May 16, 2013
According to a new white paper from Cushman & Wakefield entitled “The Changing World of Trade” unprecedented trends in technology, demographics and infrastructure are causing a major transformation in global supply chains across the retail, industrial and logistics sectors.
“For ARAS this paradigm shift in supply chain and material handling offers a new set of exciting opportunities. Considering our location [Jafza], products and credentials, we are geared up for this new wave of growth,” said the management of ARAS Developments. By 2014 long-term trade will grow 9.5% per year and could result in global trade flows reaching $45 trillion by 2021, compared to just $6.5 trillion in 2001 when China joined the World Trade Organization.
“In major markets around the world, countries are positioning themselves to capitalize on the growth in international trade by investing heavily in infrastructure improvements such as ports, airports, highways, railways, industrial parks and, most importantly, intermodal hubs,” said Maria Sicola, executive managing director and head of Cushman & Wakefield’s Research in the Americas. “Meanwhile, governments are focused on negotiating new trade agreements and easing foreign direct investment regulations.”
The paper describes rapid change in retail supply chains as the sector becomes more global, urban and specialised due to the rise of online shopping and mobile technology, and changes in consumer spending patterns. To meet the demands being driven by e-commerce, technology and transportation costs, companies are actively streamlining their fulfilment processes – improving logistics to maximise efficiencies in inventory, service time and delivery – which is driving demand for high-quality space.
In major markets around the world, countries are positioning themselves to capitalise on the growth in international trade by investing heavily in infrastructure improvements such as ports, airports, highways, railways, industrial parks and, most importantly, intermodal hubs. Governments are focused on negotiating new trade agreements and easing foreign direct investment regulations.”
Seismic changes in retail requirements are putting new pressures on shippers who are expanding to developing economies while concurrently struggling to adapt to the challenges of high-demand retailing in increasingly dense cities. In response to these challenges, logistics efficiencies, location and transportation strategies, as well as improvements in technology management, are having major impacts on distribution channels and real estate sectors alike – essentially re-writing the rule book on how goods are delivered to consumers, worldwide in the new ‘demand economy’.
The fundamental changes in retail since the recession in 2007 have altered customer behaviour and created a new set of demands. Where the physical store was previously the primary point of distribution, now it may be the Internet. For supply chain executives, it means that they face a new set of challenges – integrating their fulfilment operations across channels to reduce cycle time and meet the needs of an increasingly demanding consumer.”
To accommodate the growing trend towards same-day fulfilment and supply chain flexibility, regionalisation will be required, consisting of a network of smaller urban locations and large distribution centres. This will likely benefit some of the better-positioned tier II markets. Outsourcing to third party logistics (3PL) providers can contribute capacity and expertise without significant fixed-cost investments.
Logistics will rely more on improvements in the productivity of capital, utilising order-management and distribution-automation technologies. In some markets, labour shortages and costs are making these investments an urgent necessity. The required investments in technology and real estate will continue to put pressure on margins across all industries, with companies seeking economies of scope and scale. Scale will be attained primarily through consolidation. The bottom line is that changing logistics priorities will continue to challenge corporate supply chain executives to develop solutions that manage current demands and plan for the uncertainties of the future. The pace of change regarding the demand for these solutions is unprecedented.
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