The primary issue driving industrial site selection decisions today is the same as it has always been: reducing costs while maintaining or improving service, says Rich Thompson, supply chain and logistics group director at Jones Lang LaSalle.
"Companies are still very cost conscious and working to mitigate increasing freight costs, but they also want to enable growth in areas like e-commerce," he says. "The focus is very much on keeping the business rolling and keeping costs under control."
Kris Bjorson, international director for retail and e-distribution at Jones Lang LaSalle, agrees that the focus on cost is paramount, but among retail clients he also sees a strong emphasis on omni-channel strategies and the integration of traditional and e-commerce channels.
"We see retailers trying to define their multi-channel strategy, dealing with decisions like what their customer commitments will be and what is the best distribution model to serve that strategy." They are considering numerous options, he says, including whether to outsource to a third party or develop capabilities internally and whether to set up dedicated e-commerce facilities or commingle channels within an existing network of store DCs. They also are redefining the role of stores in interfacing with customers, he says.
E-commerce facilities need to be set up differently since they typically require more picking locations and a greater workforce density, Bjorson says. "Not all existing DCs are set up in places that can accommodate an additional 500 to 1,000 employees, plus seasonal spikes." Additionally, most e-commerce distribution warehouses are tall buildings with multiple picking mezzanines, he says. "Each existing location has constraints that will determine whether it can co-locate services or not," he says.
In the early days of e-commerce, a lot of retailers outsourced fulfillment for this channel, but that trend has shifted, Bjorson says. "Over the last 12 months, we have seen the focus move to using existing DC networks, with an emphasis on how to make these DCs work for multiple channels."
Thompson agrees. "Many retailers now recognize that they need to bring those skill sets in-house," he says. One of the keys to success in this effort is a sophisticated IT system, he says. Thompson points to Amazon as a great example, noting that the huge e-commerce company credits a lot of its success to its proprietary system.
To view the Kris Bjorson video in its entirety, click here
To view the Rich Thompson video in its entirety, click here
Keywords: supply chain, supply chain management, supply chain management scm, inventory management, 3pl, third party logistics, transportation management, logistics management, warehouse management, logistics & supply chain, logistics services, supply chain solutions, logistics it solutions, supply chain planning, supply chain services, retail supply chain, logistics management: facility location planning, Jones Lang LaSalle, Kris Bjorson, Rich Thompson
Timely, incisive articles delivered directly to your inbox.