The Impact on Industrial Property amidst an E-Commerce Boom
Category Industrial Property News
The past 14 months has seen a boom in online retail in South Africa. This, in turn, has created an increased need for warehousing, cold storage and logistics, and is largely to thank for a stable industrial real estate sector.
With a once-in-lifetime forced acceleration to ensure business continuity and to meet consumer demand, the retail industry has had to catapult their products and services online since the country's first lockdown. Consumers are now able to shop everyday essentials, and not just high-end products, delivered straight to their door, and with rapid, same-day delivery to boot.
According to Engineering News, 2020 saw Dischem experiencing a 344% increase in online sales for the first 24 weeks of the year. Mr Price's online sales were up 75% for the year, which beat its 2019 Black Friday sales performance.
By June, Massmart's online sales grew 100%, that of Builders Warehouse by 160% and Makro's online sales by 84%.
However, new challenges are emerging for supply chain businesses amidst growing opportunities for business and e-commerce portals. Industrial property has an important role to play in how supply chain answers these new challenges.
"The last-mile delivery, online-to-offline (O2O), and fresh food delivery capabilities for retailers, e-commerce platforms, and third-party logistics (3PL) providers have seen rapid development and growth. (E-commerce is the fastest-growing 3PL market segment)", according to the Plante Moran website.
In an article published on Bizcommunity last month, it was revealed that "by 2025, e-commerce will expand by an additional $1.4tn, and account for half the growth in the global retail sector, according to global market research company Euromonitor International."
It has become vital for businesses to relook their strategies in order to remain competitive in the ever-growing digital sphere.
The role of industrial property in supply chain
The significant growth in online sales has resulted in increased strain on supply chains, many of which were already near full capacities.
It is critical to understand the intersection of industrial property and supply chain management - it is impossible to silo the two. Explained on Xact Solutions "Property seems like one of the most significant costs for a business, but in reality, normally accounts for just 5% of budget. It can, however, create costs in the supply chain that eclipse any savings made. Industrial property can drive or inhibit change and growth, so requires strategic planning not just a cost-cutting mindset."
Supply chain management incorporates the point of manufacture and storage, whether in warehouses, cold storage units and factories right through to the point of consumption, and therefore needs to be grouped together with supply chain strategies. Supply chain management is industrial property management. Whether dealing with one warehouse or a large property portfolio spread across a global supply chain, these choices are crucial for the health of the supply chain.
The impact on the global supply chain
The colossal and rapid online retail migration and the increased demand of goods is not the only thing to have increased pressure on the global supply chain.
The blockage of the Suez Canal - the world's most important waterway - in March 2021, where a container vessel had become stuck and caused a backlog of ships, is case in point. The sea traffic jam of at least 150 vessels hauling almost $10-billion of oil and consumer goods waiting to pass through the Suez Canal had an incredible knock-on effect which may, by some estimates, take months to clear.
Amid a global pandemic and increased pressure on transportation of goods, this sort of interruption on the supply chain raises concerns of goods shortages, rising costs for consumers and further strains on the shipping industry.
Supply Chain Digital reports that "The disruption has in part been created by a large number of full containers, along with hinterland distribution requirements, which is placing strain on yard and throughput capacities, as well as causing cargo to build up."
In this scenario, warehousing, storage and cold storage facilities is vitally important to combat theft at ports and delayed cargo going missing, to ensure this does not cause further impact further down the supply chain and beyond cargo transportation.
The "new normal" for global supply chain, which is under immense time constraints and consumer pressure, will include strategies on how to avoid the butterfly effect from occurring. It has also created further demand for industrial property spaces. At its core, supply chain management and industrial property will need to work as a conjoined unit. This strategic focus will affording stakeholders an opportunity to have a more 'just in case' philosophy, and not a 'just in time' one.
This approach will also ensure the massive e-commerce demand is levelled and met without risks and hinderance setting back business operation.
API Property works closely with our supply chain, logistics and manufacturing clients to ensure seamless solutions for all their industrial property needs. Contact one of our knowledgeable and passionate brokers today for more information.
Author: API Property Group
