Logistics' First and Last Miles

LOS ANGELES—An item in the Wall Street Journal noted that distribution centers have become increasingly massive in the era of e-commerce. Whereas a warehouse of 500,000 square feet was considered 'big-box' five or 10 years ago, “now it's become a million-square-foot mega-distribution center,” Dwight Hotchkiss of Colliers International told the WSJ.

However, the sheer size of modern DCs is only one aspect of the impact that e-commerce has made on the industrial sector. ““Our analysis finds that e-commerce and evolving delivery methods are the primary factors driving the shape of the logistics sector both today and in the future as e-retailing is slated to increase significantly in cities and towns across the globe,” says Hotchkiss, national director of industrial for Colliers | US and president of brokerage services | US, in connection with a new report from the firm. “This will result in the creation of new and innovative space at the initial 'First Mile' level, including mega distribution centers, and the 'Last Mile,' where there is already a proliferation of e-fulfillment distribution centers on the edge of urban areas.”

Along with scale, there's also technological sophistication at work in the mega-DCs. “As a matter of operational efficiency, retailers and logistics companies have been engaging with a full range of mobile technologies and the deepening utilization of sales data analytics, which are essentially spun off from their digital platforms, to help formulate process-driven facilities,” the report states.

For example, the use of radio frequency identification, or RFID, is enabling logistics providers to link up “the various parts of the supply chain,” in order to provide accurate inventory management reporting. It also allows operators to collect product characteristics, such as batch size, color and size, “which translates into useful business analytics to help service their customers.”

Consolidation is another trend in so-called “first mile” logistics facilities. “In some markets, especially those with a diversified customer base and a shortage of labor, logistics facilities with advanced automation technology are enabling much higher productivity rates and improved delivery times, generating economies of scale,” according to the Colliers report. Hotchkiss and his team see “a clear trend of many pan-national or regional operations to be consolidated into the one key DC hub.”

If “first mile” DC hubs are marked by size, then their “last mile” counterparts by necessity are more compact, since that last mile may be in a city. “The urban environment is a specific challenge for logistics companies,” the report states. “The last mile of the logistics chain, which accounts for a large proportion of shipment costs and complexity of operations, is often the most inefficient,” due to low load factors, long dwell times at loading and unloading points and “a high number of delivery requirements to individual customers within a short time.”

Accordingly, e-commerce retailers have started to include smaller urban warehouses in their networks in order to shorten delivery routes and provide quick delivery services to online customers. The report cites the example of Amazon's “Prime Now” service, which has been rolled out across 16 major US cities, offering Amazon Prime customers deliveries in as short a time as one hour.

“The only ordering vehicle for the consumer is via a mobile application,” according to Colliers. “This delivery time is made possible by the use of smaller, local 'urban' warehouses that are stocked with the 25,000 items made available on the Prime Now mobile application.”