Ben Ames has spent 20 years as a journalist since starting out as a daily newspaper reporter in Pennsylvania in 1995. From 1999 forward, he has focused on business and technology reporting for a number of trade journals, beginning when he joined Design News and Modern Materials Handling magazines. Ames is author of the trail guide "Hiking Massachusetts" and is a graduate of the Columbia School of Journalism.
Investors have shelved billions of dollars in construction projects since the Covid-19 pandemic and recession began in February, but the logistics sector has largely bucked that trend as companies continue to push a surge in new warehouse creation to handle booming e-commerce demand, according to a pair of studies released this week.
Counting all types of construction nationwide, builders doubled the value of projects they launched between the depths of the 2009 recession and the pre-Covid market peak in 2019, topping out last year at $853 billion worth of single family and multifamily housing, commercial projects, institutional building, manufacturing plants, public works, and electric power/utility sites.
The coronavirus stopped that trend abruptly, however, pushing the overall construction market into a steep decline that is forecast to tumble 14% in 2020 to $738 billion, according to “Dodge Construction Outlook 2021: Moving Forward on the Road to Recovery,” an economic report produced by New Jersey-based Dodge Data & Analytics, a market forecasting firm in the commercial construction sector.
But one exception stands out amid that sea of red ink, as warehouse starts are still expected to grow in 2020. Dodge defines warehouses as part of the larger “commercial” construction segment—alongside stores, offices, hotels, and parking garages—which is expected to fall 23% to $107 billion in 2020 before rebounding in 2021 with a 5% rise to $113 billion.
Likewise, a second report also found signs of a nascent economic recovery in logistics despite significant negative impacts on the retail and hospitality industries, which are particularly reliant on consumer spending and mobility, according to the latest “Global Real Estate Perspective” report from real restate firm Jones Lang LaSalle IP Inc. (JLL).
More specifically, warehouse growth is seeing spikes in certain specialty areas, such as an increase in last-mile logistics facilities as online retail grows, the conversion of retail facilities into logistics facilities in dense urban areas, and demand for cold-storage in the food & beverage and life sciences sectors. “Demand for logistics space has bounced back sharply, hitting record or near-record levels in several major global markets during the quarter. E-commerce companies have been particularly active, supported by increased consumer demand for online shopping,” the JLL report said.
Despite that optimism, the 2021 economic rebound could be delayed until later in the year if certain variables don’t line up, the Dodge report said. “Prospects for recovery in 2021 will be limited until a vaccine has been approved and has been widely adopted, a process that is expected to begin by mid-2021. The uncertainty surrounding further federal stimulus and growing budget gaps at state and local levels, however, cloud the outlook,” said report author Richard Branch, Dodge’s chief economist.
U.S. economy awaits second round of stimulus funds
Another wild card in the recovery will be federal stimulus funding, which made a significant impact on the economy beginning in March, when Congress passed the $1.7 trillion CARES Act—an acronym for Coronavirus Aid, Relief, and Economic Security—including the Paycheck Protection Program (PPP) and other loans and grants. That effect was temporary, however, as the fiscal boost provided by the CARES Act began to fade after income support programs within the act expired in July and the PPP ended in August, Dodge said.
The prospects for quick passage of a second large stimulus package now seem dim, based on November 4 election results that have split federal government control between a Democratic Biden Administration and House of Representatives and a Republican Senate. “Without the help provided by CARES funding, the economy is unlikely to regain significant forward traction until a vaccine has been approved and widely adopted across the United States,” the Dodge report found.
In the longer term, the researchers expect an additional $1.5 trillion of stimulus to be approved in the first quarter of 2021, helping the economy return to stronger growth in the second quarter of 2021. Yet even when that recovery occurs, the impact of the pandemic could have long-lasting implications for the retail industry, changing many of the supply chain patterns that have stood for decades, thanks to the closing of thousands of retail stores that failed to survive the recession.
“While brick and mortar is unlikely to disappear entirely, online shopping became a much more ingrained part of consumer purchasing behavior due to stay-at-home orders,” the Dodge report said. "A massive number of consumers clearly turned to online shopping to deal with the restrictions of Covid-19 in the second quarter. If this sea change in consumer behavior becomes a permanent phenomenon, the long-lasting effects of Covid-19 could mean further deterioration in retail construction starts in coming years.”
Despite the impact of those trends on retail stores, the accompanying rise in e-commerce has been good news for the warehouse construction needed to provide fulfillment for all those online orders.
Beginning at a low point of just 49 million square feet in 2010, warehouse starts increased by double-digit rates for seven consecutive years, resulting in an “amazing” 508% increase that brought starts up to 297 million square feet in 2017, the firm said. After a flat period in 2018, the hot curve resumed with 354 million square feet in 2019, and is forecast to resume that growth in 2021 with post-Covid projects led by a growing number of million-square-foot mega-warehouses built by amazon.com.
