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Forgotten but not gone

12 July 2017

Real estate is an often forgotten part of the supply chain but could be a major pinch point in coming years, Savills director Kevin Mofid told a Warehouse Technology Group Live event in Manchester last month. HSS editor Simon Duddy reports.

The battle for warehouse space is hotting up and much of the reason is online retailer Amazon. Savills director Kevin Mofid says: “The ‘Amazonification’ of everything is coming, they are moving into builder’s merchants, selling cars, prescriptions, and have no consideration for profit. They are making seeming illogical business and real estate decisions, compared to other companies. This will impact us all, no matter what industry we work in.”

Last year, Amazon leased 8 million square feet in the UK, 23% of total warehouse space leased. Kevin says this is proportionally more than the big grocers were snapping up pre-recession. Part of the knock-on effect is that there is the lowest amount of warehouse space available ever - 26.3 million sq ft. While that sounds like a lot, Kevin raised concerns that much this space is far from high quality, while rates of new build are slow.

Kevin says: “There are just 22 spec builds at the moment, with most at the small end, and nothing over 300,000 sq ft. As a result, rents are increasing, much warehouse space is more expensive than office space on the periphery of London.” Kevin urged attendees to think carefully now about future warehouse property needs.

Getting it through

It is one thing to have a plan, short or long term, it is quite another to get it past the board. Operations often has problems exerting sufficient influence at the highest level within companies, but Simon Dixon, managing director at consultancy Hatmill, was on hand to offer advice on achieving successful investments.

Simon explains: “Projects tend to be quite expensive, with payback over a number of years. Problems also tend to sit in the warehouse, for example, a need for more SKUs, but the success of solutions deployed often also depends on what the rest of business is doing.

“Therefore, think carefully about a number of factors, such as changing order mix, service levels required; and do the research, speak to a number of suppliers, and don’t assume. Lots of people say after ‘Oh I thought it would do that’.”

Simon also urged attendees to be clear on the benefits of any investment, and share these with stakeholders, as well as any developments which may change the outlook or costs of the benefits expected. “Expect to do a number of presentations to the board, where the plan will be tested. Give feedback on progress, and don’t hide problems. Prepare stakeholders for the fact that the business plan will change.”

Peter Ward, CEO of the UKWA, also gave an invaluable overview of megatrends affecting logistics on a global level. “The world is shifting. Vendors in the Far East are getting tougher on merchandising teams. The buyers no longer have control and this has a knock-on effect on logistics,” Peter explained.

Peter also referred to Brexit as the ‘elephant in the room’ and identified access to the Single Market and Customs Union as key issues.

On 14th June 2017 the Warehouse Technology Group threw open the doors of the Logistics Research and Innovation Centre in Manchester. The centre comprises a 12,000 sq ft unit fitted out by the partners. The equipment is functional, operating and in daily use. Visitors get to see how the technology works in a real world environment.

Handling & Storage Solutions is the media partner for the event.