Distribution 2021 Outlook

Distribution 2021 Outlook

Featuring Bill Mahoney, EVP, Chief Commercial Officer

What will be in store for the distribution industry in 2021?

In 2021 we will always have some space, but I think overall the business will continue to be fairly tight. The real estate market also remained fairly tight and I think 2021 will be a good year where buildings will be mostly full with high turning levels of inventory. NFI is very excited to look to grow by hopefully another 10% in this business line for next year. We’re pushing forward with a strategic goal of getting to a 100 million square feet over the next three to five years, and we’re pretty optimistic about having the chance to do that. Post-pandemic in the back half of 2021, I really don’t think that shippers will look to reduce inventories. I think that consumers will continue to have high demand. I think the shippers will find a way to put more inventory in more locations. So, I’m pretty excited about this business line’s opportunity to continue its growth, which it’s been on for the last five to seven years for NFI.

How do you think warehouses will evolve in 2021?

I think NFI is going to continue to invest in its campus strategy. We have been the recipient of so many different benefits of having large campuses; providing our employees opportunities to advance, get further training, and develop their career. These campuses have allowed us to create some fantastic cultures out in the market. Campus locations like we have in the Lehigh Valley in Eastern Pennsylvania, as well as Southern California for the Inland Empire with locations like Chino, Ontario, and others in Perris, have provided us an opportunity to really grow much larger than we probably anticipated we could. I see NFI really investing in those campuses, developing as we are today in Chicago, Dallas, and Orlando, and really finding a way to continue to expand. That has provided us the chance to help those customers react quickly, bring more tools to the table, and have an opportunity to do it faster, better, cheaper, which is something our customers will ask us for every day.

Geographically, where do you think shippers will be looking to expand their networks?

You know, I think the jury’s still out to a certain extent. We all realize that there’s many different development projects underway. That seemed to be the growing trend for a period of time, but we’re getting far more phone calls from customers looking to store sizable amounts of inventory in a region than we’re getting for shippers looking to store small amounts of inventory in an urban city center, where somebody can order today and have delivery in an hour. That, I believe, is going to be the long-term lasting effect of COVID; that maybe we don’t need delivery in an hour, maybe we don’t need to fly and go to that meeting tomorrow, maybe we can live in an environment where we can be a little bit more patient. Obviously we realized in our space and our business, because of the strength of our people, we could operate pretty remote from the rest of the organization and communicate on video and phone. I think a lot of that is yet to be determined, but there’s no doubt there’s still development underway and I think that it will just be another piece of the overall omnichannel solution. There’s no doubt that we’ll continue to see growth in the warehousing division of NFI with manufacturers building large amounts of inventory in regional distribution centers (DCs), fulfilling the network of their customers throughout the country, not just necessarily 100 different fulfillment centers located right on top of the population base.

What advice would you give shippers in 2021?

Don’t run out of inventory. Don’t be the one on the news that the consumer is in the store and they can’t find your product on the shelf. I would tell them to think hard about SKU rationalization; maybe you don’t need to offer every possible item in the world to your customer, but make sure the one item they really want you have enough of it, and I would tell them to focus on capturing the sale. Pick smart providers, pick good providers, ones that are going to stand behind you when it counts the most. That will continue to be something that I emphasize in our new engagements, as we learn new shippers and new customers and really sell our services to them, is be one of the success stories. Be the shipper that talks about the 3PL that you picked that stood behind you when you needed them the most. And I think that we will ultimately be grateful to our customers for standing behind us and standing with us, as we supported each other during these times.

How should shippers navigate needing additional space in a tight market?

Work with the providers that can provide scale. I think that with scale comes more flexibility, both as a warehouse provider, as well as a carrier. I think that’s something we leverage and we should leverage that being in the upper echelon of providers in our space, capacity will be tight, but I think we’re in a situation working proactively with our customers that we’re able to leverage space. They may be committed to, but not necessarily in need of, space for short periods of time, and that creates an opportunity to gain share; provide that customer with a solution in someone else’s building. We’re able to take the best opportunity to lower one customer’s cost and help provide flexibility to the other.

How do you think shippers will adjust their networks moving forward?

