ongoing container shortages across Asia and Europe. With lockdown restrictions hindering the travel of containers to Asia whilst demand for capacity continued to increase, businesses across APAC quickly found themselves in the midst of a compounding crisis. Limited ability to book available containers, either due to the slowdown in production or the elevated prices for purchase or leasing of containers continues to create congestion across Asia and the Pacific. With the freight industry facing these global shortages, container vessel congestion stemming from previous slowdowns as well as the obstruction of the Suez Canal by the Ever Given container ship in March 2021, have also had ripple effects across the supply chain, with strain driving up shipping rates and causing delays around the world as overbooked carriers face additional pressure due to Chinese port closures. The grounding of the Ever Given in the canal waterway has been estimated to have held up US $9.6 billion worth of trade across one of the world’s most important trading routes, resulting in a backlog that is still being dealt with months after the event.

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Logistics and Supply Chain Technology Report 2021

Which countries in APAC does your business operate in?

63%

China (incl.H.K)

55%

Southeast Asia

Singapore

46%

South Asia

45%

44%

Japan

40%

South Korea

21%

None of the above

The effects of the global pandemic have led to an increased diversification of risk, as least cost is supplanted by risk-management (‘just-in-case’) processes as the primary motivation behind planning. Businesses operating across APAC have been forced to expand their operations to a broader pool of suppliers as well as distributing manufacturing across multiple countries in order to build redundancy during the post-pandemic recovery period. However, despite successive administrations advocating for near and on shoring in the US, capital investment constraints coupled with intellectual property rights claims have deterred companies from moving so drastically across regions, increasing the incentive for ‘China Plus One’ strategies and continued foreign direct investment in low-cost hubs in Southeast Asia proximate to their current operations to shorten supply chains and reduce single-source dependence.

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中国电信（欧洲）有限公司 C h i n a T e l e c o m ( E u r o p e ) L t d .

Logistics and Supply Chain Technology Report 2021

How important is the Chinese market for your supply chain? Centrality of China

50%

100%

We have no dealings in China We have facilities in China We have suppliers in China China is a major market

53%

24%

18%

The majority of our respondents told us that China is still a major market for their business. Whilst a substantial portion of businesses we surveyed only relied upon a few suppliers in China (24%), over half placed the region as central to supply chain operations (53%). With a further 18% citing the fact that a number of their own facilities are based in China, and just 5% of all businesses surveyed telling us that they no dealings in China, it is no wonder that disentangling operations has proved difficult. Though relocation to countries such as Vietnam and Thailand has presented an export-friendly solution with a market and supply ecosystem close to China, the desire to build redundancy via relocation has been constrained by supplies available to the region. Those with long and complex value chains have continued to struggle with accelerating component costs over the last 12 months (the semiconductor industry being a notable example). Similarly, the level of specialised production and agglomerated industries within China means that these value chains, though facing a degree of uncertainty, will not be completely undone by recent disturbances.

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中国电信（欧洲）有限公司 C h i n a T e l e c o m ( E u r o p e ) L t d .

Logistics and Supply Chain Technology Report 2021

Existing Issues

Have you experienced any of the below issues with your supply chain operations in China?

50%

100%

Regulatory and legal requirements

53%

Cross-cultural communication

29%

Oversight of operations

28%

Other

24%

Connectivity Issues

15%

* Multiple answers allowed

Despite the reliance upon China, our survey respondents relayed a number of critical issues with their current operations that, were other regions to offer viable solutions, might lead businesses to make dramatic shifts in sourcing and manufacturing. To this point, regulatory considerations were front of mind for our respondents who were concerned about operations. Ensuring compliance with local laws and reducing cross-border costs have been a persistent pain for 53% of our survey respondents, citing regulatory and legal requirements as a pivotal issue facing their supply chain operations in China. Furthermore, not only were 28% of respondents struggling to gain adequate oversight into their operations in China, but cross-cultural communication with Chinese staff was still found to be a sticking point (25%), making it even more difficult to resolve issues (regulatory or otherwise) when they arose. Despite the commitments of tech giants Google and Facebook to laying more subsea cables to connect East Asia and the US, connectivity was another issue raised by a slim portion of respondents (15%). This is also likely due to a more complex regulatory environment around network connections to China that foreign companies are not familiar with. Strong investment in 5G and other communications infrastructure will be better suited to improving resiliency of services for those based in APAC, and yield improvements in this area in the interim.

