Logistics: Top five tech trends

Logistics stands out as the property type most likely to benefit from the consequences of digital disruption. PERE assesses five emerging technological trends that could drive the sector in the coming years

1. Big data

Timescale: Happening now | Impact: High

Top tech change: big data will underpin relative demand assumptions

Shippers and logistics operators are already alive to the potential for mining useful information from the vast, unstructured data sets produced by the ever-increasing number of internet-connected devices people use. Some of the more obvious uses include examining data for insights into the movement of goods and vehicles to optimize route planning and delivery slots. However, big data can also provide information on customer preferences and behavior so that it is possible to predict what goods will be wanted in a particular location at a particular time. As more objects are linked to the internet, the potential for real-time analysis of data will continue to grow.

That has implications for the location and size of warehousing, because distributors of products will have less need for ‘buffer’ stock to ensure they can meet demand, and will be able to keep appropriate quantities of their products closer to the end consumer. “Retailers and their supply chains list that as their top technological change,” says Chris Caton, global head of research at Prologis. “Big data has the ability to change relative demand levels across locational requirements for national, regional, city and last last-mile distribution centers.”


2. Robotics/Automation

Timescale: Happening now | Impact: Medium*

Automation: edges us to a life of fulfillment

Automation has transformed factories, removing the need for hordes of low-skilled workers, and the same trend is playing out at an accelerated pace in logistics. Only a few years after retailers and logistics operators first began to trial robotic solutions for picking and packing, some warehouses have now become almost completely automatic. In September, Chinese e-commerce company JD trumpeted its first fully-automated fulfilment center in Shanghai, where machines handle 9,000 orders an hour, work that would usually be done by 180 humans.

The trend has already begun to change the shape of distribution buildings. Amazon’s automated facilities need to be built higher in order to accommodate several levels of robot-occupied mezzanine. Some argue increased automation will make the location of warehouses less sensitive to labor supply considerations. However, that may be trumped by other trends that are pushing distribution locations closer to the urban areas where swifter delivery to consumers is possible.

*For real estate; the consequences for employment may be more significant.


3. Augmented reality 

Timescale: Short term | Impact: Medium

AR: all about e-commerce

Systems that overlay an environment with computer-generated data have a number of applications that could be of benefit to logistics operators – pickers and drivers could be fed information about orders through glasses or headsets. However, the implications for logistics property rest largely upon the boost AR could provide to e-commerce. “AR will be important to the further energizing of e-commerce and its ability to gain greater penetration in sectors like apparel,” predicts Caton.

Clothing is one of the areas where traditional retailing still offers significant advantages over online shopping because customers can try the product for size. Apparel returns tend to be higher than for other categories of product ordered online. By using AR shoppers can view a virtual representation of how they look in a garment. Meanwhile, Ikea has developed an app that creates pictures of how furniture would look in your home. Amazon is getting in on the act too, launching a new feature called AR View that lets customers visualize online products in their own living space, including furniture, electronic and toys using their smartphone camera.


4. Blockchain

Timescale: Long term | Impact: Very high (maybe)

Blockchain: the distributed ledger is more relevant than cryptocurrencies right now

Sometimes referred to as ‘internet 2.0’, blockchain is the technology at the heart of cryptocurrencies like bitcoin, but it is the underlying, ‘distributed ledger’ technology which permits highly secure peer-to-peer transactions that could have the greatest impact upon logistics, as well as real estate – and some say many other areas of business and human interaction.

Applications of the technology are in their infancy, but blockchain’s advocates believe it could revolutionize global trade by cutting out middlemen and virtually eliminating fraud. For shippers, the technology promises to improve tracking and visibility across their supply chains. When combined with the internet it could enable the creation of an indelible electronic signature and history for each item traded with information about its whereabouts in real time.

“Once blockchain is fully embedded within the supply chain it will change the nature of logistics real estate and how it works,” forecasts Logan Smith, head of European logistics at BNP Paribas Real Estate. “For example, you could do dynamic routing so two trucks side by side on the highway could pull up to each other, swap loads, and keep going to their destinations.”


5. 3D Printing

Timescale: Medium term | Impact: Low

Not economic: 3D printing has not evolved sufficiently yet

One of the technologies most often singled out as over-hyped, 3D printing is still a long way off from developing into Star Trek style replicator technology, and it can only reproduce items composed of a limited number of materials. However, it is beginning to have an impact in business areas that require highly specialized parts, such as medical prosthetics. Distribution patterns and volumes for companies supplying complex and customized products are likely to change as they switch to a build-to-order model.

The technology may reduce the need to store large inventories of rarely-employed components, such as replacement parts for vintage cars, so spare-parts warehouses could become much smaller. Nonetheless, applications of the technology for large-scale distribution and manufacturing are limited by the costs involved. Unless there is a radical change in the underlying economics it will remain vastly cheaper to manufacture most commonplace items abroad and import them, even from the other side of the world, than to reproduce them with 3D printing.