In response to emergencies, companies seek out more distribution centers

A number of companies are now pursuing a new distribution center strategy in order to be better prepared for disasters and other disruptions:

Major storms like Hurricane Sandy and other unexpected events have prompted some companies to modify the popular just-in-time style of doing business, in which only small amounts of inventory are kept on hand, to fashion what is known as just-in-case management.v

The shift has led retailers and logistics companies to alter supply chains by adding distribution hubs, according to the CoStar Group, a real estate research firm in Washington. In turn, the hubs are creating real estate opportunities in markets on and off established distribution paths, including growth in markets outside the traditional seaport hubs on the East and West Coasts…

Just-in-case is a response to the vulnerability of just-in-time supply chains, said Rene Circ, CoStar’s director of industrial research. Since the 1990s, just-in-time has made sense for many companies looking to reduce the cost of keeping large inventories on hand. Technology enabled retailers and manufacturers to closely track and ship items to replace merchandise sold or components consumed in production…

The tendency toward numerous distribution facilities runs contrary to a strategy that was common just after the recession, when some companies sought efficiency by consolidating warehouse operations, according to Bob Martie, executive vice president for the New Jersey region at Colliers International, a real estate service provider.

Consumers may not pay much attention to this distribution chains. In fact, they may only really notice them when major events disrupt them. However, the distribution system is incredibly important for the American consumer economy. The reason products are on the shelves when consumers want them is due to this. Companies argue more efficient systems help them keep costs down. Better planning can reduce truck traffic on local roads.

This article adds another twist to the distribution center story: there is money to be made in distribution center real estate. Perhaps quite a bit of money.

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