EXAMPLE

MKT 4465 Current Event in Supply Chain Management

By Frank Thompson

SOURCE: Page, P. (April 20, 2016). The Wall Street Journal Logistics Report.

ARTICLE: Prologis warehouse rent jump as space remains tight. Whelan, R. April 19,

2016. The Wall Street Journal.

1. Article as reported in the WSJ Logistics Report:

Prologis Inc. isn’t about to upset the balance of power in a warehouse market that’s decidedly in

favor of building owners. The world’s largest owner of warehouses and distribution

centers counted a record 20.1% increase in rents in the first quarter, gains the

company attributes to extremely tight capacity in the face of rising demand, WSJ

Logistics Report’s Robbie Whelan writes. Even with vacancy rates approaching all-time lows,

however, Prologis expects to trim its 2016 construction budget to maintain its profitable

leverage in a seller’s market. That makes the company, and the broader warehouse business, an

outlier in a logistics sector where asset-owners have been coping with excess capacity and thin

margins in a range of operations. Brokerage firm CBRE Group Inc. says warehouse space in the

U.S. have gotten tighter for 24 straight quarters, a trend the industry’s biggest provider doesn’t

want to reverse.

2. Synopsis:

Using a third party to outsource warehousing is an option for companies that can increase

supply chain surplus provided it lowers costs to the company. With vacancy rates in

warehousing approach all-time lows one company is reducing its 2016 construction budget.

Prologis Inc. is the world largest owner of warehouse and distribution centers and will keep its

company’s inventory tight for 2016. This helps the company maintain a profitable leverage in a

seller’s market. For the past 24 straight quarters, the US warehouse market has gotten tighter

and by cutting back new construction, Prologis Inc. hopes to keep it that way.

3. How this is supply chain related:

As stated in the text, using third parties can increase supply chain surplus. It makes sense when

value for the customer is increased or the cost relative to a firm performing the task in-house is

reduced. Third party warehousing availability provides the company flexibility in logistics when

faced with uncertainty in demand. If availability of space continues to tighten the excess

capacity in the market will continue to decline and prices for space can start to increase (Chopra

and Meindl, 2016).

Also, warehouse availability involves the issue of response. E-commerce provides customers the

ability to make purchases any time of the day and with little physical effort (Colla and Lapoule,

2012). Consumers have come to expect a quick response time with the time between placing

orders and receiving merchandise (Chopra, 2003). Customers also expect complete deliveries

including all items ordered in satisfactory condition (Colla and Lapoule, 2012). Companies must

build such a competitive advantage to stay competitive to stay ahead of its competition (Kucera,

2013).

4. My thoughts:

E-commerce and customers’ expectations make having the product warehoused closer to the

customer imperative. As an example, Amazon is investing $13.9 in warehouse construction for

the very purpose of getting the product to the customer quicker (Kucera, 2013). Amazon is also

aware and attempting to stay ahead of competition from eBay and Walmart (Kucera, 2013).Not

all companies are the size nor have the resources these massive companies have. However, they

are still filled with customers’ expectations. Third party warehousing may be one solution.

Supply chain managers will need to monitor the situation and their competition closely. The use

of techniques such as decision trees can help in the decision making process. Through this,

decisions on whether to tie up longer term warehousing space or depend upon the spot market

option. With owners of warehouses such as Prologis Inc. looking at cutting back, availability of

space may become a greater challenge. As companies move more toward Internet sales and

quicker delivery, third party warehousing may be needed. If availability becomes tighter the

supply chain strategy and planning become even more important. Without it as competition

grows, a company could be left behind and left out.

5. References:

Chopra, S. (2003). Designing the distribution network in a supply chain. Transportation

Research Part E 39, 123-140.

Chopra, S. & Meindl, P. (2016). Supply Chain Management – Strategy, Planning, and

Operation. Sixth edition. Pearson.

Colla, E. & Lapoule, P. (2012). E-commerce: exploring the critical success factors. International

Journal of Retail & Distribution Management, 40(11). 842-864.

Kucera, D. (2013). Amazon ramps us $13.9 billion warehouse building spree. Bloomberg.

http://www.bloomberg.com/news/articles/2013-08-20/amazon-ramps-up-13-9-billion-

warehouse-building-spree.

The Current Event Explained

This information is found on the actual WSJ

Logistics Report. With this information the reader

can find the exact WSJ Logistics Report used for

the current event.

Information on the actual article as found in The

Wall Street Journal. You find the article by following

the blue link found in the WSJ Logistics Report

paragraph. Read the whole article.

This is the actual paragraph as found in the WSJ

Logistics Report. Copy it and paste it into your

current event assignment. This helps the reader

understand the subject of the current event. If this

is not there, the current event will not be

graded.

After reading the full article in The Wall Street

Journal, write a short synopsis of the article. It

should give more information that is found within

the WSJ Logistics Report paragraph.

What concepts of supply chain management are

included within this article? How does it relate to

our studies? Use outside sources to support your

thoughts. Be sure to cite these sources within the

current event.

In this section include your thoughts on the article

and on the topic presented. Support your thoughts

and opinions with outside sources being sure to cite

the source.

This is a list of outside references used to write your

current event. You are to support sections 3 and 4

with outside sources. Follow this format.

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