How Cloud and Fiber in Industrial CRE are Transforming Supply Chain Site Selection

by | 07 May 2019

As the world of the logistics user is changing, cloud technologies are becoming increasingly intertwined with logistics. Forbes reported via Forrester that in 2018, nearly 60% of all North American enterprises relied on public cloud platforms — and in 2019, that number is expected to grow even higher.

For decades, industrial operations have utilized software systems housed directly within the physical building. Today, these software and operating systems are more often accessed through fiber-optic networks that plug into the cloud for serverless computing.

Historically, industrial commercial real estate (CRE) decisions were based primarily on physical factors such as clear height, transportation cost and utilities — but now, fiber connectivity is just as important. Factors like network availability, capacity, cost and quality must be considered to keep pace for current and future operations. Disruptors in the form of cloud-based operating systems and warehouse management software are changing the supply chain in real time.

Here, we examine how cloud and fiber connectivity affects industrial CRE, and why that matters to business leaders and CRE advisors when evaluating and selecting properties. Colliers International prioritizes tangible innovations that bridge industrial CRE and technology. Solutions like these are necessary to serve an evolving supply chain and clients and customers who require more, faster.

Industrial CRE Site Selection for Changing Tech Needs

Traditionally, in-house operating systems were used to fulfill customer orders remotely. Now, advanced industrial distribution networks offer a competitive advantage as they allow suppliers to meet demand and delight customers with greater inventory availability and faster deliveries.

E-commerce order fulfillment is now tracked by order management systems, which require a centralized, real-time view of inventory from multiple locations — and operate through the cloud. The “brain” that determines where to stock inventory and how best to fulfill consumer demand is often positioned on software platforms that reside in the cloud. As businesses adopt cloud-based services, data visibility and analytics become a key consideration.

For example, when a customer places an e-commerce order, an off-site, cloud-based system communicates an action to an industrial warehouse site. Once that action order has been deployed, the customer can track the order’s progress through various nodes in the industrial site. All of this relies on reliable fiber connectivity to communicate back and forth between the cloud and the warehouse, and then the customer, meaning the system must gather the necessary data and have it readily available. The supply chain is changing rapidly to become far more consumer-centric.

Thus, being able to connect from an industrial distribution center to the cloud via fiber is becoming an increasingly critical differentiator when evaluating industrial site options. Firms must consider network speed in site selection as their businesses become more digital, because network speed directly impacts operational efficiency. Operational and decision-making software programs employ actions that affect fulfillment and distribution operations in real time.

To explore this idea further, look to a recent client who manages fulfillment operations across all their industrial sites using cloud-based software. This software requires constant, high-quality, reliable network connectivity for each industrial site to operate. The client is in the process of establishing 20 new industrial locations with a bold, demanding timeframe. Colliers has leveraged resources and expertise — including our own in-house systems for data collection and analysis — to quickly evaluate the availability, quality, speed and cost of fiber at multiple locations.

While helping this client select industrial locations in their first three markets, we were able to eliminate 40% of the potential locations very early in the site selection process, because they did not meet the organization’s fiber infrastructure requirements. This led directly to a more efficient use of time and resources for everyone involved.

Because Colliers’ advisors can identify properties that meet the cloud and fiber needs of our clients without a costly trial-and-error period, site selection time is reduced significantly and clients can occupy their chosen industrial properties sooner, creating a more rapid delivery of capacity to serve customers. This is the differentiator behind Colliers’ Technology Solutions team.

Evolving Tech Services for a Changing CRE Landscape

Luke Denmon, senior vice president of the Technology Solutions team, is an expert in bridging the intersection of technology and CRE. He uses his industry experience and relationships to negotiate network services and quickly eliminate sites that don’t provide the necessary network infrastructure.

Luke and his colleagues know that the needs of the typical industrial CRE tenant have changed. This new generation of industrial business requires expanded data and technology services.

Technology solution services like network procurement are just the beginning of an evolving industry with demands that go beyond the four physical walls of a property. Tech solution services for industrial CRE can involve securing everything from basic copper phone lines to dual-path fiber-optic circuits. A changing CRE landscape demands an advisor who can coordinate network services at specific geographic points, to ensure the availability of a network solution that fits an industrial user’s various needs.

Harvard Business Review identifies that cloud-based services are laying the groundwork for AI and automation to gain traction. Deloitte reports that the serverless nature of automation will affect the labor market for the next generation. It’s clear that automation is truly the future, and cloud and fiber-enhanced facilities are poised to enable new technology to take flight. In the meantime, the day-to-day, functional operations of industrial users must be completely integrated with new cloud and fiber solutions, allowing industrial organizations to become leaders in their sectors.

Industrial used to just mean industrial — warehouse and warehouse equipment — but now, industrial warehouses are just as much about the technology that industries are using. Assessing a property’s fiber and network connectivity options before setting up shop in that site allows for faster, more efficient warehouse computing.

About the author:

Todd Steffen is a Chicago-based vice president of Supply Chain & Logistics. Todd partners with Colliers’ advisors to provide supply chain consulting services ranging from strategic capability assessments and development to operational guidance on inventory management, transportation, procurement and omni-channel distribution network optimization. Todd brings more than 25 years of large-scale supply chain expertise and worked for leading companies such as EY and Walgreens.