November 18, 2019
Mike Turner, vice president, business development with DSC Logistics and Supply Chain Management, will be one of the panelists at the upcoming Connect Industrial 2019 conference on Nov. 19. Connect Media asked Turner about logistics trends, their impact on real estate, and what we can expect in 2020.
Q. What is the one trend that is having an impact on supply chains and logistics?
A. The growth in e-commerce and omnichannel consumer activity is a huge trend, that is impacting the logistic industry in several ways. For one thing, labor demand is becoming less predictable with higher peaks, and more intensive; as labor demand increases, so are wages and retention programs. More amenities are needed in the industrial environments to retain talent. This is also impacting technology, as e-commerce is spurring the need for automated solutions. As much of this technology is still emerging, this will impact building layouts, we just don’t know to what extent that will take place. Speaking of which, e-commerce still requires large distribution environments, as it tends to take up more space than traditional retail and distribution.
Q. Moving on to real estate, how does real estate play a role in today’s logistics sector?
A. When used for e-commerce, the real estate needs to be closer to the consumer base to deliver immediate gratification with shorter transit times. This also means an increased need for smaller locations, closer to the customer base. Some companies are keeping e-commerce operations separate from manufacturing, but in a lot of cases, the e-commerce operations have evolved and grown within distribution centers. And, with the proliferation of e-commerce, we’re experiencing more demands for space for returns processing. Outside of e-commerce, real estate in the logistics sector is also used for crossdocking or transloading to facilitate mode changes; as trade issues evolve, this could impact import and export activity. When it comes to manufacturing uses, plants are often used for buffers. Such real estate is also used for value-added services (VAS) and light assembly, either at co-packer locations, manufacturing sites or inventory warehouses. So, to answer your question, real estate plays a role in this sector in a variety of ways.
Q. What is the outlook for the logistics sector?
A. We expect continued growth. As consumer behaviors lean more and more toward natural, healthy choices, we expect refrigerated and frozen to grow. We expect the e-commerce trend to continue to grow, and, with it, the demand for automation and continued labor retention challenges. With the demand for automation, once a firm ROI can be proven, you might see more build-to-suit operations, as companies get more bullish in automation investments. Right now it’s still challenging to prove the ROI, but when labor situation becomes challenging enough and/or the technology becomes more affordable, we might see more large-scale automation projects. If the economy slows as some are predicting, we also could see an uptick in inventories due to demand rates when/if they slow in comparison to forecasts. This would increase the need for space, but would have other negative impacts on the logistics sector overall.
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