There is no doubt that supply chains have come under pressure like never before in 2020, as logistics and warehousing serviced a country in lockdown for the first time. The complex ecosystems that get goods from A to B have had to adapt rapidly. As the pandemic drove new consumer behaviour, creativity has come to the fore as the logistics industry works to solve fresh challenges, often on a daily basis.
According to Colliers International, during COVID-19, 85% of companies that occupy warehouse space have reviewed their supply chain network specifically and 31% are storing more stock locally to avoid shortages. This highlights a demand for more strategically located warehouse space. When the dust settles and consumers and retailers are given the chance to pause, what are the considerations for this new landscape?
Getting even closer to consumers
Knight Frank predicts that the growth of e-commerce could drive demand for 92 million sq ft of warehouse space across the UK by 2024. When it comes to the detail, the British Property Federation’s (BPF) ‘What Warehousing Where?’ report predicts that 69 sq ft of additional space will be needed per home to fulfil deliveries generated by the growth in online retail, figures based on e-commerce accounting for just 21.4% all retail transactions in the UK, which is 10% below the actual online sales recorded by the Office for National Statistics during 2020. The market opportunity is undeniably sizable and growing.
With 80% of the UK population living in cities and able to choose between click and collect, or continue with home deliveries, the aim is to shorten supply chains where possible in order to balance consumer demand for convenience with environmental pressures on transport networks.
The predicted trend towards micro-fulfilment based on a hub and spoke model is now coming into its own as retail real estate continues to explore the opportunities for dark stores and micro hubs that can potentially deliver more value to consumers, landlords and the wider supply chain.
The opportunity lies in supplementing regional distribution centres with urban delivery hubs close to consumers, creating a strong and seamless journey that drives both speed and efficiency.
Innovation: driving fluidity and agility
It’s well documented that last mile logistics is the most complex and costly element of the supply chain, accounting for some 40% of overall costs. Innovating in that space has the potential to save money, as well as minimise environmental impact.
Big data, robotics and automation will all be vital tools, capable of unlocking new operational models and enabling direct to consumer delivery. This is particularly important as warehousing moves closure to urban, more populated areas to meet demand.
Matthias Winkenbach, Director of MIT’s Megacity Logistics Lab and CAVE Lab highlighted in Goodman’s own Thought Starters series, a deep dive into the future of urban logistics, the considerable opportunities that data and technology can bring to resolving some of that complexity and offering alternative solutions.
While it may look as though change has been purely reactive, much of this was already in motion, not least the role that warehousing will play in addressing environmental constraints, especially as increased restrictions on fossil-fuels dominate transport for the last mile.
Going forward, both carriers and retailers must ensure they are rethinking their last mile strategies to deliver more sustainably. Can brands encourage consumers to consolidate orders into fewer deliveries in the interests of the planet, both from a packaging and a transport point of view? And, from point of purchase to delivery, how can warehousing help firms manage and move inventory as efficiently as possible?
The past 12 months have shown what is possible in the face of unprecedented disruption. Supply chains have been reconfigured to improve their resilience, while new ways of procuring and delivering goods and services have been adopted at pace. The future is challenging and exciting. With a vaccine now being rolled out, forward-thinking firms across the sector must turn their attention to creating flexible and resilient supply chains capable of servicing both consumer and environmental demands. Decisions focused on real estate that gets them closer to consumers and enables innovation, will help them meet demand and seize the opportunity.