Dan Benhamou, senior vice-president at Brookfield, explores the three “megatrends” shaping global supply chain infrastructure
The way the world works together to fulfil supply and demand through the movement of goods is constantly shifting, driven by the likes of changing geopolitical landscape, evolving consumer habits and the rising demand for more sustainable practices. This dynamic environment impacts supply chains and the infrastructure needed to support them. Especially since the pandemic, flexibility and resilience have become crucial characteristics of a modern successful supply chain.
From an investment perspective, we view three megatrends as fundamental in supply chain planning to adapt to the requirements demanded by an increasingly unstable global supply chain. These pillars are digitalisation, decarbonisation and deglobalisation.
Digitalisation
Logistics is set to be transformed on a global scale by digitalisation. It’s been trending for many years, but advances such as AI, robotics, drones and autonomous vehicles are set to change the game over the next cycle.
These emerging technologies are shaking up the logistics game, with automation being used to pick orders, for example, helping to drive greater efficiency in operations. Businesses should be planning for how digitalisation will impact their operations and how they can maximise the opportunities afforded by it.
We are seeing an acceleration towards more data-driven decision-making, with sensors picking up thousands of data points on location, temperature, humidity and more. While this mass of information was previously hard to interpret into decisions, artificial intelligence is enabling this to be decoded and translated into smart outcomes. We are already seeing surprising outcomes from this, such as the reworking of supply chains to locations that previously weren’t obviously beneficial.
Decarbonisation
The ultimate goal for this pillar is a transition to net zero throughout production, transportation and storage. This begins with the basics of renewable power generation, such as solar panel installations at warehouses and low-carbon fittings such as LED lightbulbs. However, a truly impactful decarbonisation strategy considers the supply chain more holistically.
Regionalised logistics parks, for example, are an emerging initiative as part of our planning, and an excellent driver of decarbonisation. At these major sites, where multiple tenants operate in one vicinity, adjacent warehouses can share energy-efficient infrastructure and resources such as heating and cooling systems, on-site solar power facilities and electric vehicle charging points.
In addition, parks create an ecosystem of tenants that fulfil different roles within the supply chains. When a company’s fulfilment warehouse is located at the same park as its transportation provider, the supply chain is shortened, thus reducing transport emissions.
Deglobalisation
The notion of shorter supply chains also ties into the third pillar of deglobalisation. While the world is very much still connected, geopolitical events, government regulations and incentives will not only impact how and where companies manufacture goods but also where the components and inventory are stored.
As a result, we are seeing many businesses pivot away from global supply chain strategies to build resilience and in Europe especially, this is trending towards regionalisation. For example, a major industry moving towards nearshoring is battery manufacturing. Rather than mega-factories in China, operations are becoming spread out across several European markets, which offers more overall protection against anything that may disrupt operations in one region.
There are significant challenges that come with migrating from a global supply chain strategy to a regional one. The change in strategy alters the flow of goods in the supply chain and the right infrastructure needs to be in place to support this – for example, storage and distribution centres for finished goods closer to consumer demand, or adequate storage for parts if manufacturing is being brought closer to home.
Leases on warehouses in Europe can be 10 to 20 years in length, and there is fierce competition for space as more companies start to explore regionalised supply chain strategies. Therefore, the shift requires a high level of planning to ensure the infrastructure is in place and suitable for the long term. We advise tenants to plan and secure space for where the company is forecast to be, rather than where it is right now.
Shaping the supply chain infrastructure of the future
Resilience within supply chains is firmly on the agenda for businesses, and likely to only become more important in coming years. With fulfilment efficiency and subsequently customer satisfaction, reputational benefits and increased sales on the line, the right infrastructure must be available to support this.
Focusing on the three Ds – digitalisation, decarbonisation and deglobalisation – will ensure that there is investment in infrastructure that supports the strong supply chain of the future. These supply chains will need to be data-informed and driven, low-carbon and resilient against global disruptions, allowing businesses to streamline the movement of their goods within their relevant markets.
