Rethinking supply chain real estate

These are volatile times in the supply chain business. Sure, COVID-19 has had an impact, but the rapidly changing nature of today’s supply chains started well before the pandemic arrived. Now the make-or-break factor in successful go-to-market strategies is the location, design, and operation of distribution centers (DC). Until recently, the building and leasing of these facilities have been almost exclusively the preserve of real estate developers. Not anymore. E-commerce businesses and others with complex supply chains are rethinking their supply chain real estate.
 

We see four key trends driving change in DC networks:

• The e-commerce revolution has increased customer demand for shorter lead times, requiring new DC locations and last-mile delivery strategies.
• Globalization and near-shoring have upended the manufacturing industry, reducing redundant inventory as manufacturers and part suppliers bring operations nearer to the end consumer. 
• State-of-the-art technology, such as Big Data and Smart Analytics, enable more strategic positioning of stock and facilitates optimized DC location strategies.
• Leading companies are also aggressively reevaluating their real estate portfolios to accelerate the implementation of their environment, social, and governance (ESG) agendas and reach ambitious targets quickly.

Traditional developers typically build a standard box on land they already hold, effectively forcing third-party logistics providers to adapt to their operational models to fit the solution. Innovative e-commerce and other business leaders have been following the trends and transforming their supply chain real estate landscape. And they are working with logistics experts with property know-how to develop tailored real estate solutions that meet their specific needs. That includes redesigning their footprint – adding more smaller DCs to their networks to get closer to their customers, reduce lead times, and improve customer service.

Rethinking supply chain real estate has also opened businesses to the shared real estate model. By sharing DCs, platforms, and services, companies can increase agility and reduce risk and cost. Major players end up with facilities designed specifically to meet their needs, while smaller businesses get access to state-of-the-art warehousing, packaging, and transport technology and services. They can combine the latest innovations, such as augmented reality and voice picking, with traditional operations to improve efficiency and capitalize on potential cost savings.

Case study: Buildings made for Mars

Recently, DHL Supply Chain proved this winning formula in the UK, designing two state-of-the-art warehousing facilities for the Mars Group. Our teams  not only secured  the land for the new DCs, but they also tailored the ‘East Midlands Gateway’ and ‘London Thames Gateway’ to Mars’ needs.

The two gateways are part of a multi-year partnership between Mars and DHL. The landmark project also involves creating a world-class logistics operation. The two purpose-built facilities  are designed to cope with a product range that includes Mars’ well-known confectionery brands, Uncle Ben’s Rice products, Dolmio sauces, Pedigree pet food, and Wrigley’s chewing gums. Along with fully automated high-bay and traditional manual low-bay storage, the site’s packaging lines will use robots and automation.

The facilities will also have excellent ESG credentials, reducing Mars’ carbon footprint by 16% in the UK. In fact, the London Thames Gateway is developing to a BREEAM ‘Outstanding’ rating, which is the highest accreditation available in UK and Ireland and currently quite rare. That’s a big plus for a company like Mars that focuses on sustainability – and it’s right in line with our roadmap to decarbonization. The design minimizes the buildings’ footprints to lower energy demand, while solar panels, recycled rainwater, and sustainable planting will further reduce the need for resources.

The East Midlands Gateway and London Thames Gateway will be operational in the spring of 2022 and 2023, respectively. The sites will have combined square footage of over a million feet and include state-of-the-art high bay facilities and innovative automated pallet storage.

Changing supply chains calls for creativity and collaboration

The new realities of commerce and competition are driving change in global and regional supply chains. Companies need to make different choices about how they locate, design, and operate their distribution networks. These are big decisions that will trigger a major shift in how they utilize real estate strategically in their operations. Any company rethinking its go-to-market strategy should make sure they are working with the right logistics partner – one that can combine logistics and real estate expertise to overcome complexities and maximize opportunities.