The Warehousing Industry: Witnessing Digital Remastering
Over the past 200 odd years, the world has gone through four industrial revolutions. The first was Mechanical Production followed by Mass Production and then Automated Production. The fourth one, currently taking place, is termed as Intelligent Production, which encompasses the advent of technology; better known as Industry 4.0 (I4).
According to a recent CBRE report titled “Digitally Remastered - What Industry 4.0 means for Asia Pacific Industrial & Logistics Real Estate” until now, it hadn’t been necessary to distinguish between the Internet of People(IoP) and the Internet of Things(IoT). However, with internet-enabled devices having permeated all aspect of our lives our homes, workplaces and factories the IoT is becoming a new frontier for technological innovation and advancement. While, the IoP is already generating ever growing volumes of data, the growing presence of IoT will generate much more data that will need to be managed.
The Manufacturing sector continues to remain an important part of many major economies across Asia. In India, this segment has witnessed exponential growth over the past few years, emerging as a leading sector in the country’s economic growth. While policy initiatives and reforms are helping the market grow, the changes driven by I4 are likely to have a tremendous impact on not just our economy but the economies and societies in the region.
Factories catering to batch size-1 manufacturing would have to feature multiple smaller loading and unloading bays to facilitate the rapid loading and unloading of small quantities of orders
As the overall manufacturing supply chain becomes more automated and sophisticated, it is becoming critical for producers to understand how current technological trends affect their respective industries. Adopting I4 manufacturing methods will require significant enhancements to existing information technology (IT) infrastructure for many businesses. It is imperative for producers/manufacturers to take proactive measures to stay relevant and competitive in this every changing environment. The objective should not be simply to upgrade IT systems to the latest and greatest, but rather to understand how data and digitization will transform the design, production, sale and delivery of their goods.
What Does This Mean for Real Estate?
I4 will create an integrated value chain and drive robust demand for customized and modular facilities, which are able to accommodate a wide range of processes and uses.
The onset of I4 will shape decisions around building location, function and fit-out as occupiers select properties best suited to this new era of manufacturing and distribution, and developers & investors strive to ensure their buildings remain in demand.
The digitalization of production will require that all buildings be connected and networked. Hence, properties will need to be located in areas with good supporting infrastructure including data, energy and transport networks. Next-generation factories, particularly those using Cobotics, will require uninterrupted power supplies and internet connectivity.
Experiential factories will need to be accessible by public transport and have sufficient parking spaces for visitors. OmniChannel factories will need to be centrally located with good infrastructure to enable them to source resources from various suppliers as and when they are required. With I4 enabling companies to customize production, facilities are likely to shift away from speculative mass production and move towards demand-driven production closer to customers. Instead of a single or small number of large facilities, companies will operate more urban hubs and larger regional distribution centers. This trend is especially relevant to batch size one manufacturing facilities, which will be highly automated and located close to demand. Siting manufacturing and distribution facilities closer to customers would also reduce delivery times.
I4 will drive demand for facilities, with technological features enabling them to be digitized and networked with internal functions and elements. Smart buildings will be capable of autonomously controlling features such as lighting, air quality and water to suit products being stored or manufactured. Factories catering to batch size 1 manufacturing would have to feature multiple smaller loading and unloading bays to facilitate the rapid loading and unloading of small quantities of orders. Data-driven manufacturing facilities would require more space allocated for servers and mini data centers, and the cooling platforms supporting them. Large office and laboratory spaces would have to be included in nextgeneration factories to house data scientists, while experiential factories would require the installation of exhibition space to showcase manufacturing processes.
While, the development of I4 is still at a nascent stage, the advent of the digitally networked global economy is set to transform the parameters for industrial and logistics real estate in the years ahead. In this new era, reversibility and flexibility will be of critical importance.