Penske said today that its facility in Channahon, Illinois, is now fully operational, and is predominantly powered by an onsite photovoltaic (PV) solar system, expected to generate roughly 80% of the building's energy needs at 200 KW capacity. Next, a Grand Rapids, Michigan, location will be also active in the coming months, and Penske's Linden, New Jersey, location is expected to go online in 2025.
And over the coming year, the Pennsylvania-based company will add seven more sites under its power purchase agreement with Sunrock Distributed Generation, retrofitting them with new PV solar systems which are expected to yield a total of roughly 600 KW of renewable energy. Those additional sites are all in California: Fresno, Hayward, La Mirada, National City, Riverside, San Diego, and San Leandro.
On average, four solar panel-powered Penske Truck Leasing facilities will generate an estimated 1-million-kilowatt hours (kWh) of renewable energy annually and will result in an emissions avoidance of 442 metric tons (MT) CO2e, which is equal to powering nearly 90 homes for one year.
"The initiative to install solar systems at our locations is a part of our company's LEED-certified facilities process," Ivet Taneva, Penske’s vice president of environmental affairs, said in a release. "Investing in solar has considerable economic impacts for our operations as well as the environmental benefits of further reducing emissions related to electricity use."
Overall, Penske Truck Leasing operates and maintains more than 437,000 vehicles and serves its customers from nearly 1,000 maintenance facilities and more than 2,500 truck rental locations across North America.
That challenge is one of the reasons that fewer shoppers overall are satisfied with their shopping experiences lately, Lincolnshire, Illinois-based Zebra said in its “17th Annual Global Shopper Study.”th Annual Global Shopper Study.” While 85% of shoppers last year were satisfied with both the in-store and online experiences, only 81% in 2024 are satisfied with the in-store experience and just 79% with online shopping.
In response, most retailers (78%) say they are investing in technology tools that can help both frontline workers and those watching operations from behind the scenes to minimize theft and loss, Zebra said.
Just 38% of retailers currently use AI-based prescriptive analytics for loss prevention, but a much larger 50% say they plan to use it in the next 1-3 years. That was followed by self-checkout cameras and sensors (45%), computer vision (46%), and RFID tags and readers (42%) that are planned for use within the next three years, specifically for loss prevention.
Those strategies could help improve the brick and mortar shopping experience, since 78% of shoppers say it’s annoying when products are locked up or secured within cases. Adding to that frustration is that it’s hard to find an associate while shopping in stores these days, according to 70% of consumers. In response, some just walk out; one in five shoppers has left a store without getting what they needed because a retail associate wasn’t available to help, an increase over the past two years.
The survey also identified additional frustrations faced by retailers and associates:
challenges with offering easy options for click-and-collect or returns, despite high shopper demand for them
the struggle to confirm current inventory and pricing
lingering labor shortages and increasing loss incidents, even as shoppers return to stores
“Many retailers are laying the groundwork to build a modern store experience,” Matt Guiste, Global Retail Technology Strategist, Zebra Technologies, said in a release. “They are investing in mobile and intelligent automation technologies to help inform operational decisions and enable associates to do the things that keep shoppers happy.”
The survey was administered online by Azure Knowledge Corporation and included 4,200 adult shoppers (age 18+), decision-makers, and associates, who replied to questions about the topics of shopper experience, device and technology usage, and delivery and fulfillment in store and online.
Supply chains are poised for accelerated adoption of mobile robots and drones as those technologies mature and companies focus on implementing artificial intelligence (AI) and automation across their logistics operations.
That’s according to data from Gartner’s Hype Cycle for Mobile Robots and Drones, released this week. The report shows that several mobile robotics technologies will mature over the next two to five years, and also identifies breakthrough and rising technologies set to have an impact further out.
Gartner’s Hype Cycle is a graphical depiction of a common pattern that arises with each new technology or innovation through five phases of maturity and adoption. Chief supply chain officers can use the research to find robotic solutions that meet their needs, according to Gartner.
Gartner, Inc.
The mobile robotic technologies set to mature over the next two to five years are: collaborative in-aisle picking robots, light-cargo delivery robots, autonomous mobile robots (AMRs) for transport, mobile robotic goods-to-person systems, and robotic cube storage systems.
“As organizations look to further improve logistic operations, support automation and augment humans in various jobs, supply chain leaders have turned to mobile robots to support their strategy,” Dwight Klappich, VP analyst and Gartner fellow with the Gartner Supply Chain practice, said in a statement announcing the findings. “Mobile robots are continuing to evolve, becoming more powerful and practical, thus paving the way for continued technology innovation.”
