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Is it time to shake up your logistics strategy?

A key priority for most organisations throughout Australia, logistics strategies need to consider a number of factors.

Written by David Brandon-Cooper, National Director, Portfolio & Transaction Management | Occupier Services

The Industrial market across Australia is experiencing a significant shake up as large scale global organisations enter our shores and space options continue to diminish across Sydney and Melbourne.

As a result, the way the retail and manufacturing industry operates is changing significantly; Leading manufacturers, logistics companies and distribution centres across Australia are altering the way they operate their warehouses and how they distribute. eCommerce continues to grow and will impact the logistics sector. Greater efficiencies will be required to keep costs competitive against global players whose scale drive costs per unit lower than the majority of its Australian operators.

To remain competitive in the dynamic Australian market, logistics strategies today need to factor in a number of key considerations including:

The threat of new entrants

Major global organisations are beginning to enter the Australian market. These organisations (think Amazon, Alibaba, Kaufland and Ashley Furniture) have far greater capability, expertise and established distribution networks than most Australian companies.

As global organisations continue to raise their presence throughout Australia, they will also raise the standard for expected delivery time for purchased goods and ease of purchase.

Greater efficiencies across an organisation's logistics network

As eCommerce continues to grow this will impact on the logistics sector, requiring greater efficiencies to maintain competitive pricing and hold market share against global competitors with larger scale entering the Australian market. Their cost per unit will be cheaper than what its Australian operator can feasibly achieve.

With land values rising, particularly in key locations such as Sydney and Melbourne, developers and tenants will need to consider building upwards (rather than outwards). This will ensure 3PL and eCommerce users can provide cost effective delivery services for end users, particularly as their locations are usually close to the consumers of the goods final destination. 

New industry benchmarks and customer expectations

The needs of customers have changed rapidly over the last five years. With high expectations from delivery and distribution services, customers want fast and efficient service at the standard cost.

To maintain a competitive advantage, organisations need to adjust their service offerings to appeal to end users. As an example, there’s been a rise in the number of organisations offering free shipping, same day delivery and even delivery within a 3-hour period.

To meet these new benchmarks, we may see distributors moving away from large regional distribution hubs to a number of smaller distribution centres within close proximity to large catchments of customers. This requirement, given limited land space, may result in new technology or multi-storey warehousing as noted earlier.

An advantage for businesses located in fairly close proximity to CBD areas is the ability to access a large population area. This means organisation’s can provide a fast and efficient delivery service to a large quantity of potential customers in one area. 

New technology

Advancements in technology continue to change the way logistics and supply chains operate with ongoing upgrades in processes and procedures. Most recently, we’ve seen Amazon toying with the idea of deliveries via drones.

Artificial Intelligence (AI), robotics and automation and the Internet of Things (IoT) have begun being implemented within office and retail buildings and organisations across Australia. These new technology advancements will begin to reach the industrial sector and have the potential to refine the industry from customer services through to the structure of supply chains. 

Maximum cost savings

To compete with new global entrants, organisations need to find savings on their logistics and distribution networks and ensure a reduction in the price of their end product. One way occupiers often find savings is through optimising warehouses and supply chain networks.

Choosing the right site is imperative to the overall success of the business, and this overall process must take into account an end-to-end solution for the organisation incorporating the planning analysis, site selection, lease negotiations and ongoing lease management. Seeking strategic advice from an occupier expert for these services is invaluable.

Increasing the need for flexibility

Ongoing changes in the logistics landscape and industrial sector underscore the importance for occupiers to remain nimble in their real estate commitments.

Flexibility in the amount of space occupied and the lease terms provided by landlords will allow occupiers to future proof their business against a rapidly changing market significantly influencing their logistics strategy.  

Looking at your logistics strategy, is your company operating at maximum efficiency with minimum cost implications? Is your property portfolio in the best position to maximise cost savings and favourable outcomes for your organisations?

To speak with an industrial occupier expert about your logistics strategy or industrial property requirements contact David Brandon-Cooper from the Occupier Services team at Colliers International today. 

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