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中国电信（欧洲）有限公司 C h i n a T e l e c o m ( E u r o p e ) L t d .

Logistics and Supply Chain Technology Report 2021

Have you experienced any of the following with your existing telecommunications infrastructure in China-APAC region?

25%

50%

Regulatory Compliance

42%

Packet loss

25%

Slow connection speeds

21%

Outages to connection

12%

The problem of regulation was also cited as a key issue with existing telecommunications infrastructure, with 42% of respondents citing regulatory compliance issues as a persistent problem over and above general issues. Telecommunication regulation in every country varies, so trying to navigate these on your own can be difficult. For instance, businesses operating in China are better placed when using approved private internet line connections rather than public internet to ensure that the software they use works inside and outside of China. Slow connection speeds when connecting to China-APAC teams (21%), and outages in their connection to the China-APAC region (12%) were also notable issues. Many public networks have struggled with the increase in load over the past year, often suffering packet loss resulting in poor quality audio and video. This was a persistent issue for a quarter of the businesses we queried (25%). Those attempting to remedy this should look to strong regional providers from China-APAC who can provide a robust Service Level Agreement with providers for critical Voice Over Internet Protocol (VOIP) and Enterprise Resource Planning (ERP) applications.

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Chapter 2: Technology Strategy

Many of the logistics industry’s long-standing technological inadequacies were thrust out of the shadows and into the spotlight during the past year, with vulnerabilities in manufacturing, distribution and sales systems laid bare by the demands of the COVID-19-era economy. Existing issues with fractured and outdated internal processes compounded as the need for technical investment across the industry grew more urgent. While the past 18 months have demonstrated that not only are technical transformations needed, but that they are possible, digital transformation still requires a careful approach to rebalancing existing practices and ways of working. With a slump in economic activity, businesses across the globe have had the opportunity to take stock of their operations, reviewing and reworking legacy systems, reducing technical debt and consolidating piecemeal infrastructure across their operations. As vaccination rates increase and economies begin to rebalance, the logistics industry finds itself at an opportune moment to invest strategically to maximise gains from pent up consumer demand and emerging online consumption trends.

Spending Which area are you looking to invest in over the next 12 months?

The availability of capital amidst low interest rates and bond yields has further opened the scope of investment available to businesses. Of those we surveyed, we found a wide range of investment strategies targeting various parts of the supply chain, but all working to push a holistic and digitally integrated approach to supply chain management in tandem with emerging legislation and governmental policy. In particular, thanks to the boom in eCommerce trade over the past year, businesses are investing more heavily than ever across the supply chain to meet these escalating levels of demand. As has been the trend for the past few years, technological investment across the industry appears focused upon breaking down silos between inventory, warehousing and transportation management solutions.

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中国电信（欧洲）有限公司 C h i n a T e l e c o m ( E u r o p e ) L t d .

Logistics and Supply Chain Technology Report 2021

25%

50%

100%

75%

Transportation Management

53%

Warehouse Management

48%

Visibility

47%

Inventory Management

43%

Forecasting

43%

Predictive Analytics

38%

Data Interchange

33%

Risk Management

30%

Internet of Things

26%

S&OP

26%

Cybersecurity

26%

Cloud Technology

25%

Blockchain

11%

Other

10%

Drones

3D Printing

* Multiple answers allowed

To this extent, Transport Management Systems (TMS) are fast becoming a central hub to organise and funnel data through to other applications. Over half of all respondents we surveyed told us that they would be investing most heavily in transportation management over the next 12 months (53%) to deal with the shift to eCommerce and to break down silos and optimise hidden capacity.

