If you have been following Amazon news over the last couple of years, you may have seen articles discussing the internet giant buying abandoned malls. This is certainly ironic, as Amazon is the primary reason these malls are abandoned in the first place, but Amazon’s goal is to turn these into last-mile logistics centers to offer customers even greater service, as these facilities are typically located in dense population areas and can provide Amazon with more generous coverage of next-day and same-day service. Another benefit of locating in these areas is closer access to labor pools, which is the lifeblood of these facilities. E-commerce facility growth in the U.S. and its strain on labor and industrial real-estate availabilities have been one of the biggest drivers in the work that St. Onge Company has been doing to help our clients develop their network strategy.
Modeling for these types of “micro-logistics” or “last-mile” networks is very different from modeling a nationwide distribution network. My experience with these types of projects is kind of like the game show “Jeopardy,” where you know the answer first and you need to figure out the question. This is because the “answer” usually involves an existing, available location (e.g., an abandoned mall), and you need to do the analysis to determine how this facility can be best used to serve your purpose. These locations are often even multi-floor buildings, which require extensive facility design engineering to meet your needs. A few years ago, companies would not have considered such facilities, but the geographic locations are so favorable, and prime distribution space is so scarce that many companies are giving these buildings a hard look.
As for the analysis itself, a combination of network and route optimization tools might make sense. The network optimization tools can help narrow down options on the front end, while the route optimization tools can help with some of the more detailed transportation costing elements that ultimately feed the final recommendation. Either way, many factors come into play that typically will not be involved in a larger scale network optimization project. Recently, we completed an analysis for a specific location on Staten Island in New York City. This facility would be responsible for delivery to the five New York City boroughs (The Bronx, Brooklyn, Manhattan, Queens, and Staten Island). Some of the factors involved included:
No matter the geographic market, these types of micro-logistics or “last-mile” studies are the next phase of modeling in an ever-changing, more constrained, and more demanding supply chain market.
—John McDermott, St. Onge Company