The Last Mile of the Distribution on Supply Chain
Industrial distribution facilities can generally be grouped into the following three categories:
1) Large, regional distribution facilities that have the ability to serve several markets and are often either located in coastal submarkets that have nearby access to ports or in more central submarkets that have close proximity to transportation infrastructure such as highways or railroads.
2) Mid-sized, market-centric distribution facilities that are typically located in outlying submarkets of a market and often have the ability to serve one to three densely populated markets.
3) Last-mile distribution facilities that are typically located in inner, urban submarkets and are designed to reach large populations within hours.
While the first two distribution facility categories described above generally handle the initial and middle stages of the overall distribution process, the last-mile facilities facilitate the final step of the distribution process (i.e. the point at which the package is finally delivered at theconsumer’s door). Due to the combination of continued growth in e- commerce sales and a general increase in consumer demand for shorter delivery times, e-commerce and logistics companies have become highlyfocused on building out this “last mile” of the supply chain.
In terms of specifications, last mile facilities tend to be smaller in size relative to regional and mid-sized distribution facilities as a result of land constraints in urban submarkets. Also, last mile facilities often have more limited building characteristics relative to larger, regional distribution facilities (i.e. a lower number of dock doors, lower clear height, etc.) as location is more important than functionality for last mile facilities. In terms of location, last mile facilities are typically located in the densest areas of markets with strong demographic trends. More specifically, last- mile facilities have historically been located in the top 25 U.S. markets (markets with an aggregate income of more than $100 billion(1)). Given the close proximity to the consumer, delivery times from these properties are typically measured in hours, and efficiency is measured by the time between the facility and consumer doorsteps.
1) Prologis Research. “The Modern Supply Chain: A New Model for Defining Logistics Real Estate.” September 2019.