The ongoing advent and influence of e-commerce on supply chain management and logistics is rapidly making a case for how retailers position inventory and warehouses and distribution centers.
In many cases, things are a far cry from how it used to be, what with many shippers setting up DCs not in close proximity to consumers, but, given the wide reach of e-commerce, that is changing. And it is not just for the changes in the physical location of logistics facilities housing, holding, and moving inventory, it is also key for the nascent last-mile logistics and reverse logistics sectors, too. After all, they are all interconnected to be sure.
What’s more, this scenario is leading to large global real estate owners taking action to scoop up land and build or establish locations, with location top of mind. That is the word from Abe Eshkenazi, CEO of The Association for Supply Chain Management (ASCM). And according to data from industrial real estate firm CBRE, ASCM observes that e-commerce returns comprise 700 million square-feet of U.S. warehouse space, making reverse logistics-focused facilities the top new warehouse category, coupled with the possibility to boost reverse logistics efficiency gains, too.
Logistics Management Group News Editor recently caught up with ASCM’s Eshkenazi to learn more about the various trends occurring within the intersection of e-commerce and related site development, as they relate to the myriad moving logistics-related parts. A transcript follows below.
Logistics Management (LM): What are the main drivers for major retailers to buy more urban land and establish well-placed warehouses, in your opinion?
Abe Eshkenazi: In my opinion, this can all be boiled down to a single factor: last mile delivery/shipping speed. Before the days of two-, one-, and even same-day-shipping, warehouses were placed in the middle of nowhere, where land was plentiful and inexpensive. Now to keep up with competitors and meet consumer demands, warehouses need to be strategically placed in locations that enable expedited and cost-effective shipping, which is, more often than not, in urban areas, closer to the end-consumer. As a result, leading real estate owners are racing to buy up more urban land, establish well-placed warehouses and dominate the business of lightning-fast e-commerce.
LM: How much of a role is e-commerce, in addition to last-mile logistics, playing in this development?
Eshkenazi: The e-commerce boom has tremendously impacted the way we look at and manage supply chains. Consumer expectations have increased as availability, variety, and ease of ordering and delivery has become the norm. Not only are consumers buying more, they’re returning more. In fact, according to CBRE, e-commerce returns constitute 700-million-square-feet of warehouse space in the United States alone. This increase in returns, in addition to the need for speed in last-mile logistics delivery, will continue to have a huge role in demand for urban warehouses.
LM: How specifically will the ongoing development of reverse logistics facilities have the potential to increase reverse logistics efficiency?
Eshkenazi: As long as consumers are making online returns, reverse logistics will remain a prominent piece of supply chain management. While most organizations view reverse logistics as a cost factor; some organizations are recognizing that reverse logistics is a market opportunity to generate revenue. As investment in facilities and the workforce necessary to operate them increases, innovation and efficiencies will enhance the full end-to-end supply chain.
LM: In what ways, will the supply chain industry need to adapt to these ongoing changes in 2020?
Eshkenazi: As e-commerce and consumer demand increases, the need for warehouses and returns will continue to increase. Consumers expect returns to be free, easy and fast, so the burden is on supply chains to take the cost out of what is inherently a loss. The challenge the supply chain industry faces now is creating the most efficient supply chain with the limited urban warehouse space available. Beyond how returns are gathered, processed, and financially accounted for, reverse logistics is not just an aftermarket problem. The issue must be factored in at every link in the supply chain in order to minimize returns and realize the opportunity of reverse logistics—as a revenue driver and as a lens through which businesses can see their waste and environmental impact more clearly.
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