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Session III | Technology and the Future of Retail vs. Wholesale Space

Session III | Technology and the Future of Retail vs. Wholesale Space. Presented by: Abigail Rosenbaum , Senior Economist Jared Sullivan, Senior Economist. What is the Supply Chain?.

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Session III | Technology and the Future of Retail vs. Wholesale Space

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  1. Session III | Technology and the Future of Retail vs. Wholesale Space Presented by: Abigail Rosenbaum, Senior Economist • Jared Sullivan, Senior Economist

  2. What is the Supply Chain? A supply chain consists of the activities and infrastructure whose purpose is to move products from where they are produced to where they are consumed. Source: Fundamentals of Supply Chain Theory.

  3. Extreme Supply Chain Alternatives • A totally “Flat” supply chain network: Chinese factories ship production directly to retailers who keep inventories on their retail shelves. • An extensively “Hierarchical” supply chain network: Overseas factories ship to a single national warehouse. From there to one of 10 regional warehouses. From there to the retailer.

  4. Supply Chain Decisions Involve of Five Key Areas

  5. Supply Chain-Why it Matters? • Supply Chain management accounted for nearly 10% of US GDP, over $1 trillion in 2010. • Supply Chain related activities can account for as much as 50% of the final price of a product. • Industrial real estate is heavily influenced by changes in the supply chain.

  6. Industrial Demand and Changes in Inventories are Highly Correlated Source: BEA, CBRE EA Industrial Outlook.

  7. Inventories-What Managers Must Consider

  8. Inventories are Becoming a Smaller Share of Our Economy Source: BEA, CBRE Econometric Advisors

  9. The IT Revolution Continues to have Impact Supply Chains… • 3D production technologies speed up industrial design and production • Robots and new software have allowed for automated warehouses • IT has allowed companies to serve more customers with fewer inventories and employees • Internet shopping has allowed firms to hold fewer inventories • P&G has deployed technology allowing larger teams to be managed by fewer people • Schwans is “right sizing” after 60 years of organic growth left its distribution system inflexible and inefficient

  10. Internet Sales: Share and Growth Continues to Accelerate Sales Growth (Yr/Yr) Source: Census Bureau.

  11. Breaking Down The E-Commerce Share By Segment Share of Sales (%) Source: Census Bureau.

  12. Cities With 30% Higher Broadband Access Have… Source: Census Bureau, CBRE Econometric Advisors.

  13. Absorption Shows Struggle in E-Commerce Era Source: CBRE Econometric Advisors.

  14. Retailing in 2025: What the Internet Does!

  15. Internet Effect: Downsizing Stores Average Store Size (Sqft X 1,000) Source: CBRE EA/Dodge Pipeline.

  16. Building Warehouse Space For E-Commerce Source: PNC.

  17. E-Commerce Poses Challenges Not Just for Retailers “Last Mile” to Consumers Small Local Packages a Challenge to Deliver “Last Mile” Could be Up to 75% of Supply Chain Costs for UPS and FedEx Home Deliveries are Up UPS: Residential Deliveries Make up 40% of US volumes, compared to 20% in 2000 E-Commerce Sales Increasing Solutions???? Source: The Motley Fool.

  18. Inventories are Becoming a Smaller Share of Our Economy

  19. Location- Managers Must Consider Range of Factors Including

  20. What Managers Must Consider For Industrial Real Estate

  21. How Choice of Network is Determined

  22. Cities with UPS and FedEx Hubs to Benefit from Increased Internet Shopping

  23. Distribution Markets Will be Impacted Most by Supply Chain Changes Source: CBRE EA Industrial Outlook.

  24. So What Does All This Mean to Real Estate?

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