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Logistics and Supply Chain Technology Report 2021

In addition, the growing suite of tools available for warehouse management has attracted investment from 48% of the businesses we surveyed. Ranging from palletising solutions that yield improved throughput and packing efficiency to the use of blockchain technologies (11%) for smart contract deployment, warehouse management remains a key area for investment with efficiency gains still to be realised across the outbound logistics process. This was also supplemented by increased investment in inventory management and related ERP solutions (43%). 48% of businesses we surveyed also informed us that they would be focusing upon investing in improved forecasting capabilities. Predictive analytics, enabled by cloud technology as well as the need for better demand estimation and supply level tracking that has emerged over a long 18 months filled with uncertainty over demand patterns. These fluctuating patterns have been further exacerbated by shutdowns across APAC due to COVID-19 surges, exponentially increasing production times on labor-intensive products as workers isolate. Businesses have had to be nimble in navigating these changing circumstances, though some have lacked the necessary visibility into their operations to make swift changes. 47% of respondents cited improving visibility as an area for investment over the next 12 months, coupling it with continued investment in IoT (13%) to support the drive for greater transparency. Greater connectivity will also be enabled by 5G, but investment in the still nascent technology is relatively low, with just 8% of respondents earmarking it for spending. With businesses continuing to lay the ground for greater visibility, real-time monitoring and analysis, facilitated by connected IoT devices, data storage and management tools become increasingly valuable components of the modern logistics enterprise. The use of smart devices generates large amounts of data, and logistics businesses across the world are increasingly turning to cloud providers to both store and manage their output. However, though 25% of businesses we surveyed told us that they were eyeing up greater investment in cloud technologies, a third of our respondents (33%) revealed that movements on this front are likely stifled by their current data pipeline, facing the need to first invest in data interchange solutions to continue working with legacy solutions and suppliers before moving entirely to the cloud.

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Logistics and Supply Chain Technology Report 2021

With visibility in mind, risk management also emerged as a strong area of investment (30%). Besides the supplier diversification and China Plus One strategies we have previously outlined, other risk-management strategies might involve mapping the supply chain structure and delving into indirect partners to identify vulnerabilities and exposure to risk, allowing for a more targeted form of investment to nip problems in the bud before they emerge. Critical supplier dependencies along the chain must be assessed in order to fully weigh up potential planning solutions and to calculate the impact upon operations. To this extent, cybersecurity practices of vendors must also be taken into account when thinking about risk, and our respondents emphasised this, with 26% stating direct investment into their cybersecurity strategies to assuage customer fears and to strengthen their systems against the growing onslaught of cyber-attacks on supply chain businesses.

Are you increasing or decreasing your IT spend?

25%

50%

75%

100%

Increasing

59%

Staying the same

37%

Decreasing

Given this trend it comes as no surprise that IT departments are seeing a boost in funding across the industry, with over half of all survey respondents informing us that they were increasing their IT spend over the coming year (59%). A further 37% told us that they were maintaining their level of investment for the time being, finding that increased funding over the past year had led to significant improvements in their operations, or required further investment levels to maintain service levels and see through prior investment. However, a minority of business are scaling back their spending after a heavy year of spending (4%). As we have seen, whilst COVID-19 prompted many to take an unplanned look at their technology infrastructure, some were better prepared for the transition to remote working and a digital-first office and, having spent the past 18 months moving quickly to scale existing infrastructure, are now up to speed and looking to cut back on IT spending. Our solutions providers echoed these results, telling us that 85% of their customers were looking to expand their technology spend, with 13% maintaining current spending levels and just 2% cutting back.

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中国电信（欧洲）有限公司 C h i n a T e l e c o m ( E u r o p e ) L t d .

Logistics and Supply Chain Technology Report 2021

What is the primary drive for your spending initiatives?

25%

50%

75%

100%

Taking advantage of new technology

31%

Creating a business differentiator

26%

Updating legacy systems

16%

Customer demands

14%

Keeping pace with the competition

Other

The drivers behind these spending decisions are varied, with our respondents noting factors ranging from keeping pace with the competition (8%) and creating a differentiator for their business (26%) to meeting emerging and growing customer demands (14%). The majority of our respondents converged on taking advantage of new technologies (31%). As the past year has proven, a modern world requires modern solutions, and the rise of digital-first third party logistics (3PL) and Software-as-a-Service (SaaS) providers across the supply chain has presented a wide range of potential opportunities for swift-moving businesses to update their technology stack and gain a competitive edge. To this extent, the prevalence of legacy systems, though dwindling is still a budgetary concern (16%) as modernisation of business infrastructure requires maintaining these systems until viable alternatives are more available.