Technologies that are on the rise include autonomous data collection and inspection technologies, which are expected to deliver benefits over the next five to 10 years. These include solutions like indoor-flying drones, which utilize AI-enabled vision or RFID to help with time-consuming inventory management, inspection, and surveillance tasks. The technology can also alleviate safety concerns that arise in warehouses, such as workers counting inventory in hard-to-reach places.
“Automating labor-intensive tasks can provide notable benefits,” Klappich said. “With AI capabilities increasingly embedded in mobile robots and drones, the potential to function unaided and adapt to environments will make it possible to support a growing number of use cases.”
Humanoid robots—which resemble the human body in shape—are among the technologies in the breakthrough stage, meaning that they are expected to have a transformational effect on supply chains, but their mainstream adoption could take 10 years or more.
“For supply chains with high-volume and predictable processes, humanoid robots have the potential to enhance or supplement the supply chain workforce,” Klappich also said. “However, while the pace of innovation is encouraging, the industry is years away from general-purpose humanoid robots being used in more complex retail and industrial environments.”
An eight-year veteran of the Georgia company, Hakala will begin his new role on January 1, when the current CEO, Tero Peltomäki, will retire after a long and noteworthy career, continuing as a member of the board of directors, Cimcorp said.
According to Hakala, automation is an inevitable course in Cimcorp’s core sectors, and the company’s end-to-end capabilities will be crucial for clients’ success. In the past, both the tire and grocery retail industries have automated individual machines and parts of their operations. In recent years, automation has spread throughout the facilities, as companies want to be able to see their entire operation with one look, utilize analytics, optimize processes, and lead with data.
“Cimcorp has always grown by starting small in the new business segments. We’ve created one solution first, and as we’ve gained more knowledge of our clients’ challenges, we have been able to expand,” Hakala said in a release. “In every phase, we aim to bring our experience to the table and even challenge the client’s initial perspective. We are interested in what our client does and how it could be done better and more efficiently.”
Although many shoppers will
return to physical stores this holiday season, online shopping remains a driving force behind peak-season shipping challenges, especially when it comes to the last mile. Consumers still want fast, free shipping if they can get it—without any delays or disruptions to their holiday deliveries.
One disruptor that gets a lot of headlines this time of year is package theft—committed by so-called “porch pirates.” These are thieves who snatch parcels from front stairs, side porches, and driveways in neighborhoods across the country. The problem adds up to billions of dollars in stolen merchandise each year—not to mention headaches for shippers, parcel delivery companies, and, of course, consumers.
Given the scope of the problem, it’s no wonder online shoppers are worried about it—especially during holiday season. In its annual report on package theft trends, released in October, the
security-focused research and product review firm Security.org found that:
17% of Americans had a package stolen in the past three months, with the typical stolen parcel worth about $50. Some 44% said they’d had a package taken at some point in their life.
Package thieves poached more than $8 billion in merchandise over the past year.
18% of adults said they’d had a package stolen that contained a gift for someone else.
Ahead of the holiday season, 88% of adults said they were worried about theft of online purchases, with more than a quarter saying they were “extremely” or “very” concerned.
But it doesn’t have to be that way. There are some low-tech steps consumers can take to help guard against porch piracy along with some high-tech logistics-focused innovations in the pipeline that can protect deliveries in the last mile. First, some common-sense advice on avoiding package theft from the Security.org research:
Install a doorbell camera, which is a relatively low-cost deterrent.
Bring packages inside promptly or arrange to have them delivered to a secure location if no one will be at home.
Consider using click-and-collect options when possible.
If the retailer allows you to specify delivery-time windows, consider doing so to avoid having packages sit outside for extended periods.
These steps may sound basic, but they are by no means a given: Fewer than half of Americans consider the timing of deliveries, less than a third have a doorbell camera, and nearly one-fifth take no precautions to prevent package theft, according to the research.
Tech vendors are stepping up to help. One example is
Arrive AI, which develops smart mailboxes for last-mile delivery and pickup. The company says its Mailbox-as-a-Service (MaaS) platform will revolutionize the last mile by building a network of parcel-storage boxes that can be accessed by people, drones, or robots. In a nutshell: Packages are placed into a weatherproof box via drone, robot, driverless carrier, or traditional delivery method—and no one other than the rightful owner can access it.
Although the platform is still in development, the company already offers solutions for business clients looking to secure high-value deliveries and sensitive shipments. The health-care industry is one example: Arrive AI offers secure drone delivery of medical supplies, prescriptions, lab samples, and the like to hospitals and other health-care facilities. The platform provides real-time tracking, chain-of-custody controls, and theft-prevention features. Arrive is conducting short-term deployments between logistics companies and health-care partners now, according to a company spokesperson.
The MaaS solution has a pretty high cool factor. And the common-sense best practices just seem like solid advice. Maybe combining both is the key to a more secure last mile—during peak shipping season and throughout the year as well.