In these challenging times, the industrial real estate giant JLL is offering some timely advice to help its warehouse and distribution center rental customers.
Since the advent of the Covid 19 shutdowns, consumers have learned to expect that the near-instant delivery service is a normal thing, along with other services, such as free shipping and returns, it says.
One problem in delivering value-added services is that logistics-related expenses can account for 80% of operations costs. “It’s true in both business-to-consumer and business-to-business markets, and the trend isn’t likely to subside anytime soon,” JLL states.
It points out that nearly a quarter of companies said that they expect customer service preferences will be the single most important challenge over the next decade, based on a study that JLL cosponsored.
“While it’s often difficult for companies to quench consumer demands – and not meeting them would be an unwise business decision – you can take steps to optimize your supply chain network to find relief from rising costs,” the company stresses.
A critical lesson arising from the pandemic is, don’t put all your eggs in one basket. In hindsight, many logistics professionals understand that overreliance on a single source of trade or point of entry was the wrong approach. “It is essential to use more than one source of supply, more than one trading partner and more than one port system,” JLL says.
Transportation and labor costs are among the single largest line items in the distribution business, and solving pain points related to both these functions will reduce costs. Once again, diversification is key.
“Nearly three-quarters of goods are currently moved by truck, but driver shortages, along with many other factors, have increased trucking costs and expanded delivery timelines,” JLL notes. “Using an intermodal strategy with both train and truck can.
help you reduce costs and offset transportation challenges related to tight trucking capacity.”
It also reinforces the importance of working closely with supply chain experts to analyze your network, identify your supply and demand points and strategically place distribution facilities.
Warehouse facilities today are struggling to find the labor they need. Automation and robotics can bridge this gap and boost productivity. JLL says, adding that that automation technologies are improving and are getting more affordable, making this a solid option for offsetting labor shortages.
Learn to look ahead and innovate, JLL urges. “Anticipating obstacles and embracing proactive strategies is critical to network optimization.”
It argues that sustainability is at the top of that list. Facility-related sustainability initiatives currently are not driving supply chain decisions, but with transportation accounting for one-third of greenhouse gas emissions, JLL says it is becoming a pillar in a network optimization strategy.
Developers also are getting creative with land purchases for facilities that better serve occupier needs. This extends to retailers transforming big box retail storefronts into fulfillment centers to get closer to population centers.
Don’t forget real estate investments. Warehouse and distribution facilities are the last links in the supply chain, and they account for about 5% of logistics expenses, so there isn’t much opportunity to impact overall costs. But industrial supply shortages are transforming real estate into a rare commodity.
Companies must include real estate as part of a holistic network optimization strategy to secure the critical space needed to drive efficiency throughout the supply chain, JLL asserts.
“Today, more and more companies are reassessing network strategies to accommodate modern business functions and better serve customers,” it concludes. “When companies get supply chain dynamics right, they create tremendous value for their business.”