March 2, 2017
The Internet of Things (IoT) is impacting businesses across industries in major ways. Given its weight, we’re introducing a blog series about the IoT and challenges it’s imposing on infrastructure and logistics. Topics covered will include warehousing, labor, transportation and technology.
The impact of growth in the IoT industry
The Internet of Things is impacting businesses across the world, and with connected devices increasing in number and strength, it’s taking the supply chain industry to new heights.
How so? Consider examples like Amazon Dash and Virtual Dash. IoT Products like these make shopping faster than ever, closing the gap between buyer and purchase. They’re driving retail replenishment, and they’re enabled by one-click order technology. Historically, Amazon’s patent on one-click has prevented others from getting in the game, but doors will open for competition when the patent expires this year. Soon, we’ll see more companies implementing one-click, which will enable even more connectivity across IoT devices and sales channels.
Product replenishment is only one area impacted by IoT innovation. Today, we’re seeing companies like Whirlpool and IBM partner with each other to leveraging data collected from connected appliances and use it understand how products are used and how they can be designed better.
All this is to say that the number of connected devices is increasing, but with it will come new challenges. According to Hotel News Resource, the IoT market is projected to grow from 28.4 billion in 2017 to 50.1 billion by 2020. However, marginal growth is predicted in terms of infrastructure expansion, so there may be a discrepancy between the growing demand of commerce and the capacity to support it.
How so? Consider examples like Amazon Dash and Virtual Dash. IoT Products like these make shopping faster than ever, closing the gap between buyer and purchase. They’re driving retail replenishment, and they’re enabled by one-click order technology. Historically, Amazon’s patent on one-click has prevented others from getting in the game, but doors will open for competition when the patent expires this year. Soon, we’ll see more companies implementing one-click, which will enable even more connectivity across IoT devices and sales channels.
Product replenishment is only one area impacted by IoT innovation. Today, we’re seeing companies like Whirlpool and IBM partner with each other to leveraging data collected from connected appliances and use it understand how products are used and how they can be designed better.
All this is to say that the number of connected devices is increasing, but with it will come new challenges. According to Hotel News Resource, the IoT market is projected to grow from 28.4 billion in 2017 to 50.1 billion by 2020. However, marginal growth is predicted in terms of infrastructure expansion, so there may be a discrepancy between the growing demand of commerce and the capacity to support it.
A look at the warehousing and storage market
Simply stated, empty space is becoming more limited and the demand for it continues to grow.
In Q4 2016, industrial vacancy was at 7.9% and that number is projected to drop down to 6.5% by Q4 2017. In large part, this can be attributed to direct-to-consumer fulfillment and the demand it’s pulling on previously vacant space. To help contextualize this, consider information from real estate investment group, Jones Lang LaSalle – in the past two years, they report ecommerce accounted for 61.2% of all fulfillment center leases larger than 500,000 square feet in the Indianapolis region (a well-established area for fulfillment facilities).
Coming back to the concern over IoT growth vs. infastructure capacity, the graph below shows total Retail eCommerce Sales against Revenue for Warehousing & Storage. Here we can see that ecommerce sales are growing at a steadier rate than warehouse and storage revenue right now, but starting in 2018, warehouse and storage revenue begins to climb. Combined with the knowledge that ecommerce is growing and vacant space is declining, it’s resonable to wonder if the spike in warehouse and storage revenue reflects a shortage of space and consequential price hikes.
(Source: Statista)
In the meantime, some companies with brick-and-mortar presences have gotten creative and found temporary workarounds to warehouse space issues by using retail stores as mini-fulfillment centers to supplement their established fulfillment facilities. However, large-scale fulfillment centers are still needed for optimized shipping methods, volume and more.
Warehousing and storage are components of broad infrastructure required to support the Internet of Things and its anticipated growth, and without careful consideration, there’s real potential for businesses to be challenged by the puzzle of demand and capacity in the coming years.
Stay tuned to continue following our thoughts on the impact of IoT innovation and the supply chain. In our next post, we’ll look at how IoT technology is impacting Labor Management & Safety.
In Q4 2016, industrial vacancy was at 7.9% and that number is projected to drop down to 6.5% by Q4 2017. In large part, this can be attributed to direct-to-consumer fulfillment and the demand it’s pulling on previously vacant space. To help contextualize this, consider information from real estate investment group, Jones Lang LaSalle – in the past two years, they report ecommerce accounted for 61.2% of all fulfillment center leases larger than 500,000 square feet in the Indianapolis region (a well-established area for fulfillment facilities).
Coming back to the concern over IoT growth vs. infastructure capacity, the graph below shows total Retail eCommerce Sales against Revenue for Warehousing & Storage. Here we can see that ecommerce sales are growing at a steadier rate than warehouse and storage revenue right now, but starting in 2018, warehouse and storage revenue begins to climb. Combined with the knowledge that ecommerce is growing and vacant space is declining, it’s resonable to wonder if the spike in warehouse and storage revenue reflects a shortage of space and consequential price hikes.
(Source: Statista)
In the meantime, some companies with brick-and-mortar presences have gotten creative and found temporary workarounds to warehouse space issues by using retail stores as mini-fulfillment centers to supplement their established fulfillment facilities. However, large-scale fulfillment centers are still needed for optimized shipping methods, volume and more.
Warehousing and storage are components of broad infrastructure required to support the Internet of Things and its anticipated growth, and without careful consideration, there’s real potential for businesses to be challenged by the puzzle of demand and capacity in the coming years.
Stay tuned to continue following our thoughts on the impact of IoT innovation and the supply chain. In our next post, we’ll look at how IoT technology is impacting Labor Management & Safety.