On-shoring is just one of many changes to supply chains that have been accelerated by Covid-19, delegates heard at Real Asset Media’s European Logistics: e-commerce, supply chains and investment locations briefing, which took place online recently.
‘E-commerce is one big driver of logistics and the other is on-shoring,’ said Logan Smith, Managing Director, Aevitas Property Partners. ‘They are two huge trends that were already on the way before Covid-19, but that have been accelerated by the epidemic, catching a lot of people by surprise’.
The health crisis has shone a spotlight on the functioning of supply chains, highlighting the risks of their interlinked and global nature. The epidemic is accelerating the regionalisation and localisation of supply chains, in order to minimise the risks of delays and disruption.
‘Covid-19 has acted like a contrast agent by showing how supply chains work and highlighting all the problems,’ said Raimund Paetzmann,Vice President Corporate Real Estate, Zalando.
Risk reduction and efficiency have become more valued than cost savings. The question is whether this is a temporary reaction or whether it will lead to permanent change.
A snap poll conducted by Real Asset Media showed that 64% of respondents believe that there will only be a small increase in on-shoring in terms of supply chains post Covid-19, while 31% think there will be a significant increase. Only 5% believe there will be no increase at all.
‘I agree with the poll,’ said Ben Segelman, Head of Capital Markets UK&I and MLEMEA, DHL Supply Chain. ‘We’ll see a small amount of on-shoring, but globalization will continue to prevail in the market. There will be lots of exciting new ways of getting things to the consumer and the distribution centre will remain the backbone of an e-commerce facility’.
The growth of e-commerce has made the supply chain more critical than ever, he said: ‘It has moved up the hierarchy of big priorities and it’s become a crucial component of the customer experience. Mastering it has become a necessity as well as a challenge’.
The need to be closer to the consumer, who is expecting shorter and shorter delivery times, is leading to more demand for last-mile locations and creative solutions including multi-story distribution centres and car parks and retail centres being re-purposed.
‘There will be more last mile and at least part of that will be multi-story,’ said Smith. ‘Inevitably, city planners and councils will have to take a closer look at the design and at the social and environmental impact and we as a sector are not used to this kind of scrutiny’.
As well as competition for space and available locations, what makes last mile challenging are high prices, traffic and environmental issues, local restrictions, zoning regulations and permits.
‘Scarcity of land will cause multi-story to grow in Europe, it’s inevitable,’ said Paetzmann. ‘We need a transfer between urban developers who don’t understand logistics and logistics developers who don’t understand urban planning issues’.
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