The industrial property revolution

Industrial property has become the fastest changing sector in Australia. A historically unsophisticated market has become one of the most complex in a short space of time. It is now not only a supply chain based sector, but is also a new retail footing for companies utilising online models.

A significant proportion of Australian warehouses and supply chain systems are outdated or not properly suited to the rapidly changing Australian retail, transport and infrastructure landscape.  The sector has reached an inflection point where future operational decisions will determine whether many organisations survive the next 5 to 10 years.

If we look to overseas, Radio Shack, Payless Shoes, JC Penny, Sears, HH Gregg, MC Sport, Gander Mountain and Route 21 will combine to close over 1,500 “bricks and mortar” retail outlets as they shift their operating model to cater to a marketplace of far greater direct to consumer activity.  There is little doubt the same macro dynamics and pressures will force similar significant change locally, and the speed to respond to this will be a critical factor in the evolutionary story of retail survival when we look back at this period.

There are more products than ever being consumed by customers and the pathways to how that product ends up with the consumers is drastically changing and becoming more complex.  The traditional Business to Business (B2B) sector has historically been served by “pallet in and pallet out” systems but the major change to the sector is the requirement to now have a business that caters or provisions for a separate pathway which is Business to Customer (B2C).  The exponential growth in online retail requires retailers to deliver direct to customer, requiring far greater operational flexibility from distribution centres.  A significant percentage of existing distribution centres designed for pure B2B activity across Australia are not designed to cater for the shifting retail landscape and need substantial change and investment to remain relevant.

TOP 8 IMPACTS OF THE GROWTH IN B2C ACTIVITY ON OPERATIONAL DESIGN CONSIDERATIONS:

1. SMALLER TRANSPORT MODES WITH MORE FREQUENT PICK UPS

More item level deliveries, resulting in changes to staging areas, hardstand interaction and layout, dock types and canopy designs.

2. SAME DAY AND JUST IN TIME DELIVERY DRIVING UP TRANSPORT COSTS

This places huge importance on the assessment of location and the need for route optimisation intelligence.

3. SIGNIFICANT CARTON AND ITEM LEVEL PICKS

Having a clear understanding of the internal operations and fitout of the facility prior to going to the property market is critical.  Storage and operational solutions will largely determine the building size and height.  Storage, whilst important, will now need to interact significantly with flow and throughput.

4. HIGHER REVERSE LOGISTICS VOLUME

A necessary evil in the growth of online sales is the growth in returns.  A sensibly sized area within the warehouse needs to be allocated for returns and rework. Site layouts need to consider how returns will be managed most efficiently.

5. GREATER SITE FOOTPRINT FOR OUTBOUND STAGING AREAS

An increase in item level products and smaller loads means that there is a requirement for more staging area within the warehouse. Efficiency of pick to order requirements also need to be improved.

6. CHANGES IN MATERIAL HANDLING SOLUTIONS TO CATER FOR CASE OR ITEM PICKS

This in turn leads to possible automation opportunities.

7. TIGHTER INVENTORY CONTROLS LEADING TO ENHANCED WMS FUNCTIONALITY

Speed and accuracy to customer has never been so important.

8. TO AUTOMATE OR NOT AUTOMATE

If automation is not a viable option or does not suit the specific operation, a manual environment will often increase headcount to cater for smaller, more frequent orders. This can lead to increased site amenities, parking and OH&S controls to cater for these additional staff.