As manufacturers continue to weigh the costs of moving goods in today’s market, increases in labor, shipping, and fuel expenses are driving many global companies to bring production back to North America. The result is an increasing demand for industrial real estate in Southern California. 

Manufacturers and distributors are now increasingly seeking factory, warehouse and distribution space in Los Angeles, Orange County, and the Inland Empire in order to utilize local ports, as well as expanding class one double track rails from L.A. to the East coast.

While lower-end consumer products, such as apparel and toys, are still manufactured overseas, production of other items, such as instrumentation, devices, machinery and equipment, is moving closer to end users in the US. Much of this is because there is a lower tolerance for error when it comes to these products, which require process manufacturing. For example, the production of surgical equipment, such as laser technology for cataract surgery, must be extremely precise, or the repercussions could be enormous.

This is especially important in the current market, in which ecommerce fulfillment has become the norm. Traditionally, manufacturers would build a distribution center and analyze palate positions, then ship product to 10 customers in 200 locations, with perhaps 100 unique products.  Today, manufacturers are tasked with same day and next day fulfillment for anywhere from 10,000 to a million unique products, often shipping to up to 25 million customers per year.

For these manufacturers, it’s imperative to have a real estate professional who can assist with analyzing technology and locational considerations against inbound and outbound customer bases in order to make the right decisions.

The fact is, if we as commercial real estate professionals are doing are jobs well, we actually want to reduce the footprint of our industrial clients. This may appear counterintuitive to what people in our industry usually strive to do, which is to sell more square footage. However, by developing a deeper understanding of global logistics, we can advise our clients on innovative ways to minimize on-hand inventory, which reduces their need for fixed real estate assets.

In addition to advising clients, commercial real estate professionals who are well educated on supply chain issues will also be better able to identify the benefits and detriments of each location, specifically as they relate to moving inbound goods into the supply chain for the end customer. 

Depending on the product being manufactured or distributed, there are various modalities to transport goods, and by deepening our knowledge of ocean, air, and intermodal transport, we are better able to establish the right solutions, depending on the service metrics our clients are trying to achieve.

This leads to better alignment with all who are involved in real estate deal making, including the executive management team, the operations team on both the transportation and distribution side, and the manufacturing team. 

As manufacturing and distribution continues to expand and return to North America, industrial real estate professionals should seek educational opportunities to better understand our clients’ business from raw products to manufacturing to finished goods. With that understanding, we will ultimately be able to deliver better solutions.

I can’t think of anything that illustrates the human cost of doing business more than the tragedy this past April in Bangladesh. More than 1,100 men, women, and children died when the Rana Plaza building, which housed a number of garment factories, collapsed. Most were garment workers who were ordered by supervisors to report to work, even after inspectors deemed the building unsafe.

Millions of people around the world work in dangerous and unhealthy conditions, earning a nominal income to deliver the products we consume. While the factory collapse in Bangladesh is a terrible tragedy, it’s another wake-up call that business leaders need. We can no longer ignore the human side of our global supply chains. Now is the time for all of us to recognize and embrace social sustainability–much in the same way we’ve focused on environmental sustainability for the past 20 years–as a mission-critical way of doing business. By social sustainability, I mean investing in the livelihoods of farm and factory laborers, ending worker exploitation, and ensuring that there is ethical sourcing behind the things we buy.

SOCIAL SUSTAINABILITY HAS NEVER BEEN EASIER
The good news is that social sustainability has never been easier to practice. There is no lack of information, and no shortage of partners who can help you develop, implement and audit a business model that gets it right:

The Fair Labor Association conducted an in-depth investigation of factories in China operated by Foxconn, Apple’s biggest supplier. Both Apple and Foxconn have agreed to follow FLA guidelines to reduce working hours, protect pay, and improve working conditions.

United Farm Workers, Oxfam America, and Costco, in collaboration with many other organizations, have lent considerable muscle to develop and support the Equitable Food Initiative. One of the initial projects had California strawberry growers commit to training their workers and paying them higher wages as an incentive to practice a higher standard of food safety.

Green Mountain Coffee Roasters recently completed a two-year partnership with Fair Trade USA and USAID to educate small-scale coffee farmers in Brazil about environmental conservation and effective natural resource management.

By putting people back into business, we’re choosing a world where farmers and workers are able to fight poverty through better trading practices, work in safe conditions, and have access to adequate schooling, health care, and housing. When this happens on a large scale, social sustainability will no longer just be “good business,” it’ll be business as usual.

For the first time in memory, I’m hearing manufacturing people sound optimistic about facilities they want to build not just in Asia but also in the United States.

I feel it is time to rethink globalization. 

Five years after the near-collapse of the world’s largest economies, with Europe in crisis, the United States economy stalled, and China continuing its ascent as a growing economic power, it seems fair to ask, “Was Thomas Friedman correct in so heartily embracing the process of ‘flattening the world’ and convincing executives to lead, follow or get out of the way?”

Read the rest of the article at Industry Week: http://www.industryweek.com/expansion-management/expansion-management-myth-globalization

Until 2010, most of Lucky Brand’s jeans were made in the U.S. But after that, the company switched to manufacturing the vast majority of its goods in countries including China, Indonesia, and Mexico. Now, with parent company Fifth & Pacific reportedly in the final stages of selling the brand to private-equity firm Advent International, Lucky Brand announced it’s getting back into the made-in-America game.