Using Real Estate to Reduce Inefficiencies and Cut Delivery Times
The customer is always right. And today’s customer wants free two-day shipping. This shift in expectation has driven a change in the traditional supply chain model. To compete with big players like Amazon and Walmart, companies must be prepared to offer a two-day or less window for shipping. To do so takes planning and an integrated real estate strategy.
Here are a few things to consider.
One way to reduce inefficiencies and cut delivery times is to close the gap between distribution centers and your target demographic areas. We see this strategy playing out with Amazon adding nearly four-million square feet of warehouse space to the Denver area within the last 18-months.
The biggest delivery cost and time savings come to those who place warehouse facilities within a five-mile radius of the metropolitan area they are targeting.
Another way to drastically cut down inefficiencies is to optimize the flow of materials within the warehouse itself.
Traditional warehouses are no longer sufficient. Today we are seeing an increase in omnichannel warehouses. Meaning warehouses set up to receive and fulfill orders from multiple channels around the clock. This change in material handling and flow requires an updated WMS system and organization that impacts even the physical structure of the building.
Most omnichannel warehouses today have ceiling heights of 30 to 36 feet versus the standard 22 to 24 feet that most operators are accustomed to. These new age facilities typically have more loading docks, longer speed bays and the ability to maximize racking by reducing isle width and going vertical. These modifications now require operators to analyze their current product flow along with equipment like forklifts and conveyor belts. These changes can limit the search for viable alternatives in an already tight industrial market which can add more stress and time to the requirement as a whole.
It’s not uncommon for a retailer to have as much as 30 percent of their online sales returned. This creates another challenge with the additional labor needed to receive and fulfill those returns.
One study shows that 69 percent of online shoppers will review a company’s return policy before making a purchase. So, taking the extra step to ensure your reverse logistics are aligned with the overall operation is key to back-end success.
Which brings us back to…
Yes, location makes the list twice, because it’s twice as important. Not only can your location drastically cut down on shipping costs to specific demographics, but it also determines the employee labor pools you are able to recruit from and ultimately try to retain. Warehouse labor for employees in Denver is at a median rate of $12.69 per hour. Compared to Boston at $11.25 and Chattanooga, TN at a high of $14.75 according to Payscale.com.
Your business model and supply chain are directly impacted by your real estate decisions, which is why before we ever talk real estate, we always talk about your business. Real Estate is about more than just square footage and rental rates. Location strategy and workforce analysis can help you make a more informed decision, saving you money and taking your business further.