News



INDUSTRIAL REAL ESTATE
November 7, 2005
The world is shrinking

Manufacturers are using technology to scrutinize every link in the
supply chain, experts say. In the process, they're closing gaps and
changing timeworn practices. And the changes are having a real impact on
the supply chain.

"As the volumes have increased, the whole field of logistics has gotten
more sophisticated," said Mal Hill of Atlanta-based Solution Property
Group, which is building an import warehouse at the Port of Savannah.
"And with the ability to manage the flow of goods more effectively,
logistics has become a cost center and a contributor to the profit
margin."

For John Porter, senior vice president of global logistics at CB Richard
Ellis Inc., world trade has elevated the movement of goods to a crucial
level for the economy.

"Our whole economy is sourced and run in terms of logistics and the
supply chain -- based on the ability of suppliers to provide all of your
basic staple needs," he said.

One change is the use of RFID, or radio frequency identification. RFID can track inventory through miniature devices embedded into the products, which carry antennas that can receive and respond queries from a radio transmitter. It allows inventory to be tracked from creation to the consumer's hands -- allowing for greater efficiency.
"RFID is huge," Porter said. "It's catching on. ... It's what Wal-Mart's
requiring of its vendors. Not all retailers require that, but it's
clearly a trend."

Another trend is the scarcity of containers, which carry much of the goods coming from Asia. And Asia wants the containers back.
"We import so much more than we export," said Ed Frazelle, founder of
The Logistics Institute at Georgia Tech and CEO of Logistics Resources
International. "And they (the containers) stay here longer than the
folks in Asia would like them to."

A shortage of containers means they need to be unpacked faster. So
manufacturers are unpacking them in import warehouses right at the port.

"You could physically drive that 40-foot box to Atlanta, but it's much
more expensive, and then it shows up to a warehouse and it's not
palletized or shrink-wrapped," Hill said.

One import warehouse will feed as many as five regional warehouses, Hill
said.

Another trend, higher fuel prices, is driving Asian trade away from West Coast ports and toward the East Coast through the Panama Canal. About three-quarters of companies still ship their product through the West Coast, said Hill.
"Over time, those companies are going to have those import warehouses
closer to the distribution center and closer to their customer base," he
said.

Another trend is the inland port. In Kansas City, for instance, plans are under way to build the Kansas City SmartPort or a direct rail route from the factories in Mexico that bypasses customs snags and creates a seamless pipeline.
Both Porter and Beth McClurg, also with CB Richard Ellis, say Atlanta
has the potential to be an inland port, though Porter said "the
economics aren't in place" yet.

Finally, companies are moving toward getting closer to the customer.
"The natural reconfiguration of supply chains will be toward more
smaller distribution centers located closer to ports and major cities,"
Frazelle said.

Smaller, closer warehouses are a direct result of greater risk of an
upset from terrorism or climactic upheaval.

Atlanta will benefit from the trend because it's close to Savannah, say
Frazelle and Porter. But Porter adds that Atlanta's industrial market
has not been as robust as Memphis, Indianapolis or Louisville, Ky.

"From Memphis, you can deliver anywhere in the Southeast within a
two-day drive," Porter said, adding that the traffic in Atlanta is a
huge problem.

"Atlanta needs an outer perimeter desperately, with service roads to the
major highways."