Ten Key Trends Impacting the North American Distribution Market

Global and regional trends such as the rise of ecommerce and the growth of intermodal hubs are affecting the placement and location of facilities
By SCMR Staff
May 07, 2012 - SCMR Editorial

The North American logistics and distribution property market is improving following the recent economic downturn, said analysts for the London-based think tank, Transport Intelligence.

Global and regional trends such as the rise of ecommerce and the growth of intermodal hubs are affecting the placement and location of facilities.

Ti’s latest report “North America Warehousing and Distribution” identifies ten key trends which are impacting on this important sector:

1.    Oil Prices. Rising oil prices have resulted in some companies re-evaluating supply chains and distribution networks in an attempt to offset cost increases. Freight transportation accounts for the majority of logistics costs – in some instances over 50% of total logistics costs. Companies in some sectors, where high levels of customer service are required, are expected to expand the number of cross dock facilities in order to reduce the overall distances to customer destinations, hence reducing fuel costs, as well as reducing delivery times.

2.    Increase in inventory levels – As oil prices and supply chain risk increases, inventory holding levels are expected to rise. As a result of higher transportation costs, many shippers are likely to move away from quick and frequent deliveries to slow and less frequent shipments, thus driving up inventory.

3.    E-commerce. To support online sales, many brick and mortar retailers are expanding their distribution facilities. While many retailers, such as Adidas, utilize mega-distribution facilities to support both online and in-store inventory, other retailers are building separate, more specialized facilities to support their e-commerce division.

4.    Intermodal transportation, that is, the transport of freight via several modes of transportation – ship, rail and truck, has increased over the past few years and this has led to the construction of intermodal hubs. Not only are these serving as transfer points, but more and more of them are becoming logistics hubs. Besides storage of inventory, value-added services such as kitting, light manufacturing and reverse logistics are also offered in such locations.

5.    Larger space. Throughout 2010-2011, companies took advantage of lower vacancy rates and “traded up” to larger warehousing and distribution facilities. Many markets are experiencing a shortage of large, quality blocks of space and this is the area which developers will focus.

6.    Near-shoring. A shift towards regional supply chains, or nearshoring, is resulting in manufacturing moving closer to customer-bases. Rising costs such as oil prices and labor costs are being attributed to this shift, also, risk management, a shorter supply chain, i.e. lower transportation costs and quicker time–to–market are other reasons for the move towards regional supply chains.

7.    Containerized imports. Over the past ten years, containerized imports have become one of the most important drivers of demand for warehousing and distribution centers in the US. Although this will continue to be the case, the focus of growth for distribution property locations is likely to change. The development of ports in Canada and Mexico poses a threat to US West Coast ports, such as Los Angeles and Long Beach.

8.    Panama Canal. Related to the point above, the expansion of the Panama Canal, scheduled for completion in 2014, is a driving force for port infrastructure activities across the region. With two-thirds of the US population located east of the Mississippi River, many of the products that had previously been transported across the country from the West Coast after delivery from Asian markets may now remain on vessels all the way to Eastern ports.

9.    Sustainability. Sustainability measures have been on the rise for many businesses for a variety of reasons such as lowering costs, to customer pressures and to simply “it’s the right thing to do”.

10.  Trade with South America. Trade has steadily increased between the US and South America and Brazil is one of the largest trade partners of the US. Miami’s warehousing and distribution market has improved over the past couple of years. Demand in locations such as Miami and Houston is being driven from existing tenants already in the market: renewals, relocation and expansions

About North America Warehousing and Distribution

North America Distribution and Warehousing 2012 contains details on the significant locations of the major distribution hubs throughout the region. It lists key logistics parks which have been developed, and which are attracting the most attention. It includes analysis of the trends and developments affecting the market. For further information visit: http://www.transportintelligence.com/market-reports/report-north-america-distribution-and-warehousing-2012/289/



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About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review. Patrick covers international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. Contact Patrick Burnson

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