After a period of overcapacity, demand for industrial space, including warehouses and manufacturing facilities, is growing, and lease rates are rising as a result. Companies therefore need to be more careful than ever as they weigh a variety of factors when considering distribution network design and investment.
Supply chain strategy needs to be the driver of network design. Supply chain and logistics drive about 75% of the operating cost of a warehouse or distribution center, while real estate expenses such as leasing costs are only 5% to 10%. But if you can’t get a handle on the 75%, you’re certainly not going to make smart decisions on the 5%-10%.
The fundamental question is: What’s the most economical way to address transportation, labor, inventory optimization and real estate, all balanced by service level and risk? In short, where will you pin your operations to the ground?
Traditionally, within a large company, there has been a disconnect between the traditionally separate operations of commercial real estate and the supply chain group.
Fortunately, that is changing. But, in order to be confident that their real estate decisions are aligned with supply chain priorities and business objectives, companies need to consider key factors: lease rates, the labor market, transportation and infrastructure, taxes and incentives, and risk mitigation. Read this report to find out more.
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