Richard Thompson, international director of supply chain and logistics solutions with JLL, reviews the major changes that are occurring in supply chain network strategy in the post-COVID era.

There’s been a throughline in supply chain network strategy over the past 30 years, Thompson says. Planners have tended to take a similar approach to that discipline with respect to determining the size and location of suppliers and facilities. The breakdown of cost remains steady as well, with freight, labor and inventory management accounting for about 75% of operating expense, and real estate cost responsible for 5% at the most. 

Now, the balance is shifting. In the past, all a merchandiser needed to meet U.S. consumer demand was six to eight large distribution centers. But the rise of e-commerce and Amazon.com has changed that. 

There’s a significant move toward construction of distribution facilities closer to the customer — and that means the placement of smaller facilities in or near urban centers. The trend is being driven by the need to get orders to buyers within two days or less. As a result, Thompson says, real estate and lease expense has gone up “significantly” over the last three years.

All that is also having an impact on manufacturing networks. A resurgence of production in North America, including Mexico and Canada, “is real, and it makes sense,” Thompson says. “We’ve seen a huge uptick in demand for manufacturing-related projects across industries.”

The automotive industry is particularly undergoing a rethinking of network strategy, as it transitions to the production of electric vehicles and batteries. But the trend is also evident in semiconductors and life sciences.

“Don’t call it near- or reshoring,” Thompson says. “It’s a regionalization of manufacturing,” as producers seek to adapt their supply chains to the changing needs of consumers.