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Key SAPICS takeaways: The changing face of consumerism and the future of warehousing

23 June 2023

As the 45th Annual SAPICS Conference kicked off, there was one common theme that ran throughout: future-readiness. From new warehousing structures and efficiencies to the rise of AI and automation, all of these topics of conversation pointed to the need to adapt and advance.

On day one of the conference, our CEO, Andrea Taverna-Turisan took to the stage to lead a masterclass on the future of warehousing, addressing many of the questions that we know are weighing on industry players’ minds in the face of change.

If you missed it, don’t worry! Here are some of the highlights, as shared by Andrea:

 

Think ahead with purpose

During a 2014 interview, I was asked by an amused journalist, why I decided to list Equites on the Johannesburg Stock Exchange. I responded with: “What you might not realise is that the way our children will interact with their purchasing activity will ultimately be defined by people providing solutions out of warehouses.”

Now, not even a decade later, we’re seeing this come into play. We’re currently making real estate decisions with our clients based on what is happening online—and, in fact, it surprised us how quickly we arrived at this point. Of course, the pandemic impacted consumer purchasing habits and propelled changes in the logistics arena more rapidly than any of us could have anticipated, but the point is, we were expecting change regardless and there’s much more to come. That’s why we think ahead with purpose and continuously encourage our clients to do the same.

 

Prepare (now) for the change that’s upon us

In the past, the typical retail supply chain—from a real estate point of view—included a major national warehouse, where imported or local goods would land, as well as regional warehouses and malls where the consumer would go do their shopping and go home. Now, of course, in the online retail supply chain, the national and regional warehouses are far larger to allow for stock holding, which no longer really occurs at malls.

Over and above that, there’s a new component that’s come about that didn’t exist 10 years ago, being the super-hub and last-mile facilities. Within the context of the entire supply chain model, this final segment, including the two aforementioned facilities, makes up a significant percentage of the cost, compared with the middle segment, which includes the national and regional warehouses. This goes to show the drastic effect that online spending habits have already on the retail supply chain.

Online retail supply chain in South Africa

What we’ve seen happen in the last decade or so is that retailers and big online operations are no longer concentrating on having many facilities, but rather fewer and larger ones, up to 100 000 m2. And that’ll remain a high priority going forward—optimising for efficiency.

Internationally, large retailers are pushing out deliveries on a scale that’s completely unprecedented. Consumers expect immediacy, and companies are fighting to keep customers, so they have to scale to keep pace.

Painting the picture in practical terms, one of our UK-based facilities is able to process over a million parcels a day. And quite frankly, it’s not about if we’ll see this level of demand come to South Africa, but when. So, to those involved in logistics and warehousing, you’ll no doubt be involved in some really exciting projects in the next five to 10 years, which will change the face of how consumerism actually works in this county.

 

Understand the possibilities

To give you an idea of the way things are moving, let’s take a closer look at the UK-based facility I mentioned:

We developed this super-hub facility in Barnsley, and it’s being used as a last-mile delivery platform by a third-party German logistics company that operates in the UK. The beauty of this facility is that it has 182 doors on two sides. The product comes in, gets sorted, and goes out. But, the minute trucks drive in, they become linked to the “brain” of the facility, allowing for unheard-of efficiency.

Say, for example, there’s a truck about to head to Leeds and another vehicle arrives with a parcel for the same destination, the truck going out can be delayed for a moment while the parcel is sent through the entire facility in less than a minute—52 seconds, to be exact. Of course, this kind of technology comes at a cost, but this is where the future of logistics is going, and, I believe, will eventually become the norm.

Equites Warehousing Sortation

We’re in a fortunate position, at Equites, to have vast development experience in the UK on our side, so we’re able to take lessons from what has worked well abroad and implement them here. Having said that, I can tell you that there are many things that we, as an industry, already do exceptionally well—better, in fact—right here.

 

Consider the challenges we face in South Africa

It goes without saying that we face some unique challenges in South Africa, and these too are affecting the future of warehousing solutions locally.

For one thing, land availability is an issue, not because there’s a shortage of land in South Africa like some international countries face, but because we need it to be zoned. The demands put on developers to bring land through that process are becoming more difficult. Once you have the zoning, before you get your Section 82 Certificate, you have to bring water, electricity, and sewerage to the site and that in itself is a challenge.

Both in South Africa and abroad, access to fresh water is going to become more of a challenge too. And, within our country, the handling of sewage is also going to present more problems.

Then, security is an ever-increasing concern locally, especially in Gauteng as well as in KwaZulu-Natal, following the riots that shook the industry in 2021.

To counter these and other challenges, we’ve been at work on a new type of product that presents enhanced security, alongside other benefits that address certain insurance requirements, include forward-thinking plumbing and solar solutions, and mitigate maintenance costs.

We’ve called this product a “logistics park” as it offers far more than an industrial space would. Essentially, each park—enclosed by a perimeter fence—houses a handful of warehouses, landscaped areas that make for an appealing work environment, shared pumps and tanks, and a central security station that adds another “safety layer” to the individual security protocols set in place at each warehouse. They also include two separate plumbing systems for potable and non-potable water, as per our baseline specifications.

Equites Logistics Parks Warehousing

Equites Logistics Parks Warehousing

To reiterate what I mentioned before, it’s ingrained in our DNA to think ahead with purpose which is what we’ve sought to do with these parks. We continuously strategise around challenges to come up with solutions that are going to enable our clients to operate smoothly, with reduced risks, going forward.

 

Work with a trusted partner

As we look to the future of supply chain models and see notable shifts in the way consumer demand and purchasing habits are shaping warehousing requirements, I do want to acknowledge that deciding to put up a new facility—or retrofit facets of an existing facility—is no small task.

I sympathise with CEOs and senior managers who might only make this kind of decision once or twice in their careers. It’s a sizable “mountain to climb” since they need to get the best out of the facility for the longevity of their business.

Understanding the magnitude of this decision, I believe it’s absolutely critical to have an industrial engineering firm assist in that process. That said, the brief to the firm needs to be 100% to ensure they can come up with a supply chain solution that will really work.

With all of that in place, wrapping the real estate around the solution in a way that fits seamlessly becomes rather easy. The challenge comes in when a client isn’t able to move fast enough on the decision-making process or might be stuck on grey areas in their business, and still hopes to have a large-scale facility built in three months, for example—that’s just not possible.

So, as you can imagine, it’s essential that all of the “homework” is done really well and all the necessary expertise is gathered up front. And I’m pleased to say that we have assisted numerous businesses in this way.

We walked the road with a large technology solutions provider in Johannesburg. Initially, they came to us saying they needed 30 000 m2  of built space. We urged them to look at doing things slightly differently, introduced them to an industrial engineering firm, and we eventually ended up building them a facility that measured 22 000 m2.

We saved the client 8 000 m2 on a 12-year lease, starting rent of R72/m2 and escalating at 7% annually. That meant that we could give our client a rand saving of approximately R80 million over the period of the lease.

As Equites, we pride ourselves on assisting our clients in that process. To us, it’s not about getting a client in, getting them to pay rent, and carrying on. We are committed to sharing our expertise for the good of our clients, especially as we all prepare for the change in consumerism and the effect that is having and will have on warehousing solutions.

If you’re looking to future-proof your supply chain, I’d love to chat to see how we can help you. Otherwise, look out for our follow-up blog where we’ll share more about “The Equites Way”.

© 2024 Equites Property Fund Ltd.
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