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About the Author

Cliff Holste is Supply Chain Digest's Material Handling Editor. With more than 30 years experience in designing and implementing material handling and order picking systems in distribution, Holste has worked with dozens of large and smaller companies to improve distribution performance.

Logistics News

By Cliff Holste

February 19, 2014



The Pace of Change for Shippers Is Unprecedented

"The Times They Are A-changin"


Holste Says:

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The bottom line is that changing logistics priorities will continue to challenge corporate supply chain executives to develop solutions that manage current demands and plan for the uncertainties of the future.
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Previous Columns by Cliff Holste

Sorting It Out : Two Factors Drive Decision to Automate – Cost & Justification

Sorting It Out: Improve DC Efficiency With Alternative Storage & Picking Methods

Sorting It Out : Improving DC Performance - Back To The Basics

Sorting It Out: Depending On Size, Shippers Think Differently About Order Fulfillment Operations

Sorting It Out: Conveyor System Capacity Constraints Impact Productivity

More

Released 50 years ago in January of 1964, this Bob Dylan classic (“The Times They Are A-changin”) was written in response to the social changes of that time. While a lot of changes have taken place over the past 5 decades, the one constant is change itself. We are living in a constantly changing social, political, economic and business environment. Businesses, for example, must change with or slightly ahead of consumer demand if they expect to stay viable. Verse 3 of Dylan’s song makes the case for a call to action:

 

 

'Come senators, congressmen

Please heed the call

Don't stand in the doorway

Don't block up the hall

For he that gets hurt

Will be he who has stalled

There's a battle outside

And it is ragin'.

It'll soon shake your windows

And rattle your walls

For the times they are a-changin'.

 


In June of 2013, Cushman & Wakefield http://www.cushmanwakefield.com/ released to the public a comprehensive white paper entitled “The Changing World of Trade” that indentifies winning strategies for adapting to the new “demand economy”. According to this report, shippers need to respond to unprecedented trends in technology, demographics and infrastructure that are transforming global supply chains across the retail, industrial, and logistics real estate sectors.

The following are logistics related excerpts from that report:




The Changing World of Trade

By Cushman & Wakefield

 

The retail sector today is undergoing rapid change, as it becomes more global, urban and specialized due to the rise of online shopping, mobile technology and changes in consumer spending patterns. The effects of customer demand on real estate include changing location strategies and increasing investments in reducing operating expenses. To meet the demands being driven by e-commerce, technology and transportation costs, companies are actively streamlining their fulfillment processes – improving logistics to maximize efficiencies in inventory, service time and delivery – which is driving demand for high-quality space.

“Seismic changes in retail requirements are putting new pressures on shippers who are expanding to developing economies while concurrently struggling to adapt to the challenges of high-demand retailing in increasingly dense cities,” said John Morris, Cushman & Wakefield’s Industrial Services Lead Americas. “In response to these challenges, logistics efficiencies, location and transportation strategies, as well as improvements in technology management, are having major impacts on distribution channels and real estate sectors alike - essentially re-writing the rule book on how goods are delivered to consumers, worldwide,” continued Steven Watt, Head of Pan-European Industrial & Logistics for Cushman & Wakefield.

John Strachan, Head of Global Retail at Cushman & Wakefield added: “The fundamental changes in retail since the recession in 2007 have altered customer behavior and created a new set of demands. Where the physical store was previously the primary point of distribution, now it may be the internet. For supply chain executives, it means that they face a new set of challenges - integrating their fulfillment operations across channels to reduce cycle time and meet the needs of an increasingly demanding consumer.”

 

Winning Strategies

Winning strategies will demand flexibility and diversity, collaboration, automation, technology – and a keen balance of scale and scope, most likely through consolidation and vertical integration.

Supply chain flexibility will require regionalization consisting of a network of smaller urban locations and large distribution centers to accommodate the growing trend towards same day fulfillment, which will likely benefit some of the better-positioned tier II markets. Outsourcing to third party logistics companies, 3PLs, can contribute capacity and expertise without significant fixed cost investments. However, companies need to strongly consider controlling their own real estate, with cost reduction and technology continuing to drive location decisions and design parameters.

Logistics will rely more on improvements in the productivity of capital, utilizing order management and distribution automation technologies. In some markets, labor shortages and costs are making these investments an urgent necessity.

Note: Supply Chain Digest suggests that companies interested in gaining exposure to the most up-to-date logistics and material handling automation technologies visit MODEX 2014 (March 17 – 20, 2014 in Atlanta) & ProMat 2015 (March 23 – 26, 2015, in Chicago).

The required investments in technology and real estate will continue to put pressure on margins across all industries, with companies seeking economies of scope and scale. Scale will be attained primarily through consolidation. Scope can be attained by vertical integration, which is expected to drive greater demand for space. Today’s most advanced distribution facilities offer clearances of about 35 feet, energy-efficient lighting and green building materials.

Note: Supply Chain Digest suggests that DCs be equipped with very flat floors for higher mobile equipment productivity as well as an ESFR (Early Suppression Fast Response) ceiling mounted fire sprinkler system for more flexibility in the arrangement of storage racks and other bolt-to-the-floor equipment.




An interactive version of the full report “The Changing World of Trade” and a related video are available at the following links:

http://www.cushmanwakefield.com/en/research-and-insight/2013/changing-world-of-trade/

http://www.viddler.com/embed/12e1175b/?f=1&autoplay=1&player=simple&secret=25643904&loop=0&nologo=1&hd=0




Final Thoughts

The retail sector today is undergoing rapid changes as it becomes more global, urban and specialized due to the rise of online shopping, mobile technology and changes in consumer spending patterns. The bottom line is that changing logistics priorities will continue to challenge corporate supply chain executives to develop solutions that manage current demands and plan for the uncertainties of the future. The pace of change regarding the demand for these solutions is unprecedented.



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