Logistics investor focus could switch from last to first mile: KF
As businesses focus on their supply chains and improving their “upstream” components there will be greater emphasis on the “first mile” logistics component and thus increased demand from investors for these assets consultant Knight Frank expects.
The firm’s latest Future Gazing Report examines opportunities for first mile logistics.
The report explains that while last mile assets are found on the final node of the supply chain, closest to the end consumer, first mile logistics assets are focused around key import and export points including ports and airports, freight terminals and key road junctions.
“Demand for these assets and locations is determined by the volume of goods flowing through these nodes. Higher levels of production and trade, or an increased need to hold more stock, all drive up demand for these first mile logistics assets,” the firm stated.
Knight Frank analysed and ranked 41 UK ports based on their suitability for future logistics investment and development given a potential role in shortening supply chains and mitigating supply disruption.
Comparing factors including port capacity, import and export growth forecasts and access to consumer markets and labour, Knight Frank’s analysis ranks Liverpool first for forecast export growth and in the top three for access to consumer markets and skilled labour and thus the top location for port-centric logistics potential.
Grimsby & Immingham and London ranked second and third.
The report explains that safety stock requirements increase in line with upstream spikes in supply lead times. So, if safety stock accounts for say 20% of a firms’ UK inventory, and maximum lead times increase from 100 days to 140 days (or 40%) due to supply chain shocks owing to trade tensions, labour shortages and COVID-related shutdowns and shipping disruptions, firms would need to raise their total inventory holdings by about 8% to protect their order books.
Knight Frank said that reshoring discussions are currently most prevalent among pharmaceuticals and healthcare-related industries and automotive firms, including those focused on alternative fuel vehicles, technology and biotech firms.
“The rise of e-commerce has led to considerable change at the consumption end of supply chains, with additional costs and facilities being allocated to this part of the supply chain in order to raise service levels and reduce delivery times,” said Knight Frank’s industrial and logistics research lead Claire Williams. “However, rising costs and delays at the production end of the supply chain are driving a rethink of the locations of these facilities and the transport connections linking them to downstream operations,” she added
“First-mile markets can enable firms to build and maintain a secure and responsive supply chain for their end users. This demand will continue, with the potential to create attractive opportunities for income-driven investors looking to deploy capital into assets underpinned by strong structural tailwinds.”