How supply chain changes are driving the future of Australia's industrial & logistics sector
Fidget spinners. They were one of the hottest toys in 2017 and were lauded for their perceived ability to relieve anxiety.
27 May 2019
They’re also the perfect example of the increased demands being placed on supply chains to be agile and react quickly to market changes, which is in turn shaping the future design, development and location of industrial & logistics facilities.
“Fidget spinners are a really good example of agility and responding to the market,” CBRE’s Pacific Head of Supply Chain, Christine Miller, outlined last week at the Property Council of NSW Industrial Breakfast.
“Because it was a flash, it was produced at a very low-cost point, it had to be imported and it had to be distributed quickly, because most people didn’t spend more than $9.95 for these items. And now they’ve moved onto the next flash. It’s an example of businesses who are producing and distributing products for consumption that have to be able to adapt quickly, but also at a low cost.”
Concurrent with the need for agility and speed to market, Ms Miller said three market forces were currently shaping the supply chain industry: omnichannel retail, Big Data and artificial intelligence (AI)/automation.
On the omnichannel front, Ms Miller noted that current forecasts were for Australian e-commerce sales to grow from $24 billion annually to $43 billion in the next four years.
However, Ms Miller said it was important to recognise that this didn’t mean sales in bricks and mortar stores were decreasing, rather they were growing at a slower pace than the online sector.
“The importance of this to industrial and logistics infrastructure is that the e-commerce and omni-channel world is saying that if you can provide multiple channels to engage with your consumers they will spend 30% more,” Ms Miller said.
“That’s a huge number and that’s talking to your existing customer base, not necessarily new customers. We also know that if you click and collect services, 61% of us will actually pick up additional items when we’re in store.”
On the AI/automation front, Ms Miller highlighted that 49% of professional service robots being produced in 2018-2020 were earmarked for logistics use to increase the throughput of existing facilities.
The benefits that have already been delivered to retailers are clear, with Alibaba’s smart logistics management system having shortened the time required to fulfill its first 100 million Single’s Day Shopping Festival orders from over a week in 2013 to just 2.6 days in 2018.
Ms Miller noted that all the above was driving retail businesses to look at their network design and how they could deliver on multiple channels, which was in turning placing an increased focus on the physical infrastructure to support this.
This had been highlighted by a CBRE analysis in the US, which showed that for each additional US$1 billion in e-commerce sales, an additional 1.25 million square foot of additional industrial & logistics space was required.
Translating that to forecasts for e-commerce growth in Australia, Ms Miller said this would drive demand for an additional 350,000sqm of industrial & logistics space in Australia each year.
Bearing in mind that 28% of transportation and distribution costs were in the “last mile”, Ms Miller noted that this was also influencing where companies were locating their facilities relative to optimum delivery points.
It was also influencing physical changes in how facilities were designed, with the drive for low cost, fast delivering networks increasing the need for distribution facilities close to densely populated areas.
This was leading companies to consider multi-level warehouses, which were common in Asia but had only just been introduced in the US last year, with several now in the planning in Sydney and Melbourne.
If we follow trends in the US and Europe, Ms Miller said disruptors might also influence the market here and bring an Airbnb-style of warehouse concept to Australia, offering companies access to underutilised logistics space and associated software solutions.For Australian/international news or global stories, follow us on Twitter: @cbreaustralia
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2018 revenue). The company has more than 90,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 480 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
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About CBRE Group, Inc.
CBRE Group, Inc. (NYSE: CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2021 revenue). The company has more than 105,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at https://www.cbre.com.