From distribution centers to warehouses, logistics real estate is a key component of supply chain success—especially for organizations that regularly handle large quantities of goods.
The growth of e-commerce, accelerated by the COVID-19 pandemic, has led to customers demanding faster, more efficient delivery of online purchases. In response, companies have been rapidly acquiring logistics properties, ultimately outpacing the supply of new construction. These record-low vacancy rates combined with product shortages has made meeting consumer expectations increasingly difficult for organizations.
Now more than ever, organizations must think strategically about their logistics real estate decisions, especially those impacting the final delivery route to end users—or the “last mile.”
This post will explain the importance of last mile logistics, the final stage of supply chain fulfillment, and how the right real estate decision can help your organization meet rising customer demands.
What Is the “Last Mile” in Logistics Real Estate?
The supply chain is commonly split into three parts: first, middle, and last. In the first mile, a product travels from a production center to a warehouse. In the middle mile, the product is transported from a warehouse to a distribution facility. The last mile is the distance a product travels from a logistics facility to the end user.
Often the most expensive journey in the supply chain, the last mile itself is a relative distance that can be anywhere from a single block to 100 miles. Many businesses leverage last mile logistics by choosing warehouses and distribution centers close to their end consumer. These properties are often located on the outskirts of urban areas.
The Importance of Last Mile Logistics to the Supply Chain
Labor shortages and product scarcities have affected nearly every aspect of the supply chain, but last mile logistics can help grow a business’s profitability in three major ways.
- A distribution center located near the end consumer means that goods can be delivered more frequently, with higher speed and cost efficiency.
- The final stop before reaching an end user is a valuable opportunity to assess the quality of the product. Checking that the product was accurately assembled and is defect-free, for example, ensures that the customer on the other end will be satisfied with their purchase.
- As seen by the popularity of subscriptions like Amazon Prime, customers are willing to pay for quick delivery. Speedy delivery requests increase the amount an organization can earn on shipping.
While fully optimized last mile logistics offer many benefits, the challenges of a shifting economy can complicate the process.
The Challenges of Last Mile Logistics
An organization’s size, real estate budget, and target market are a few of the factors that introduce difficulties to last mile logistics optimization.
Companies may, for example, struggle to find the right real estate to match their logistics needs, while others may not have the bandwidth to match the same-day delivery standards set by global companies like Amazon.
Furthermore, urban deliveries can be complicated by busy traffic and limited parking, while rural deliveries can be inefficient from extended distances between stops.
Some of these challenges can be avoided, however, when carefully selecting a last mile logistics facility.
Questions to Consider When Selecting Last Mile Logistics Real Estate
The right logistics location fits a company’s specific needs and allows it to meet the demands of its customers. Your logistics real estate should ultimately be a customer-centric decision. For both B2B and B2C companies, population density and the location of your end consumer should be the biggest considerations in your CRE decision.
Use the following internal questions to guide your next logistics real estate decision.
Proximity to Transportation
- Where is your logistics real estate in relation to major transportation hubs like highways, airports, ports, or railyards?
- Can your employees successfully navigate urban areas, including traffic, parking, and other transportation laws? What about rural areas?
- How long will it take to deliver goods to end users?
Physical Building Features
- Do the physical features of your logistics real estate, including dock doors, clear height, bay spacing, and power requirements match your distribution needs?
- Do you have the necessary equipment and space to accurately pack, assemble, and/or unpack your product before it’s sent to the end user?
Access to Technology
- How can your company leverage technology to further improve last mile logistics?
- Does your facility present opportunities to use drones, robots, or crowdsourcing to increase the efficiency of last mile deliveries?
- What is the cost to deliver goods to end users?
What are the labor costs in the area?
- How can you ensure your employees are compensated fairly while still ensuring business profitability?
Understanding how last mile logistics can increase the efficiency of your business is an important part of supply chain success, especially in a time of heightened customer expectations.
If you suspect your organization is lacking sufficient logistics real estate to meet consumer demand, an Allegro team member can help you identify your logistics needs to locate a property that matches your business goals.
Want to learn more about logistics real estate?
With the rise of e-commerce, warehousing and logistics have become an increasingly critical component of many companies’ commercial real estate portfolios. To learn more about logistics real estate and the trends impacting your decisions today, take a look at our Ultimate Guide to Logistics Real Estate Transactions.