Supply Chain Evolution, Multistory and Data Analysis at NAREIT’s Investor Forum
Thomas S. Olinger, Prologis’ chief financial officer, presented at REITWeek 2018, NAREIT’s Investor Forum in New York City. Olinger provided Prologis' near-term outlook, discussed major themes emerging in logistics and industrial real estate, and took questions from the audience.
One of Olinger’s key themes was the evolving supply chain. He spoke about the need for supply chains to respond to dynamic market expectations around timeliness. Consumer demand for next-day and same-day delivery is a significant catalyst of change across the supply chain, but there are factors beyond e-commerce at work. Rising expectations for service also drive change. He noted that Walmart recently tightened their supplier delivery window to two days. Additionally, consumers want a wider variety of product choices and expect retailers to have that broader array on hand.
Large retailers and third-party logistics companies are working to meet changing consumer expectations. Olinger noted that most supply chains were designed for delivery to retail stores, and distribution centers were as distant as a three-day drive from the stores they were designed to serve. “Ten years ago, that model worked,” observed Olinger. “Today, for the majority of our customers that doesn’t work. Most of our customers are looking for Last Touch™ distribution. They need to find the footprint to accelerate time to doorsteps and storefronts.” He pointed out that all of this is good for Prologis’ population-centric portfolio. Demand has never been stronger.
Olinger spoke of meeting increased demand with multistory developments in land-constrained markets near large population centers. Long popular in Japan, Prologis introduced the first modern multistory warehouse in the U.S. with Seattle’s Georgetown Crossroads. The company is also working on a multistory distribution center in San Francisco and exploring others in New York, New Jersey, Miami and Los Angeles. “When land value approaches 50 percent of building value, you have to go up” explained Olinger.
Prologis is also working on ways to analyze the data that flows through its warehouses. Currently in its early stages, Prologis’ advanced analytics efforts will provide predictive and actionable insight for customers, operations, capital deployment and third parties interested in digitization of the physical world.
Olinger’s 30-minute presentation was broadcast live and can be accessed via webcast through August, 2018.