Part 2 of 2

How has the demand for industrial space changed in the last 15 years, given the ecommerce disruption and resulting changes to supply chain strategies? That was one of the many questions we asked Adam Mullen, head of supply chain services at CBRE as we dive further into our 15^th anniversary coverage. “eCommerce has driven the most disruptive movement of our time, changing the supply chain landscape forever—led by new consumer behaviors,” he says.

According to Mullen, supply chain strategieshave always included a focus on effectiveness and efficiency—but now, speed is the most important consideration for many companies. Consumers, he says, are very savvy, and know how to seek out the lowest cost, the fastest shipping methods and expect visibility into order status.

“To compete, companies have had to get much smarter about what inventory where, how to better communicate with consumers and deliver orders without any interruption,” he adds. “To do that…more sophisticated systems, infrastructure, thoughtful locations and highly focused transportation strategies (by the way, Freight is expensive)—fast order delivery without a shipping charge is not easy to cover with typical product margins.”

As for how tenants are looking at space performance differently today, Mullen says that 15 years ago, it was a surprise when your order showed up when promised, let alone within a week's time. “Space performance today is critical, but only a small piece of the overall equation. If the space is in the wrong location, the consequences will be detrimental,” he says.

• Freight costs – freight drives 50%+ of most companies overall supply chain costs
• Inventory – drives 20%+ of most companies overall supply chain costs
• Labor – drive 15%+ of most companies overall supply chain costs

“The highest performing distribution center will not be able to make up for locating in a sub optimal location, or making bad inventory decisions or not having enough/productive/skilled labor,” he says. “Once the location and inventory locations are defined, and the market has the right labor, the space is highly functioning today.  It is automated and working hard to receive an order and process that same order within 24 hours – with updates to the consumer throughout the entire process (e.g., we received your order, we picked your order, your order is on a UPS truck).”

The perfect space, he says, “is flexible, not over automated around a specific order profile or product type – rather capable of absorbing new products (SKU's), able to ramp-up and down with seasonality, etc.”