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Logistics and Supply Chain Technology Report 2021

Does your IT department engage directly with customers when developing or implementing customer-facing IT?

50%

100%

Yes - Continuously

43%

40%

Yes - At the start

17%

Our respondents were split in response to this question. Though the slim majority of IT departments engaged continuously with their customers during development (43%) and a further 16% interacted with the customer at the beginning of development, a large proportion of respondents skirted any form of direct communication with the customer whatsoever (40%). Though off-the-shelf services might consider initial consultation to provide enough information prior to development, our industry workshops have found that IT leaders should still be visible in the operation to both build trust and be clear point of feedback for customers. Building these relationships with the customer during implementation is crucial to creating an efficient feedback loop between development workflow and deployment outcomes. Crucially, open communication can facilitate faster action on teething issues during development, with incremental iterations avoiding the sudden appearance of large-scale problems with major updates.

How open are businesses to adopting new technologies in their supply chain or logistics operations?

50%

100%

Somewhat open

61%

Very open

37%

Not open

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Logistics and Supply Chain Technology Report 2021

The overwhelming majority of our solutions providers found that businesses were open to adopting new technologies in their operations. No doubt spurred on by the urgency of the pandemic mode of working, 37% of solutions providers found their customers to be very open to integrating new technologies into their operations, with a further 61% open, but cautious. Just 2% remained staunch in their resolve to stick to the technology that had served them thus far.

Which department is primarily responsible for driving innovation in your organisation? Innovation

25%

50%

Senior Leadership Team

31%

Operations

30%

Innovation Department

22%

IT Department

12%

Marketing

Sales

Despite our survey affirming that Senior Leadership Teams remain largely responsible for innovation in their organisations (31%), we also found that Operations had increasingly become more involved in the process (30%). This is in no small degree due to the necessity of technological decision-making required over the past year, thrusting IT from the back-office into leading technology strategies. Those with dedicated Innovation Departments also found them to be taking the lead (22%). As might be expected, marketing and sales play a largely reactive role, with just 3% and 2% of respondents citing them as drivers for innovation within their organisations, largely subject the constraints of the plans laid out by senior leadership and IT.

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Logistics and Supply Chain Technology Report 2021

Who is driving the need for innovation in supply chain technology?

25%

50%

75%

100%

Solutions Providers

46%

44%

Shippers (LSP Customers)

33%

24%

21%

Logistics Providers

32%

Shippers

LSPs

To this extent, our survey found that solutions providers have been leading the charge for innovation in supply chain technology with both shippers (44%) and solutions providers (46%) affirming their roles. However, among our respondents, there were mixed views on the extent to which logistics service providers (LSPs) and shippers were driving the need for innovation, with shippers ultimately edging ahead of LSPs (a cumulative 57% compared to 53%).

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Chapter 3: Cloud Technology

The move towards cloud-first operations in the logistics space heralds a number of potentially key improvements in supply chain management. From dealing with variations in demand patterns and assessing supply bottlenecks to ridding operations of legacy infrastructure and reducing operational costs associated with data storage, the future of a responsive and reliable data-centric system in supply chain has now come to be synonymous with cloud technology. Crucially, cloud computing infrastructure enables supply chain businesses to drive together towards the long-awaited goal of end-to-end visibility, enabling a growing ecosystem of transparent and interconnected systems and processes such as the Internet of Things (IoT) to flourish. To this extent, common cloud frameworks can be viewed as a growth enabler, able to extend digital transformation by facilitating vendor collaboration and data visibility at each stage along the chain, spanning from sourcing and production to delivery and last-mile processes. However, whilst the cloud can provide a helpful platform upon which collaboration with suppliers can be coordinated, approaches must be thoughtful, especially with large networks of suppliers to onboard to new systems. Setup costs can rise rapidly when shifting operations to the cloud, necessitating new hires to facilitate the change in infrastructure. In order to expedite the shift to the cloud, upstream solutions providers must present enough flexibility to allow smaller suppliers across all geographical regions to easily input data and reduce data gaps at minimal operational cost whilst being able ensure that the data model can scale to the needs of larger operations. A pragmatic approach to upstream solutions will expedite uptake across the region and the industry at large. Some tension remains within this transition as decision-makers deliberate between public, private and hybrid cloud architecture solutions. A global and increasingly more remote workforce demands cloud infrastructure that offers greater control, speed and flexibility. To this effect, hybrid solutions presents a number of key advantages relative to both on-premise and other solutions, maintaining maintaining connectivity for enterprise clients and providing tangible cost and security improvements for data management.

