Logistics space in a changing supply chain
Prologis has the industry’s only in-house research team, giving us clear sightlines on today’s opportunities and tomorrow’s trends. And for good reason, because for supply chains the only constant is change. This is why we have the industry’s only proprietary database. That is why we decided to dive deeper into the current and future role of logistics real estate within supply chains.
In our first paper of a three-part series, we found that the rise of e-commerce is pulling supply chains closer to consumers, driving up demand for more costly logistics space.
In our recently published second paper, we build on these insights to examine a key question: are these new network strategies sustainable? The answer is yes for two key reasons: e-commerce delivers substantial value to consumers, and logistics real estate can create value far beyond its cost.
We came to these conclusions following our cooperation with The Sequoia Partnership, a leading supply chain research group. Together, we developed a model to calculate the total cost of supply chains and their constituent parts. This new model helps us evaluate the tradeoffs companies must make in their supply chains to optimize costs and address rising demands on service levels. It also accounts for the rising influence of e-commerce on key components of end-to-end supply chain spend: transportation, labor, retail operations, and logistics real estate.
Based on our analysis, several additional findings emerged that can help future-proof supply chains and logistics operations:
- E-commerce intensifies the focus on distribution center location strategy.
- Decentralized e-fulfilment distribution is the most cost-effective model.
- New methods of e-fulfilment (e.g., click and collect) add to logistics demand.
- Reconfigured supply chains are intensifying the need for labor.
Dirk Sosef, responsible for Prologis' Research & Strategy initiatives in Europe, explains: “E-commerce is pulling supply chains closer to Swedish consumers. Demand for logistics real estate is growing in and around population centers such as Stockholm and Gothenburg. We expect this trend to continue, especially because e-commerce in Sweden is still lagging somewhat."