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Disruption in the Supply Chain

I’ve used this space to speculate about potential looming changes in the corporate office environment. Once we get beyond this pandemic, does everyone then go back to the office, or is remote work the new normal? Recently, I’ve been reading more about emerging trends poised to disrupt the warehouse and distribution sector.

An August 3 article by John Boyd highlighted five trends he’s seeing in this sector directly resulting from the pandemic.

  • Move Toward ReshoringReshoring manufacturing supply chains from China back to the U.S. has been a trend since this administration cut taxes, but we expect the pace of this supply chain realignment to pick up even more now. We also expect warehouse site selection within the U.S. will become less ‘port centric’ and more oriented to the dynamics of domestic production and consumption.
  • Weakened EconomyCompanies will likely be keeping a closer eye on cost efficiencies and operating costs due to financial impacts of COVID-19. As a result, companies may favor cities and states with more favorable tax regimes for their supply chain facilities.
  • Growing Role of Risk Management– Manufacturing companies have always been aware of the importance of risk management, but the pandemic will greatly expand the boundaries of risk management and its role in site selection. It will now need to include a range of COVID-related considerations.
  • Rising Importance of the Cold Chain– Cold storage was already on the rise before COVID-19, but now, we are seeing unprecedented interest in the cold chain from investors and site-seeking industries like pharmaceutical and food. Additionally, pharmaceutical and biotechnology firms are developing a wide range of new products that rely on cold storage throughout the entire supply chain.    
  • Technology and Connectivity Driving ChangeCOVID-19 is also causing for a spike in warehouse automation. Greater use of robotics will also be encouraged by the COVID-19-driven reshoring of manufacturing and supply chain facilities back to the U.S.

Following that was an August 6 article announcing LINK, a partnership between Innovation Endeavors and Sidewalk Infrastructure Partners to address what they see as a long-standing problem: supply chains operate as disparate, disconnected nodes rather than as a cohesive and collaborative ecosystem. Their hypothesis is that, if companies are brought together to collaborate around shared data and information, leverage predictive technology and deploy novel designs and infrastructure, they can create a supply chain that is both resilient and efficient while meeting the needs of rapid, online delivery.

And then on August 10, a Wall Street Journal headline, Amazon and Mall Operator Look at Turning Sears, J.C. Penney Stores Into Fulfillment Centers. The largest mall owner in the U.S. has been in talks with Amazon about turning anchor mall department stores into distribution hubs.  

Those are just three articles in one week that I’ve happened to see. The jury’s still out on lasting changes to the office environment, but I think it’s safe to say the logistics/distribution space may never be the same. Greater St. Louis, including both sides of the Mississippi River, is ideally suited for reshored manufacturing operations and the reconfigured distribution networks outlined in the articles referenced above. It won’t be long until more companies with plans to diversify their supply chain set their sights on becoming STLMade. In fact, we’re already talking with several about active projects for our region.

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