Future of Supply Chain
eCommerce Logistics: Matching Real Estate with Demand
Everyone from pure online retailers to department stores is trying to figure out how to deliver goods over multiple channels while maintaining a consistent customer experience. How can I have the right product in the right place to get it to customers in two days, maybe in one day— possibly even the same day? In short, how can my logistics real estate help me meet demand?
The changes transforming the global supply chain today are the biggest I’ve seen in my 20 years in the industry. And it’s still not clear exactly where we will end up. Retailers and manufacturers are experimenting with different service models, looking for the right mix of online and traditional in-store sales, speedy delivery, personal attention, and the overall customer experience that consumers now demand.
Those are big challenges. It’s my job to help our customers manage them, and capitalize on the opportunities created by the eCommerce evolution. Many of the challenges have a real estate component, so providing more flexible real estate options can enable customers to try new things without putting their companies at risk.
eCommerce has created a direct-to-consumer sales channel, and everyone—from pure online retailers to department stores—is still trying to figure out how to deliver goods over multiple channels, while maintaining a consistent customer experience. How can I have the right product in the right place to get it to customers in two days, maybe in one day, possibly even the same day?
How can I have the right product in the right place to get it to customers in two days, maybe in one day, possibly even the same day?
If you are a brick-and-mortar retailer who has spent decades building a distribution network around delivering shrink-wrapped pallets of products to stores, that’s an entirely different model than delivering one pen, one box of Kleenex, and one iPad to a home in Chicago. That traditional supply chain needs a complete overhaul.
For one thing, it takes a lot more space—about three times as much—to fulfill small individual orders than it did to ship truckloads of bulk goods to and from a central warehouse. The picking and packing function is much more intensive and takes more space, for example. Online merchants also offer a wider variety of products than they would sell in a store, and they need storage space. And when you’re not carrying any inventory in store locations, you need to keep it all in a distribution center. So, if you’re selling exclusively online, you may not need any retail space, but you need much more distribution space.
The shift to a more industrial real estate setting sometimes presents additional, unexpected wrinkles. For example, a big fulfillment center might be housed in facility with a million square feet. A traditional warehouse of that size would come with 200 to 300 car parking spaces. But an eCommerce facility requires far more workers, and would need 2,000 spaces.
Many traditional retailers are trying to figure out how to use their existing store network more effectively. For example, having customers order online, but pick up purchases in-store, which brings more traffic to the store and may drive additional sales. Or perhaps they can fulfill online orders out of their store inventory. Each option presents an opportunity to try new distribution models, and there are many experiments underway.
To help our customers move their supply chain closer to their own customer, we’re doing a couple of things.
If you are a brick-and-mortar retailer who has spent decades building a distribution network around delivering shrink-wrapped pallets of products to stores, that’s an entirely different model than delivering one pen, one box of Kleenex, and one iPad to a home in Chicago.
First, we’re locating our distribution space near major population centers. This has always been a core investment strategy for Prologis, but today we are looking to even more infill locations.
Second, we’re designing our buildings to better meet customers’ changing needs. That means more parking spaces and room to move trailers in an out from loading docks more efficiently. We’re trying new land-use concepts, like multi-story warehouse projects in Seattle and San Francisco. We’re able to put more square footage on the same site as a traditional one-story warehouse without compromising access and delivery efficiency. And we’re building in broadband and security technologies, and smart controls to move higher volumes in and out of the building more effectively.
Real estate has never been a particularly flexible business—huge amounts of capital get tied up in multi-year leases that don’t easily expand or contract. As our customers’ business needs are changing rapidly, we strive to provide more flexible options that solve problems and enable new ways of doing business. We know their customers are making new demands every day. Our goal is to make sure their real estate portfolio helps them meet those demands and build stronger businesses in the years to come.
Disruptive Innovations and the Art of Warehousing
Ken Ackerman, The Ackerman Company
- Chapter 1: Supply Chain Disrupted
The Old Supply Chain: That System Is Broken, and We're Not Fixing It
Tina Sharkey, Brandless
We Are All in the Supply Chain Business Now
Neil Ackerman, Johnson & Johnson
Supply Chain Is the Heart of Business Today, Its People Are the Lifeblood
Dale Rogers, Arizona State University
- Chapter 2: Evolving Technology Drives Efficiency, Visibility, and Results
Supply Chain Collaboration Drives Business Opportunity
Rich Thompson, JLL
The Power of Supply Chain Design
Jeff Metersky, Llamasoft, Inc.
Fulfilling the Promise of Supply Chain IoT with Rain RFID
Jason Ivy, Impinj
Good Data Will Set You Free
John Heller, S'Well
- Chapter 3: Emerging Supply Chain Business Models
A Roadmap For Reshaping The Retail Supply Chain
eCommerce Logistics: Matching Real Estate with Demand
Steve Callaway, Prologis
Supply Chain Brings Challenges – and Opportunity
Kurt Beckett, NW Seaport Alliance
Self-Inflicted Wounds: Taking Stock of the Retail Industry
Ben Conwell, Cushman & Wakefield
- Chapter 4: Meeting Customer Demands and Supply Chain Professionals
Constrained Assets Add To Supply Chain Challenges
Scott McWilliams, Geodis
Balancing Technology With The Human Touch
Ryan Gorecki, Innovel Solutions
Embrace Supply Chain Innovation, But Don't Neglect The Fundamentals
Kevin Kryscio, Ace Hardware
In The Commerce Era, The Customer Wins
Bob Speith, QVC Group