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Logistics and Supply Chain Technology Report 2021

According to your company’s strategy, have you or do you plan to migrate your whole or partial service onto the cloud?

25%

50%

Some has migrated

46%

No + Exploring options

33%

No + No plans

13%

Wholly migrated

Our survey found a broadly positive sentiment towards a cloud-based future across the logistics industry, with 8% of our respondents telling us that they had moved entirely to the cloud, and the majority of enterprises we surveyed informed us that they had begun to shift some of their business to the cloud (46%). Beyond this, a further third (33%) were exploring options for moving to the cloud, appraising which options would offer the most secure and performant choice. A small portion of respondents told us that no part of their business had been migrated to the cloud and, furthermore, they had no plans to do so (13%).

Does your business use any of the following cloud technologies?

50%

100%

Office 365

71%

Other CRM on the cloud

44%

Other ERP on the cloud

39%

Public clouds

30%

Google Workspace

13%

Other

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中国电信（欧洲）有限公司 C h i n a T e l e c o m ( E u r o p e ) L t d .

Logistics and Supply Chain Technology Report 2021

Businesses informed us that their operations were currently enabled by a number of cloud providers, ranging from public providers such as Azure, Amazon Web Services (AWS) or Google Cloud (31%) to SAP, Oracle or other ERP on the cloud. The reliance upon Microsoft’s broad suite of word processing, presentation, spreadsheet and other office software in the form of 365 was still present, with 71% of our respondents citing it as the key technology being used in the cloud. Following this, almost half of all respondents were utilising Salesforce, Dynamics 365 and other Customer Relationship Management (CRM) technologies on the cloud (44%). A minority also informed us that they were using Google Workspace in the cloud (13%).

Where do you see the biggest benefits to cloud technologies within your operations?

50%

100%

Flexibility to scale

69%

Ease of collaboration

52%

Reduction in IT costs

39%

Automatic/remote system

38%

Data protection/security

22%

* Multiple answers allowed

As we have seen, the cloud provides numerous technical benefits to a historically fragmented industry. Amidst the myriad potential benefits outlined in this report, our respondents told us that the flexibility to scale and adapt operations was the primary benefit that they were anticipating from a move to the cloud (69%). Being able to coalesce supply, demand and inventory planning into one integrated platform reinforces the benefits of a cloud solution. One successful cloud-based pilot can easily be rolled out over other areas without the hang-ups of legacy on-premise infrastructure. One clear example of this benefit can be seen when modelling scenarios. To no small extent, the viability of on-premise modelling has diminished severely over the pandemic, with many discovering that the computational cost of extended scenario planning rendered local infrastructure a no-go. Being able to run these scenarios in the cloud, especially for larger businesses, presents a drastic improvement computing capacity and reduction in IT costs, a key benefit cited by 39% of businesses we queried.

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中国电信（欧洲）有限公司 C h i n a T e l e c o m ( E u r o p e ) L t d .

Logistics and Supply Chain Technology Report 2021

Which of the following have you experienced as challenges when incorporating cloud technology into your operations? Reducing technical debt and removing legacy infrastructure is a crucial benefit of moving to the cloud. Furthermore, the interconnected nature of business enabled by a modern cloud-based operation also allows for improved ease of collaboration with partners (54%) as utilising a common framework and data store can reduce friction when integrating with suppliers and further lowers overheads.

