By Amy Sorter
Thanks to the advent of e-commerce, the “last mile” has become an important part of the supply chain/logistics language. And, thanks to “The Evolving Expectations of the Last Mile,” attendees at the recent Connect Industrial conference, which took place in Houston, became a little more savvy about the concept.
The panel, moderated by Vigavi Realty’s Christen (Hatfield) Vestal, agreed that transport costs make up a huge percentage of supply chain spend. However, the solution to reducing that cost varied, depending on who was speaking. As an example, Sean Dalfen with Dalfen Industrial indicted that the focus needs to be on the consumers, meaning that facilities are better off, closer to consumers. Meanwhile, RealTerm’s Rob Moriarty felt that locations near intermodal, rail or highways “provides cost savings by eliminating drive time and distance travel for the user.”
Another issue discussed involved the evolution of retail, from a supply chain perspective. Moriarty indicated that it’s becoming more cost-effective for a user to store inventory in a warehouse than a retail space, from a rent perspective. Furthermore, he continued, with companies such as Amazon starting to design facilities for storing oddly shaped goods or bulk products, “users will continue to experiment with inventory balance.”
Mike Turner with DSC Logistics agreed, but pointed out that, if a user is focusing on automation, that automation works best with more common products. “If you have different types of items,” he said, “the RPO becomes more difficult when it comes to building automation for odd-shaped items.”
When questioned about working with railroad companies on rail-served real estate projects, the three panelists acknowledged that it depends on how accommodating those companies can be. “Most try to be accommodating,” Turner said, “but they have a structure they have to follow.” Dalfen acknowledged that his company owns several rail-served buildings, but they don’t factor railroads into their developments. He did suggest, however, that, going forward, rail will become more important for transporting goods. “The cost of using rail is substantially cheaper than using rubber tires and trucks,” he said, adding that rail would be useful for bulk goods.
Because ports and intermodal facilities depend a great deal on trade, the current trade dispute was chewed over, as well, with the panelists agreeing that, over the long-term, riding out ramifications of the dispute would be tough. Moriarty noted that, in the short term, he is seeing users rerouting some of their trade and freight from China to different origins, such as Viet Nam, Taiwan or South Korea. “If you have real estate that is well-located and feel good about rent-growth prospects, that outweighs any setbacks you might see from some of these traffic and trade disputes,” he added.
The final issue discussed concerned the future of e-commerce, with Turner observing that the concept isn’t just a retail phenomenon. Other industries are moving into the space, with omnichannel playing a role. “When you order something, it could come from a store or distribution center,” he pointed out, adding that Macy’s turned most of their stores into distribution environments. Moriarty, in the meantime, felt that the largest path for e-commerce growth would be through expansion of non-traditional product categories.
Dalfen provided an interesting observation, noting that innovation comes from pain, with the pain taking the form of recession. The reason? If things cost more and as margins shrink, users need to become more innovative to bring down costs. “How do you get companies to survive and be profitable? Through a pain situation,” he added. “If you can’t afford to hire works, then comes digitation and automation. If there is pain, then there is innovation.”
Pictured (R-L): Christen (Hatfield) Vestal (Vigavi Realty); Mike Turner (DSC Logistics); Rob Moriarty (RealTerm); Sean Dalfen (Dalfen Industrial)