Much has been written about the impact of e-commerce on real estate demand and “last mile” delivery. Contrary to what we hear about struggling malls and massive retail closures, the demand for real estate to feed the growing e-commerce demand, especially in urban areas, is increasing. It is all about the need to have warehouse space strategically located near the consumer. And now the same thing is happening as production moves closer to the customer.
Austen Hufford recently reported in the WSJ that production facilities are feeling the push to be closer to the customer. They want to counter the rising logistics costs, curtail supply chain bottlenecks and seek out workers in a tight labor market. Companies building plants nearer to customers say that the investment costs can be made up in faster turnaround times and increased orders.
Being close to the customer has always made sense. It reduces transportation distances, shipping costs, travel times and traffic delays. But its importance is now becoming even more significant than the conventional site location factors such as real estate costs and taxes. Manufacturers are trying to shorten the distance between production and consumers and this trend will continue to grow.
Disruptive influences such as tariffs and technologies such as 3D printing will continue to emerge that will change the way that companies design and manufacture their products. But the need to fulfill the demands of the consumer will only reinforce the requirement to shorten the distance between production and the end user.
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