Innovation in warehousing
With e- and m-commerce growing consistently at a much faster rate than the overall retail sector, the boom in warehouse efficiency and the industrial property market in general is unsurprising.
There are several alternative warehouse efficiency management approaches being tried by omnichannel retailers:
- Integrate warehouse operations with stores to become, part of the distribution network. Although some of the very best retailers internationally are making this work, it is still proving to be problematic because of legacy store inventory systems, among other things.
- Keep e-commerce and store warehouse operations separate.
- Operate combination distribution facilities that service both stores and e-commerce customers.
However, in each case the warehouse that is part of the solution will look nothing like the one we have traditionally pictured in our minds.
A big warehouse is better than a small one
The new distribution centres are much bigger than those of old, with higher ceilings and stronger floors to hold more merchandise. They employ more people and provide them with greater amenity, including A-grade offices.
According to Colliers International, the average footprint of new distribution centres over 5,000 sq. metres has increased from 10,468 sq. metres in 2010 to 13,972 sq. metres in 2014. In Melbourne, the average size is pushing 20,000 sq. metres and Sydney is not far behind. The larger warehouses can accommodate the operations of multiple clients that share resources, rather than each occupying a single, smaller facility. This leads to efficiency gains and reduced costs. Big warehouses are not only larger but also more technologically sophisticated, with guided vehicles, RFID (radio frequency identification) technology and other bells and whistles to streamline operations and make them more efficient.Key tenants in these new warehouses are often logistics companies like DB Schenker that provide fulfilment services for multiple outsourcers, such as e-retailers.
Shared warehousing may work for some, but not all
Adam Jacobs, co-founder of online retailer The Iconic, outsourced its distribution capability in a shared warehouse space for the first six months of the company’s life but it didn’t work out. After moving warehouse four times, Jacobs told me in a recent interview: “We rented our own warehouse, we hired our own people, built our own infrastructure and systems and processes, and today it is the absolute core of our competitive advantage within the market.”Still, for many smaller operators, outsourcing logistics in a shared warehouse space is easily the most attractive option and possibly the only one given the costliness of the alternatives.