Interact Analysis estimates e-commerce growth will trigger an additional 28,500 warehouses to be brought into service globally by 2025. Other researchers also predict an acute need for more DC space. Traditional retailers, third-party logistics companies and others will also be demand catalysts.” It’s important to bear in mind that e-commerce is only a portion of the overall demand for distribution facilities. and global markets will be to produce enough new facilities to meet this rapidly expanding market. ![]() “Moving forward, the challenge in many U.S. “While there is a sizable construction pipeline in the United States, much of that new space is already leased to meet the demand of the past few years,” James Breeze, senior director and global head of industrial and logistics research for CBRE, said in explaining the CBRE space estimate. The continuing e-commerce boom, along with the supply imbalances linked to the pandemic, have a lot to do with that need. It can’t be visualized like port congestion with a fly-over, but it’s for real, especially for key logistics nodes and lanes used to import consumer goods.Īccording to research from industrial real estate company CBRE, the United States will require an additional 330 million square feet of distribution space by 2025. This is especially critical in today’s macro-economic climate with high interest rates, increasing supply costs, and decreasing demand.The historic level of port congestion playing havoc with supply chains is grabbing loads of attention but, at the same time, a massive warehouse space crunch is going on. Improving Cash Flowįree cash flow is cash generated by a business after all operating expenses (including operating capital costs) are paid. Free cash flow is important because it enables companies to ensure it can efficiently run operations, pay its debts, invest in the business (for example, via stock buy backs), and capitalize on growth opportunities (like M&A) without the need to raise capital. In the medium term, further value will be released from working capital improvement through the reduction in excess stocks by decreasing lead time deviation, reduction of slow and obsolete ( SLOB) inventory and through the reduction in invoicing days. In the short term, the value will be generated from operational efficiencies such as a reduction in manual interactions, improved distribution planning and improved warehouse operations as well as cost reduction in the areas of detention and demurrage (D&D), expedite costs and carrier detention. ![]() Visibility platforms align very well to this thinking as they generate value quickly without absorbing large amounts of cash. This new style of budgeting will encourage supply chain driven businesses to only invest in technology solutions that generate value quickly, improve profit margins, cash flow and support new business models. This will improve profit margins which positively impact free cash flow.ĬFOs can be expected to ask their organizations in 2023 to optimize and maximize cash across the enterprise. As economies around the world see limited and even negative growth, companies are forced to double down on efficiencies that can drive down costs. ![]() What will be different from a year ago due to socio-economic and geo-political issues, is that the focus in 2023 will be on cost savings and cash flow. When this scenario occurs across multiple products simultaneously, it doesn’t take a finance major to understand that this results in a cash flow crunch. Considering most stores take 60 to 90 days to go from purchase order to stock on their shelves, you would have to wait a long time before you see any return from these items. Once you pay for products and shipping services, your free cash takes a hit and the capital remains trapped until you can sell these goods. With products stuck at ports, in warehouses or in-transit over the road, the gap between purchasing inventory and selling it is widening and growing more expensive by the second. Sellers of all shapes and sizes are reporting reduced margins and cash flow due to increasing pressure on the supply chain. 2023 will continue to throw more challenges and disruptions to an already weakened supply chain.
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