Future trends

There are a lot of new opportunities for value added logistics and services as the final processing of the product moves increasingly closer to the customer. Investors will adapt their views to the new warehouse standard as almost every user will have these requirements. It will also mean that leases will initially become longer, as the industry is not one to embrace change, but flexibility can be achieved with larger contracts. These large contracts will be the first steps on the path to sustainable supply chain networks. Logistics real estate represents centers of gravity in the supply chain that in themselves are inflexible. Nonetheless, the unpredictability of customer spending patterns will force companies to think in new business models.

So what would a new supply chain look like for a company using the CDC-RDC model? The main factor for deciding the location network strategy is the question to what extent the working capital should be allowed to determine the supply chain. In the old version of the lease contracts, companies needed to determine how much iron inventory would be needed for every DC to provide the market with the right customer service level. The duration of the lease would be based on this, as occupancy levels are always very important to ensure a smooth operation. If large European lease contracts were to allow operations to be scaling up or down within the CDC-RDC network, this would mean that the supply chain design could be based on a reduced iron inventory and a larger customer base. This makes it easier to minimize the storage costs in relation to the financial costs of the working capital.

The inbound side of the supply chain will undergo some minor changes in the near future. For example, a large number of tri-modal infrastructural solutions have been created to promote sustainable transport. Green incentives will result in an increasing number of companies using these transport modes. It is therefore important for investors to be present in these regions, since the new flexible business model will have a major advantage for the choice of location for the CDC. This choice will remain very stable if the outbound logistics strategy is based on a flexible choice of location for the RDCs.
At the RDC level it will not only become very important to be able to scale operations up or down in terms of square meters. Flexibility will also be needed in terms of human resources and equipment. This will make it possible to establish a very sustainable way of working for the future, which in turn will mean a new definition of flexible networks.

The market is ready for new initiatives, but will we decide to take the long road to victory, or is it to be short-term benefits once more?