50%

100%

Integration of legacy systems

52%

Security of your data

48%

Other

38%

Cloud migration

34%

Ongoing cost management

29%

Compliance

25%

* Multiple answers allowed

The greatest challenge facing the logistics industry’s move to the cloud is the integration of legacy systems into this new working environment. The disadvantages of many legacy systems were clearly shown by the pandemic, lacking the ability to plan at speed or be effectively automated. Moving away from manual intervention and towards the cloud enables substantial efficiency gains in these areas. However, whilst a number of processes can be smoothly mapped into a cloud environment, a total transition to the cloud is easier said than done for a number of businesses, with migration referenced as a persistent concern for 36% of our respondents. In attempting to ease this transition, businesses might seek out advanced interconnection solutions such as cloud exchanges, which provide seamless and direct access from any office, data centre, or colocation environment around the world and the security of a high performing and reliable connection.

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中国电信（欧洲）有限公司 C h i n a T e l e c o m ( E u r o p e ) L t d .

Logistics and Supply Chain Technology Report 2021

How much does your company expect/plan to invest in cloud transformation over the next 12-18 months?

25%

50%

£20k to £100k

27%

No investment planned

25%

£100k to £500k

19%

Over £2 million

11%

Less than £20k

10%

£500k to £2 million

75% of all respondents planned to invest in cloud transformation over the next 12-18 months, with the majority (28%) testing the waters with small pilots between $20,000-100,000. Those with more faith were ramping up spending, with 11% investing over $2 million in cloud computing.

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Chapter 4: Internet of Things

If the dream of a wholesale digital transition in supply chain operations is to be realised, then the Internet of Things (IoT) will need to be central to the industry’s transformation. Spurred on by the glut of lower-cost smart sensing infrastructure available to the industry, with devices increasingly capable of providing real time insights and more granular tracking information, the push for IoT-centric environments has allowed for a wide growth in self-steering, event-driven logistics processes across an ever more connected set of operations. The vast scale of digitalisation across the industry over the past few years has encouraged data-driven transparency to become more available across a variety of sources along the supply chain, building the foundations for an interconnected network of IoT devices capable of driving the industry forward.

The Promise of 5G:

The gradual maturation of the IoT sector has been further bolstered by growing investment in 4G/ LTE as well as the rise of 5G. IoT devices have evolved from mere monitoring systems to active components in a distributed network of automated decision-making software. APAC has pulled ahead in 5G and IoT investments over the past year, driving industrial transformation across all sectors. However, despite broad governmental support for 5G across Southeast Asia, many providers are still struggling to keep pace compared with other regions, especially as some have yet to recover from the investment outlay into 4G networks. The business case for 5G is still emerging, but those who want to lay longer term plans for the next decade view 5G as a nascent but necessary technology to enable digital transformation and to sustain competitiveness. Low-latency as well as broad coverage will function as a lynchpin to support IoT networks and automated infrastructure across a wide range of verticals. Remote control also becomes possible, broadening the possibilities for a remote distributed workforce and a scalable automated monitoring environment throughout the supply chain. A broad buy-in across telecommunications and solutions providers alike could foster greater adoption from stakeholders across the industry as a foundational technology upon which to build the future of logistics.

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Logistics and Supply Chain Technology Report 2021

Furthermore, smart deployment of Customer Premise Equipment (CPE) will help businesses to take advantage of cost-effective 5G mmWave performance by relaying phone signals to a host of mobile devices, industrial modules and other connected devices from a local network rather than by accessing increasingly congested public networks.

Data: Lifeblood of Prediction Having access to real-time data as well as large amounts of historical time-series data from sensors can help to reduce information barriers within a modern business intelligence environment. Improved analytics and visualisation can provide productive insights in decision-making scenarios, as well as increasing understanding of cross-departmental engagement and understanding. Enabling collaborative thinking through clear, data-based insights can allow organisations to dynamically solve problems in a way that is cohesive across operations, breaking down silos and reducing inter-departmental confusion. IoT devices can also enable business to expand the remit of human-in-the-loop AI. Generating predictive insights requires learning models to be developed in tandem with automation throughout the supply chain. Predictive models served by real-time as well as historical data will foster more effective business planning from the warehouse to the last mile and allow for more optimised decision-making.

Does your company utilize Internet of Things (IoT) capabilities in your supply chain and logistics operations?

50%

100%

61%

Yes

39%

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中国电信（欧洲）有限公司 C h i n a T e l e c o m ( E u r o p e ) L t d .

