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Post COVID-19 Trends Affecting Industrial Real Estate | WCL Consulting

Translating Market Dynamics

The post-COVID-19 Supply Chain world is seeing dramatic changes that impact the industrial real estate industry. Firms that implement new tactics in response can achieve a competitive advantage. Knowledge of the trends outlined below aid in this process.

 

Background

Supply chains are experiencing record levels in Innovation Disruptions (e.g., digitalization, automation technology, e-commerce, etc.) and Crisis Disruptions (e.g., pandemic, recessions, regulatory changes, recalls, tornadoes, etc.). While we compete in a volatile, complex, and uncertain time, there are opportunities to be achieved.

 

TRENDS

Supply Chain

  • A decade long focus on supply chain optimization to minimize costs, reduce inventories, and drive up asset utilization removed buffers & flexibility to absorb delays and disruptions.
  • Amazon and Walmart’s continuous implementation of innovative supply chain strategies reminds Corporate America that their supply chain strategies can provide a competitive advantage.
  • Supply Chain Risk Mitigation focus is increasing in importance with: China/US Tariff Battle, Japanese earthquake and tsunami, and the Thailand floods, and COVID-19 which seriously disrupted goods movements around the world.
  • A growing percentage of companies are considering a change in China sourcing strategies. It will not be easy considering the supply chain ecosystems that are now in place throughout China. It appears while Vietnam and Cambodia are benefitting, importers face rising business costs, development bottlenecks, and less competitive workforce.
  • Supply chain sustainability initiatives will continue to grow as “going green” proves to not only help the environment but can lower costs and increase customer loyalty and organizational goodwill.
  • Accelerated digitalization due to lessons learned as shippers with digital platforms in place did much better responding and dealing with COVID-19 disruptions compared to shippers with manual methods.

Trucking

  • Autonomous heavy-duty trucks are no longer far-fetched in terms of an ability to achieve radically better efficiencies and cost reductions. Autonomous trucks in multiple testing phases are showing positive progress. Warehouse facilities will require modified yard layouts and process changes to accommodate autonomous vehicle interface operations.
  • The number of intra-regional and last-mile truck trips has increased while the average length of haul has declined. Average trip lengths have decreased by 37% since 2000, while urban vehicle miles traveled have increased for much of this time.
  • According to MIT by consolidating e-commerce goods transportation into trucks and vans making several deliveries on a circular route, rather than individual point-to-point trips by consumer vehicles to retail stores, the carbon footprint of transport falls by more than 50% as measured by kg CO2e.
  • The trucking industry will experience increased carrier bankruptcies, a higher number of mergers, improvement of technology, and increased e-commerce influence.

Warehousing

  • The e-commerce segment is expected to grow in the coming years and will continue to drive demand for efficient warehousing operations. The e-commerce picking process is far more labor-intensive and time-sensitive than traditional warehouse activities involving the bulk transfer of products.
  • E-commerce and direct-to-consumer growth will continue to transform the fulfillment operations of retailers, manufacturers, plus their wholesalers and 3PLs.
  • On average, 69% of customers will not shop with a company again if their delivery is late. With stakes, this high, speed, agility, and quality are imperative to get customers their orders correctly and quickly.
  • Retailers are becoming more flexible in how they transact with consumers by decentralizing their distribution/fulfillment networks to bring inventory closer to consumers.
  • Warehouse automation continues to grow with warehouse robotics, automated guided vehicles (AGV), autonomous mobile robots ((AMR), cobotics, and automated picking processes.

 

Conclusion

Today corporate real estate and supply chain executives compete in a market loaded with volatility, uncertainty, and complexity that demand strong value propositions from their trusted-advisor service providers. Today’s “Normal” requires all organizations to modify the “old ways” of doing business, moving forward with innovative solutions.

 

Interpretation

An opportunity exists for nimble-minded executives who can quickly adjust and implement new tactics. I strongly recommend the following:

  1. Develop a warehouse location logistical competitive assessment that will improve its value proposition, achieve a competitive advantage, and help avoid a PRICE focused discussion.
  2. Implement a Potential Tenant Pre-Meeting Site Selection Priority worksheet (download here) to make sure tenant/landlord meetings address tenants’ site selection decision priorities.
  3. Improve potential tenant company profile quality research information to provide critical intelligence for use in business development meetings.
  4. Incorporate SPEED in the Tenant interface processes which will provide a key competitive advantage.

WCL Consulting’s Current Engagements:

  • State and Local Impacts of Automated Freight Transportation Systems – Identify challenges and opportunities in implementing autonomous trucking.
  • Warehousing & Trucking 2020 – An Era of Sustainability presentation – Develop a story to educate local government agencies on today’s green supply chain initiatives.
  • Industrial Real Estate Park Location Logistical Assessment – Provide Logistical Competitive Information to aid in investment due diligence and marketing messages.

To discuss how WCL Consulting can help your firm navigate the post COVID-19 trends in Industrial Real Estate please contact: 

Jon DeCesare
President
WCL Consulting, Inc.
310-963-6172
jondecesare@wclconsulting.com