Los Angeles Basin Drayage Rates 2016-2019

New drayage rates released by Tina Arambulo and Eric Kenas @ Cushman & Wakefield indicate that differences between drayage rates by area are narrowing in infill areas of Greater Los Angeles while widening in East Inland Empire markets. Therefore, Greater Los Angeles importers may be less sensitive to location differences in infill areas while increasingly biased towards locations west of Fontana based on drayage rates alone.

The chart below shows the widening or narrowing of percentage differences between markets from 2016 to 2019. The negative percentage indicates a narrowing of drayage rate differences for the compared locations while the positive percentage indicates a widening of drayage rate differences for the compared locations.

Drayage Rate Delta

 

New Format + Latest News in SCRE

I am excited to announce that after experimenting with post formats, I have decided to proceed with a new blog format which I think delivers timely information in a succinct and easy to follow structure.  Moving forward, the blog will be separated into two sections.

The first section will consist of a single topic which directly relates to supply chain and real estate.  Here I will cover, in as depth a manner as necessary, some of the latest trends and technologies I am seeing and hearing about.

The second section will consist of an aggregation of links to information which I have found over the past week to be interesting and thought provoking.  The links will be categorized to make navigation simple.

The reason I have decided on this format is two-fold.  One, selfishly I am using this blog to learn more about topics pertaining to my everyday business.  Therefore, don’t expect too much discussion on the banalities of industrial real estate here.  I wouldn’t be honest if I wrote about those.

Secondly, I do care about making this blog accessible and encouraging readers, including myself, to use it as a resource.  There are a number of great resources which cover supply chain issues or real estate issues.  I want to combine the two effectively.

Since I have blabbered on about the structure of this blog, which adds no value to your day at this point, I thought I would include the section with the past week’s SCRE links below.  Enjoy and please let me know your thoughts!

SCRE Links

Distribution Centers

From the Journal of Commerce: One reason for falling freight traffic may be the high levels of inventory

From Industrial Distribution: Werner Electric Supply uses custom pick module and warehouse design to double sales

From the Wall Street Journal: Warehouses Getting More Complex

Trade

From the Harvard Business Review: What politicians won’t talk say about manufacturing and trade

Ports

From the Journal of Commerce: POLB head says competition getting fiercer

From Modern Materials Handling: Panjiva reports lower US bound water shipments in March

From the LA Times: Ports of Los Angeles and Long Beach are losing market share to the east coast

From the Journal of Commerce: Real estate driving shippers to Savannah

Shipping

From the Journal of Commerce: Survey says…more shippers shifting to rail

Industrial Real Estate Market

From RE Business Online: US approaches historically low levels

 Lease Accounting

From Cushman & Wakefield: In Lease Accounting Changes: CRE to take Center Stage

From PwC: Overhaul of Lease Accounting

SC Tech and its Impact on CRE

I recently read an interesting article in the 1Q 2016 CSCMP’s Supply Chain Quarterly titled “Ten tech trends that will transform your supply chain”.  The article reviews ten technology trends cited by International Data Corporation (www.idc.com) as trans-formative to the manufacturing supply chain.

As I am a supply chain real estate adviser, when I read this article my thoughts immediately focus on, assuming this list is prophetic, what are the potential impacts on the real estate within the manufacturing supply chain.  Starting with the IDC list, I have written a few of my opinions below on how each trend might correspond to supply chain real estate.  As always I welcome your feedback!

