Consumer Experience is Driving Ever More Cost-effective Distribution and Fulfilment Centres – How Can our Market Respond?

Neil Walker
Retailers seek cost-effective distribution and fulfillment centres as a seamless part of an agile logistics network.

The changing consumer experience is driving the need for a slicker retail supply chain. As omni-channel operations have become the norm, and customer expectations of next-day and same-day delivery are continually raised, the challenge for retailers is to optimise their distribution and fulfilment processes.

These facilities have become more complex in recent years. The speculative and simple cookie-cutter shed is largely a thing of the past, replaced by increasingly sophisticated and technology-dependent distribution and fulfilment centres. Scale is entirely different. Out-of-town units of 350-450,000 sq ft were once considered large, whereas one million sq ft plus is now standard for many clients.

Additionally, there are smaller supporting facilities appearing close to population hotspots. These urban locations closer to the point of consumption are a growing part of the supply chain, with some high profile companies trialling drone deliveries to complete the final deployment of products to the customer.

The changing consumer experience is driving the need for a slicker retail supply chain.

A more strategic role has emerged for distribution and fulfilment facilities. Rather than being treated as cost centres, they’ve become a more important component of the supply chain infrastructure, with competitive advantage “Most of these new requirements are data driven, as part of the rise in connected technologies throughout the manufacturing and distribution value chain” potential. Expectations of the buildings themselves are changing. They’re now frequently expected to accommodate a shorter, faster supply chain by supporting shortened product life cycles, and to move products as quickly as possible.

Today’s facilities may offer critical supply chain competencies such as omnichannel capabilities, reverse logistics, return handling, and value-added services ranging from product assembly to product labelling, repacking, and repair. In addition, they’re often expected to store a broader range of products with specific requirements in terms of dimensions, temperature, fragility, and safety obligations.

Most of these new requirements are data driven, as part of the rise in connected technologies throughout the manufacturing and distribution value chain. Industry 4.0, where machines are optimised with internet connectivity, allowing a system that can make decisions on its own, is furthering the idea of ‘smart warehouses’.

Most of these new requirements are data driven, as part of the rise in connected technologies throughout the manufacturing and distribution value chain.

The above factors have brought about changes in client requirements. The cultural shift towards the distribution and fulfilment centre as a strategic asset, together with the growth in individual specification, has led to fewer speculative developments. Some 70 per cent of projects in this sector are now occupier-led, where once it was 30 per cent. In some cases, the retailer occupier, or third-party logistics provider, will identify the land (inevitably brownfield) and in most cases will know exactly what they need from the facility.

Clients are typically dealing with a wide variety of challenges, from planning restrictions and design/construction/fit-out issues, to roof drainage problems, complex fre regulations and Secured by Design requirements. The interface with vehicle provision and movements s also a major factor in the operation. Considerations include loading dock spaces, weighbridges, and associated access issues.

We might expect to see more attention paid to sustainability of distribution and fulfilment centres in the future. To date, there has been less integration of issues such as energy efficiency into the design and delivery of these buildings. Cost and speed to market tend to be the priorities. However, larger retailers are likely to include logistics and distribution in their corporate social responsibility policies, and this is influencing the sector.

New entrants to the supply chain are needed, but it’s likely to take some time before these emerge.

The supply chain has of necessity become more specialist and the market is constrained by a lack of players, affecting costs. Only a handful of ground engineering contractors have the necessary capability, and façade sizes restrict the choice of cladding contractors. New entrants to the supply chain are needed, but it’s likely to take some time before these emerge.

Procurement is invariably via design & build, either single-stage or two-stage. Currently, clients may be hard-pressed to find contractors who are enthusiastic about single-stage, as market buoyancy allows them to be more selective in their choice of projects to tender. On the plus side, two-stage maximises earlier use of contractor intelligence. The Faithful+Gould team often manages client expectations around these issues, supporting the development of clear design briefs, and helping clients meet their procurement risk and value objectives.

We have a detailed understanding of the way in which buildings, services and infrastructure work together to facilitate efficient distribution and fulfilment operations. We appreciate the critical role these facilities play in our clients’ overall strategy and the complex, inter-dependent issues that can arise.

We’re therefore ideally placed to assist clients in first assessing development options and then supporting design, construction and commissioning phases. We also have significant expertise in the procurement and management of associated automation equipment, on projects in the UK and Europe.

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