I think order lead time will change. There is so much more product moving direct to consumer right now that you’re probably going to have to allow more time. You’re going to see a lot of shippers basically putting restrictions on their customers. They’re putting limiting factors on how much they can order and when they can deliver by. So I think this patient type of new reality is going to be something that just changes the overall supply chain and those operations in some cases are going to probably benefit because there’ll be a little bit more of an opportunity to do it at a cheaper rate.

How do you see NFI helping shippers this year?

I think trying to be predictive of what they think. One of your earlier questions was us predicting what we think 2021 is going to look like. Shippers are going to ask us that question a lot. What’s the freight market going to look like? Is there going to be available space for my inventory in the market? I think we’re going to work collaboratively with them, give the best possible guidance and advice we can, and do the best we can to figure out if they have the right inventory in the right location, and if there is enough of it. Those will be three discussions I think we have with all of our distribution customers next year.

In 2021, how do you think labor will factor in as shippers are looking for providers to service their needs and to grow with them?

I think from a labor perspective, employees have a lot of choices. There’s a lot of needs in this market right now for quality employees that are going to add value to the organization. I think providing an opportunity first and foremost for development, for training, and for advancement. So I think you’ll find he who holds the labor is going to necessarily not just be challenged to attract the labor, but is going to be challenged to retain that labor. We want to have cross-trained, educated talent in our customer’s business, but as that employee continues to develop and more employees get to know that customer’s business, it transcends down throughout the organization. Eventually that customer is getting the best possible experience that we can provide them. 

We will overcommunicate our growth. We believe that that’s a differentiator in the market. You grow and double the size of the business, you provide that employee an opportunity to move up, become management and move up through a regional organization chart, and that’s going to be a way that we try to compete for that labor. I think being flexible and offering different days and different hours, all of that type of labor scheduling, that’ll be a way that we differentiate NFI in the future and we’re working on it today. And I think we’re seeing great returns, which is why we’re able to grow at a rate that our competition can’t. 

What opportunities do you see for cross-docking in 2021?

We’re pretty excited about the fact that business order cycles continue to shrink, cross-docking or some type of inbound consolidation that needs to occur, occur in the market. As this consolidation occurs on docks, NFI then turns around and handles that delivery out to a specific distribution center on behalf of the customer. Cross-docking or mode conversion provides another chance for NFI to serve part of the supply chain for our customers. We’re going to expect cross-docking to grow in the future because customers are offering more vendors more manufacturing of goods, and in the retail market specifically, cross-docks are where we can collect all of these inbounds, and in some cases do DC bypass for some mass retailers. We’ll continue to look to sell more cross-dock business out in the market. We recently opened up a new location in Columbus, Ohio and have another four or five already scheduled for next year, with NFI managing the transportation inbound to the cross-dock from various vendors and suppliers, consolidating it on dock, and then handling delivery to a store or distribution center. 

What is on the horizon for reverse logistics in 2021?

We believe there will be significant growth with reverse logistics, especially as e-commerce grows, and we intend to play a major role in that space. We are today, with many of our different DCs, the single node or the single location handling all channels that a customer sells through, and those returns come back to the DCs. So we’ll look to process those returns faster, better, cheaper, with more accuracy. ]Processing their returns faster helps our customers’ businesses grow, because ultimately disposing of that product, albeit back to a store shelf or sold on a secondary market, helps them find a way to move it quicker, not store it somewhere where it can’t be sold. So reverse logistics will be a growth category for us and in the very near future. 

What are you most excited about when it comes to distribution in 2021?

What I’m most excited about as the leader of the Sales and Account Management team is, as we spend most of our time engaging with our clients, always having the confidence that we can meet the challenges and the demand that our customers need us to. So I’m excited that the division is really positioned well for growth. I’m excited with the growth of taking on the Cal Cartage businesses and their expertise in e-commerce and direct fulfillment, direct-to-consumer type business that they have today, that really rounds out our portfolio. There is not a good that we cannot handle in our network successfully today and that division has built such a robust structure that is going to support the new business startups and growth of its existing business. I’m pretty excited to watch it grow very quickly and I know my team is, too.

Joining the company in 2001, Bill Mahoney is the EVP, Chief Commercial Officer at NFI. He helps to design comprehensive supply chain solutions for existing and prospective customers.