Logistics and Supply Chain Technology Report 2021

Though a significant portion of the businesses we surveyed were using IoT capabilities within their supply chain and logistics operations (39%), the overwhelming majority had yet to embrace the technology (61%). This lack of buy-in might be explained by several factors - poor product fit, security concerns or a lack of business need.

Does your business use IoT for any of following processes?

50%

100%

Real-time location tracking Monitoring storage conditions

59%

44%

Forecasting ETAs

35%

Robotics

29%

Locating goods and assets

21%

Other

12%

Of those respondents who were currently leveraging IoT capabilities, the majority of our respondents were deploying them for real-time location tracking and telemetry across their operations (59%). Those utilising reliable map-based IoT services for real-time tracking find themselves better able to cut down on asset management issues (misplacement and delays) and converge with route optimisation systems for improved fleet management capabilities. In addition to this, monitoring storage conditions (44%) has been a clear cut use-case for IoT infrastructure across the supply chain. Over the past 18 months this has become particularly apparent as growing attention has been paid to the cold chain for climate and condition sensitive goods such as perishable food items and COVID-19 vaccines. Similarly clear cut has been the use of IoT for robotics in warehouses and distribution centres (29%) as well as locating goods and assets within facilities (21%). IoT promises also to have a significant impact upon retail and fast-moving consumer goods (FMCG) sectors, particularly as retailers look to bring the benefits of e-commerce to their brick-and-mortar outlets, responding faster to changing stock levels and consumer demand.

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中国电信（欧洲）有限公司 C h i n a T e l e c o m ( E u r o p e ) L t d .

Logistics and Supply Chain Technology Report 2021

A clear digital picture of the supply chain can refine automated workflows to reduce regulatory hold-ups at borders, providing greater information about consignments and provide customers with accurate estimated time of arrival (ETA) for their shipments. Indeed, 35% of the businesses we queried told us that IoT was already being used for forecasting ETAs for goods in transit by their business.

Which of the following have you experienced as challenges when incorporating IoT technology into your operations?

25%

50%

75%

100%

Connectivity difficulties

53%

Security risks to data and operations

38%

Data storage and management

30%

Employee skills gap

26%

Other

Above all, our respondents felt that connectivity with IoT devices was still their greatest challenge (53%). 5G networking has a clear role to play in improving this situation but, as many across the industry are aware, the current state of IoT connectivity is a source of constant frustration, with constant compromises necessary to ensure compatibility and security.

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中国电信（欧洲）有限公司 C h i n a T e l e c o m ( E u r o p e ) L t d .

Logistics and Supply Chain Technology Report 2021

The persistent risk presented to data and logistics operations by IoT was cited as a central challenge faced by 38% of survey respondents. Security flaws within IoT devices are well documented by this point and devices at the network edge must be kept up to date, with firmware patches regularly applied and infrastructure updated wholesale if necessary. However, due to the existence of both an IoT and cybersecurity skills gap, this may often be a neglected area of operations. Dealing with the IoT skills gap in logistics is yet a nascent issue for businesses, but with the number of IoT devices growing exponentially it has the potential to develop into a fatal problem. Maintaining and managing data, sensors and other devices investment in IoT infrastructure requires investment in upskilling and training your workforce. Whether through training programs or incentivising talent to join and build a team, 27% of enterprises surveyed for this report told us that a solution needs to be found for the continued existence of a skills gap for employees. Data storage and management have also been a tricky process to handle for 29% of the businesses we surveyed. The large amount of data being generated from IoT devices have increased the urgency with which businesses must deal with their data storage procedures. As we have seen, the right solution can encourage collaboration and greater visibility across the supply chain and though cloud providers are slowly filling this gap, finding the right infrastructure to both manage and store data requires the right partners.

