The rise of the urban warehouse
The growth of eCommerce in conjunction with changing consumer behaviour has led to a rise in urban warehouses and the need for last-mile deliveries.
With demand for near-instantaneous distribution systems at an all-time high, this creates a number of challenges for retailers and logistics companies.
There is also a big impact on real estate as retailers are increasingly required to make adjustments to their strategy in order to survive. The size, location, and operation of urban warehouses must be adapted to optimise delivery efficiencies that will meet the expectations of the shorter timeframes being demanded.
The following post explains some key challenges that have been brought about by the e-commerce boom and the resulting rise in urban warehouses and last-mile deliveries.
The main issue for retailers is that the supply chain is transitioning from a linear flow of goods; “from factories to distribution centres to stores” to a more complex integrated network that also includes click and collect points and last-mile delivery to the final consumer.
For eCommerce stores, the challenge lies in offering faster last-mile delivery without the benefits of a physical store network that also enables other efficient services like click and collect orders. On the other hand, traditional brick and mortar stores are finding it difficult to implement some modern processes to a supply chain that was previously predicated on replenishing a moderate number of stores with large volumes of stock regularly.
As a result, many companies can no longer be competitive with their current supply chains. With a shift in dynamics, the retail industry must place extra emphasis on logistics and improved urban real estate networks to be in the best position to meet the mounting challenges.
Some of the challenges experienced by retailers are highlighted in the table below:
|
Location |
Immediacy |
Cost |
|
The distance between the retailer’s real estate and their customers |
Cutting down the lead time between receiving and fulfilling orders |
Working out the real fulfilment costs of stores vs. e-commerce |
|
The accessibility of warehouses for staff and deliveries |
Flexible options that cater to choice, convenience and accurate delivery times |
Ensuring the supply chain doesn’t negatively affect the bottom line |
|
Management of the end-to-end supply chain with selected partners |
Offering click and collect services as one of the options |
Comprehensive stock knowledge – keeping up with stock movement including returns |
|
A dedicated last-mile delivery solution |
|
Upgrading from a traditional model to an omnichannel network |
Urban warehouses are now an integral part of the supply chain because they offer better convenience and slash delivery times. Their closer proximity to both residential and business customers makes them critical for effective last-mile delivery.
That being said, meticulous locational planning is required for these urban warehouses to avoid issues with the local residents and companies. And while retailers will benefit from greater efficiencies, the increased demand for urban real estate will place further strain on a market that already has limited supply of suitable facilities with the right specifications.
Floor space isn’t the only consideration to take into account either. The design of urban warehouses is also paramount, as they need to factor in short-term changes in space requirements. Newer facilities can accommodate this but older industrial buildings will either have to significantly alter existing processes or heavily invest in new technology for enhanced flexibility.
Technology continues to go from strength to strength and now includes robots that can pick the stock, software that maximises the available space by narrowing aisles, and better deployment of staff. While costly, automating warehouses in this way improves operational efficiencies.
What does the future hold?
It is clear that many of the current distribution networks are no longer satisfying the need for convenience and speed that is required by the modern consumer. The first problem is that many existing facilities can no longer meet the geographic or size requirements of evolving business models.
This has given rise to urban warehouses that are smaller and closer to the communities they intend to serve and can meet changing consumer demands. With fierce competition for prime real estate ramping up, the limited supply will push up investment values. As a a result, businesses seeking a competitive advantage will have to come up with innovative strategies to fulfil timely last-mile deliveries and keep customers happy while maintaining profitability.
This article was written by Gophr, a London-based courier startup creating data-driven, smart technology for B2B last-mile delivery.
