Supplies Unchained: Perspectives on Providing 21st Century Distribution Solutions

Wayne Gretzky famously claimed the secret to his success was quite simple: “Skate to where the puck is going, not where it has been.” Gretzky’s philosophy struck a chord with leaders in a multitude of industries and for good reason: the idea of consistently being ahead of trends by anticipating what’s coming better and earlier than the competition is how you become known as “The Great One.”

In the industrial market, commercial practitioners are attempting to skate ahead of supply chain innovation in order to capitalize on a robust market. What will the warehouse of the future look like? How will goods be delivered and what specialized handling equipment will process them? How fast can someone get twenty pallets of refrigerated goods from the Port of Charleston to a cold storage unit in Ohio?

These are the sorts of questions Howard Lichtig, SIOR, is asking. Amazon is making a substantial investment in Lichtig’s Cleveland/Akron market, converting two failed malls into distribution centers employing several thousand North-East Ohioans.

Lichtig feels this represents an opportunity, so he’s anticipating future market needs by developing a cold storage hub to accommodate increased demand. “I’ve got land under contract and am working on securing tenants,” Lichtig says. “We have lenders and it appears we can build about a five hundred thousand square feet and accommodate north of 100,000 pallets.”

As the only hub in Lichtig’s market, it's being built ‘forty-foot clear’ to accommodate future occupants who will be thinking by the cubic foot, and will feature a glycol antifreeze system to prevent floors from buckling, allowing rooms to change temperatures based on current needs.

Lichtig’s Tips for Comprehensive Thinking

  1. Ask your client if they need help comparing markets and utility/labor/costs. They may not tell you what’s going on in another part of their company only because they never saw you as part of that solution
  2. Don’t silo yourself into transaction work. You provide better value by widening your focus beyond rent rate per square foot.
  3. Work with academics to figure out how market trends relate to real estate. They’re not our competitors but our collaborators.

Chris Copenhaver, SIOR, agrees with Lichtig’s assertion that there is a need for more distribution solutions like cold storage hubs. He believes these opportunities further heighten the importance of supply chain solutions and advises clients to “follow the transportation trail.”

“We are taking a deeper dive with our clients on their new locations,” Copenhaver explains, “accounting for distances to major logistics hubs and ensuring they make sense throughout the entire supply chain.” If Copenhaver’s clients can’t easily get their inventory from suppliers, they can’t meet the delivery expectations of their customers in today’s “on-demand” culture.

Copenhaver anticipates a major shift in material handling equipment such as automated retrieval systems and “pick & pack” machines. Construction and design trends in cold storage facilities are costly, because they require a building shell designed to fit around the interior operations, not the other way around.

“Due to the amount of capital corporations have to invest,” Copenhaver explains, “our clients are forecasting the next 20 years of operating efficiencies, labor availability, changes in technology and environmental protection.” Much of this expanding supply chain is fed by goods shipped overseas on deep draft vessels, a phenomenon that led to expansions of the Panama Canal and East Coast ports like the one in Charleston, South Carolina, as well as rapid development of inland ports, which serve as holding facilities for goods.

Copenhaver’s Tips for Effectively Specializing

  1. Gain insight into the shipping industries and how they operate between customers and suppliers.
  2. Educate yourself in cold storage construction and governmental regulations.
  3. If you’re going to pick a specialty, stick with it and network.

Hagood Morrison, CCIM, MBA, SIOR, says this evolution has changed his business. “Folks like me get paid when we fill a distribution center that’s here,” Morrison says. “Before, when you did not have active inland ports with active distribution centers, it meant a simpler process to fill bulk distribution centers.”

Now Morrison’s team must know how to get a shipping container from Charleston to the inland port in Greer, South Carolina, the next day, where it will be retrieved and shipped to a distribution hub. Morrison closely monitors trucking costs and “turn times,” which are measured in the time it takes for a trucker to pick up a container, deliver it, and get back. “I’ve got a matrix schedule which allocates for the number of costs for a facility and number of turns. And I work it constantly because it is a major attractant for my clients.”

At the end of the day, logistics is a fancy word for how things get from one place to another. It’s a complicated, dynamic system of knowledge, demanding attention and dedication to all of the ‘links’ in the supply chain. Commercial practitioners with interest in this corner of commercial real estate must work to understand everything from how to create a hazmat compliant storage facility inside a larger facility to how to get FDA approval for storing coffee inside of a distribution hub that also contains chemicals and uncooked meats. From the Port of Charleston to a grocery store in Akron, practitioners like Lichtig, Copenhaver, and Morrison are providing this value to their clients and there are many more like them out there ready to network in order to get deals done. Will you become one of them?

Jump start your path to a designation with SIOR’s new Member Associate program: www.sior.com/membership/become/member-associate

Morrison’s Tips for Learning Port Logistics

  1. Study transportation patterns around your market and understand how trucking costs are constructed.
  2. Put in the time to be able to break down the types of services which support a port and understand what those are.
  3. Invest in education: read the Journal of Commerce (JLC), create a network of SIORs in ports like yours for brainstorming, and attend logistics talks a at SIOR conferences to stay current.

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