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Chapter 5: Cybersecurity

Whilst the evolution of the supply chain to a digital first environment has heralded numerous benefits for a traditionally stagnant industry, it has simultaneously exposed vulnerabilities in a number of vital business operations, exploding assumptions about the security of data and the independence of business processes in cloud-centric environments. To this extent, cybersecurity operations have been a focus for many this year with the recent influx of supply chain attacks, zero-day exploits and ransomware causing widespread issues. As we have found, the COVID-19 pandemic has had a drastic impact upon uptake of digital infrastructure, accelerating digital transformation across the supply chain, with an eye towards building resilience. Unfortunately, as low levels of security awareness meet lax regulations and high digital connectivity, the interconnected and global nature of the logistics industry continues to provide fertile ground for cybercrime to thrive. Developing markets are at particular risk from ransomware and malware attacks. Contextualised by a worrying attitude towards security, with executives often casting concerns around the impact of security incidents as exaggerated, logistics operations remain a persistent concern for a global market looking to mitigate cyber risk. The growing toolset of attacks available to would-be-hackers demands organisations to implement more frequent reviews of their infrastructure. Whether this be by shoring up existing threat mitigation strategies, investing in upgrading legacy infrastructure or preparing for the changing shape of work by enabling secure digital access for remote workers, continual review of business security strategy is a crucial part of ensuring security models improve as the threat landscape develops. A more optimised security model with continuous improvement cycles and with performance metrics judged against company goals will not only ensure security but also improved efficiency in IT operations, extending to the wider business environment as businesess move to cloud-based infrastructure.

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中国电信（欧洲）有限公司 C h i n a T e l e c o m ( E u r o p e ) L t d .

Logistics and Supply Chain Technology Report 2021

The Case for Transparency

The shift towards a remote working environment and geographically distributed teams also prompts a wider need for secure methods of accessing, delivering and storing information away from business premises. Adapting to these changes requires not only well-informed and capable talent, but also the financial investment to be able to mitigate problems through proper procurement, rather than cobbling together a cheap solution from third-party suppliers with little oversight. Though cloud technology has remedied this problem by centralising assets on a shared infrastructure accessible from any location, the issue remains that choosing the right provider with the right architecture for your needs is equally as crucial to ensuring a smooth shift to a remote-first workplace. Thus, as the cloud develops into a key technology in logistics operations, businesses will require greater scrutiny over third party security policies and data handling procedures. Cloud centralisation may improve efficiency, but it harbours devastating consequences for businesses if found to be insecure.

How much is the security of your data a factor in your decision when developing your technology strategy? (0 being lowest factor, 10 highest factor)

100%

50%

Solution Providers

83%

Shippers

77%

Indeed, the security of data was judged to be a significantly contributing factor when developing technology strategy amongst businesses, scoring an average of 7 across those we queried. Improving transparency is one step the logistics industry can take towards managing security in the diffuse environment of third-party SaaS products, in-house solutions and legacy software that comprise the modern supply chain software stack. This comes not only from better training, but by improving the culture of transparency across the supply chain. To this extent, breach disclosures have been one source of contention across APAC.

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中国电信（欧洲）有限公司 C h i n a T e l e c o m ( E u r o p e ) L t d .

Logistics and Supply Chain Technology Report 2021

With many arguing for more robust data breach laws region, companies looking to lead the charge in cybersecurity will have to change their reporting models to account for report any unauthorised access to the system, irrespective of whether data had been accessed or stolen in order to allay concerns. Consumer trust is easier and better built in the open. Secrecy over vulnerabilities and breaches can breed distrust among consumers when they eventually come to light, highlighting flaws in data management practices as well as trust that data controllers will have to work to remedy via their active engagement with customer concerns. Publishing the results of regular security audits would also go some way to assuaging fears.

Does your organisation provide enough training on cybersecurity threats for employees?

All Respondents

However, whilst data security was factored into strategy, proper protocols for training employees seemed to be lacking. On average our respondents found their organisations to be middling on cybersecurity training. Across businesses we surveyed the average score was 5/10, far too low given the growing threat posed by malicious actors and the rise of ransomware-as-a-service (RaaS) models providing more and more opportunities for attacks. To some extent, this lack of training may be offset by adopting other practices, though minimising friction for untrained users whilst also providing robust risk-adaptive security practices is a difficult thing to balance. Single-sign on (SSO) coupled with a multi-factor authentication (MFA) process are popular models for secure access. Indeed, MFA experiences, though perhaps perceived as finicky and time-consuming may actually provide greater comfort to potential customers concerned about access to their data. Businesses might choose to work with solutions providers to design an authentication flow that only low-level authentication suitable for low-risk actions, and greater authentication only required when necessary to avoid frustration for the end-user.

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