Supply Chain & Logistics Advisory

Answer from Michael Carson, Head of Supply Chain & Logistics Advisory, EMEA

Although real estate accounts for only 5% of a company’s total supply chain costs compared to 45% for transportation, 30% for labor and 20% for inventory—a company’s real estate strategy can have a significant impact on operational costs. That’s because when real estate assets are located in the right place and are equipped to carry out the right functions, much greater efficiencies can be achieved.

Important factors to consider:
The proximity of your warehouse or manufacturing sites in relation to both inbound supplier locations and your outbound customer locations determines your overall transportations costs.

The number of locations in your network directly correlates to the amount of inventory held within your supply chain. The more sites in your network, the more inventory you will hold.

The location and operational nature of real estate assets within your supply chain have a significant impact on labor costs. Areas with lower labor availability command a higher rate of pay, which is of course a key consideration.

To make the most informed decisions, companies need to have a clear understanding of the relationship and trade-offs between their real estate assets and their wider supply chain. Cushman & Wakefield’s Supply Chain & Logistics Advisory team can help.

Answer from Michael Carson, Head of Supply Chain & Logistics Advisory, EMEA

Like all aspects of supply chain, there is no one size fits all approach. Most companies deploy a combination of tactics to mitigate inbound risk. Approaches include:

1. Shortening the inbound supply chain (also called nearshoring or reshoring) by partnering with suppliers that are closer to your facilities and therefore shortening lead times, and in turn risk.

2. Multi-sourcing, which involves spreading sourcing activities over multiple suppliers. Should one supplier or supply route have issues, alternative inbound sources ensure continuity.

3. Building downstream inventory or holding more inventory close to your customer demand. This doesn’t necessarily address the root cause of the inbound supply risks, but increased inventory ‘buffer’ can support continuity of service when supply is volatile.

4. Leveraging data to increase visibility across your end-to-end supply chain. Reports such as Cushman & Wakefield’s Manufacturing Risk Index is a great tool to support this.

We partner closely with companies to understand their supply chain and business needs before determining the best approach for their organization.

Answer from Tim Foster, Head of Supply Chain & Logistics Advisory, APAC

As we move into the post-pandemic world, many companies are trying to determine their optimal go forward inventory strategy. Just-in-time policies seem less relevant and just-in-case policies are clearly not sustainable. And simply reducing inventory may not be the right strategy—missing out on customer orders through lack of product availability can severely harm a business. At the end of the day, companies must evaluate the right inventory strategies and policies for their business. What’s right for one company or sector may not work for another.

So how do companies determine the right inventory level for their business? It starts by simplifying product ranges and being able to accurately predict demand—the use of predictive analytics is increasing, given the explosion of data about consumer buying behavior. On the supply side, running highly responsive manufacturing processes to adapt quickly to changes in demand and improving the consistency of supply by working with suppliers and upstream manufacturers. Finally, by prioritizing which products or categories drive revenue, companies can determine the right level of inventory required to enable growth and maximize stakeholder value.

We work closely with companies to help evaluate the right go forward inventory strategy for their business needs, now and in the future.

Answer from Tim Foster, Head of Supply Chain & Logistics Advisory, APAC

Whether it’s a consumer standing in a grocery store or waiting for the delivery of an online order—or a business that needs materials for production or critical supplies for their business to keep running—it’s the supply chain that ensures that the products ordered are available and the customer experience meets or exceeds expectations.

Rising costs and supply chain disruption means there is no better time to review everything about supply chain performance, starting with the service delivered to customers. A good customer service policy is segmented by channel, customers and products and is used to address response times, order fill rates, minimum order quantities and value-added services.

We are adept at analyzing and modeling all the factors that go into a good customer service policy, helping companies develop quantified and fact-based policies that drive top and bottom-line performance.

Answer from Megan Krest, Senior Project Manager, Americas

Supply chain activities are responsible for a bulk of scope 3 Greenhouse Gas emissions of a company—which include the emissions that are not produced by the company itself or the activities from assets owned or controlled by them, but rather those indirect emissions that occur across the company’s supply chain. To this end, a key component of managing costs throughout these areas is to engage suppliers early and often. Although you likely don’t have direct control over your suppliers’ operations, you can require any suppliers to have sustainability principles and practices in place such as ISO 14001 which indicates a supplier holds their operations to a strict environmental standard. Additionally, ensuring your operations, as well as your suppliers, are in line with all relevant human rights laws and labor laws is a key component to a sustainable supply chain, protecting you against reputational damages that can put your organization at risk.

Although reducing the environmental impact of your supply chain may be seen as a cost, much of these efforts are focused on savings and reductions which will lessen costs over time. We partner with companies to create a cascade of sustainable practices that flow smoothly throughout the supply chain.

Answer from Ben Harris, Senior Managing Director of Client Solutions and Strategy, Logistics & Industrial, Americas

Supply chain factors that are carefully weighed before making real estate determinations include site locations, total logistics costs, inbound and outbound transportation, labor expense and inventory-carrying costs.

Once these factors are considered and potential sites are narrowed down, your company must then balance tradeoffs between labor availability and cost, and operational quality. Also critical is deciding whether existing buildings with tenant improvements will suffice, or if entirely new facilities need to be constructed.

Having a misaligned supply chain and real estate strategy can result in not only missed savings opportunities, but also in a real estate portfolio that limits company growth. That’s because supply chain optimization is no longer “nice to have,” but instead “essential for a profitable business.” Few companies, however, have seized this opportunity.

Supply chain analysis can be the key differentiator for creating the right real estate strategy for your company, giving you the competitive edge. Cushman & Wakefield specializes in evaluating all factors relating to the supply chain and real estate to save you time and money.