  1. Cloud-based commerce networks
    • Increased cloud usage may correspond to larger bandwidth requirements.  Properties with ISP’s providing larger bandwidth at lower costs may be much more attractive to end users.  Properties without bandwidth may require tech work-arounds, which may or may not be possible.
  2. Micrologistics
    • A great trend for industrial real estate and 3PLs in infill markets.  For those companies who desire dedicated facilities, considerations may include lack of trailer storage on-site, sub 30′ clearance heights, truck ingress and egress issues, and sharing common areas.
  3. Integrated business planning
  4. Modern postponement
    • Modern postponement ties in with the cloud and micrologistics concepts and many of the same real estate considerations apply.  Requirements for 3D printing and other flexible manufacturing processes may increase the need for additional power sources.
  5. Resiliency and visibility
  6. “Broadening” of the supply chain
    • Adding product design, manufacturing, and service to a supply chain will most likely drive demand for more employee intensive properties.  Amenities such as increased employee parking areas, increased power, and proximity to retail amenities would likely be of greater importance.  Companies could separate the product design and service functions to office space.  However, if there is a need to have all three functions in a certain location, this separation would typically be more expensive than if all three were in one industrial space.
  7. Cloud-based WMS and TMS
    • With greater cloud-based data there may be additional demand for internet bandwidth.
  8. Robotics
    • Increased power requirements, access to alternative sources of energy, locating in lower cost energy areas may be drivers for companies employing robotics in the supply chain.
  9. Internet of things
  10. Talent
    • Location, location, location.  It probably goes without saying that anyone with marketable talent will want to work in a desirable environment, unless the corresponding compensation in one shape or form is adequate to offset their preference.

Ocean

From my GLS class this past Tuesday taught by Brandon LeCou of Hamburg Sud NA, some information I thought was interesting about ocean transportation:

  • Beneficial Cargo Owners (BCO’s) with high cargo volume have tremendous leverage in negotiating rates directly with carriers, however, they may not have the expertise nor the risk protection offered by working with a freight forwarder
  • A “tramp service” is an ocean carrier which goes where it wants to go, i.e. it is not part of an established ports of call.  An example would be chartering a shipment to Guam for a bulk shipment of power plant parts.  As you might expect, the term “tramp” is derived from the English word meaning a beggar or vagrant.
  • There are a significant amount of carriers and they are constantly consolidating and forming alliances with other carriers.
  • Containerships are still called steamships, even though most of them run on diesel.
  • Most of us heard about the CMA CGM 18,000 TEU Benjamin Franklin’s recent call to the POLA.  It is the largest steamship to service the POLA.  Interestingly another the previous record for ship size was set two days earlier when the 15,000 TEU Maersk Edmonton called on the POLA.
  • CMA CGM is planning on calling on the POLA with all six of its 18,000 TEU ships over the next year.
  • Big ships can cause big problems for infrastructure and other supply chain requirements.  It remains to be seen whether US ports are prepared for the larger ships.
  • More ocean carriers are offering freight consolidation, warehousing, trucking, and rail services to deliver packages to their final destination.

Remote

I am currently in the town of Landers, California, in a house off a dirt road which you need the latitude and longitude coordinates to find.  Basically I am in the middle of the Mojave Desert and it is beautiful.

I have noticed that the nearest place to buy really anything is 5 miles away, a liquor store which doubles as a market.  The selection is obviously limited.  There is a Von’s about 10 miles away, but I am not so sure about its existence given its location on the map looks even more remote than my current location.  I get the impression that the population in this area need to drive a decent distance in order to buy really anything from a storefront.

It makes me wonder what kind of market exists for ecommerce in remote areas.  Although the population density is not substantial, you would think the participation percentage would be significant.  If I owned a store that served such a population, I certainly would look into ways to partner with ecommerce companies or even start my own website storefront to deliver goods or have them ready for pickup at the brick and mortar storefront.  When ecommerce offers convenience to a city dweller how much more so to those outside of populated areas.  

The Next New

Today I am wondering what is the next new innovation in logistics that will be a game changer for the industry.  Is it widespread implementation of RFID (5c magic price), automation, new ways to transport?  On one hand technology continues to improve rapidly for ERP and software, on the other tools like RFID have been around for a long time.  Warehouse clearance heights go up but how many companies really take advantage of the extra cubes?  I am interested in hearing from supply chain experts on their thoughts.