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Industrial Real Estate as a Competitive Weapon: Connecting to Customers By Getting Closer to Where They Are

In a recent article on LinkedIn, I covered the fact that transforming supply chains from internally-focused to customer-centric operations is the key to unlocking their potential as a competitive advantage—a "weapon" in the battle of building a more successful business.

There are many ways to become more customer-centric. We looked at how my colleague Renee Ure, Chief Operating Officer at Lenovo Data Center Group, has led her team members to develop new skills and attitudes that drive success.

Amazon is Setting the Pace

However, because e-commerce giant Amazon has been rapidly reinventing "last mile" fulfillment—with a goal of same-day delivery to just about anyone in the United States on the horizon—it is now clear that being customer-centric in our behavior isn't good enough.

The supply chain must also literally bring our work closer to our customers—both by offering more visibility in everything we do and physically moving closer to where they are to serve them more efficiently.

With that in mind, today's article focuses on how we need to rethink and reconfigure our industrial real estate to better meet the customer's needs.

My colleague Todd Steffen, Vice President, Supply Chain & Real Estate Advisory Services at Colliers International, shared his expertise with our SCLA Executive Think Tank group, noting that lowering operating costs can also be achieved when adding capacity to your organization's network.

The main point to think about is that whether your particular organization serves consumers directly or works only with other enterprises, there is no question that putting the customer's needs first is the surest path to better business performance.

But Should We All Try to Mimic Amazon? Yes…and No.

Are you surprised to learn that Amazon is now dominating e-commerce with 40% of all sales? When Mr. Steffen shared this stat, it certainly gave us all something to think about. However, when you consider that Amazon also has 918 facilities and 329,289,600 sq. ft. of space at its disposal (as of Q4 2020), it puts things into perspective.

What does this mean for the rest of us? Well, for one, we need to understand that Amazon is now in close proximity to customers—even in many rural and remote areas. And they're delivering orders with remarkable speed. Customers within large metropolitan areas have always expected quick delivery of items they order online, but Amazon is now setting that expectation everywhere. And so, we all need to deliver faster or lose out.

A Need For Speed

We heard from another colleague recently who spoke about his business working on getting their tier 1 and 2 products closer to the customer for same-day/next-day delivery. He shared that this effort has required revamping operations for a new focus on delivery speed to customers versus strong fulfillment, which is the opposite of what supply chains have traditionally been optimized for.

Of course, being in stock on a given SKU is also crucial. But the speed of delivery is paramount. This requires technology upgrades, network optimization, and giving customers visibility—and real estate that's strategically located.

Optimizing Our Physical Footprint

No, we shouldn't overextend ourselves trying to catch Amazon. However, American manufacturing is expanding right now thanks to geopolitical issues and the pandemic, and it's a great time to rethink our real estate holdings. This may mean selling facilities that don't make sense in the "new normal" that's coming up now that COVID-19 is beginning to fade from the scene. Or it may mean building new facilities of different types than we've utilized in the past.

We can't all be Amazon, but we need to be closer to more of the US population centers. Instead of a few sprawling DCs, we may need scores of smaller "micro-distribution" or fulfillment centers...as well as fleets of couriers lined up and ready to deliver.

There is little argument that this is a unique time. 5G networks are also just over the horizon, and that tech capacity will help us revolutionize how—and where—we do business over the course of the next few years.

Has your organization been working to "be more like Amazon" in creating a more customer-centric supply chain and optimizing your real estate assets? Please feel free to connect with SCLA to share your perspectives and join the conversation—or reach out to me directly!


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Tuesday, 19 October 2021

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