The Path Forward: Tackling Land Scarcity and Escalating Energy Costs Across Multiple Australian Industries

 Written by David Lamb, Consulting Manager, Dematic

A number of Australia's industries, spanning from food and beverage to retail, wholesalers, and spare parts, all face a dual challenge: land scarcity due to urbanisation and the relentless surge in energy expenses.

While these issues pose large barriers for these industries to overcome, they also create opportunities for innovation, enhanced efficiency, and ongoing sustainable practices. Against this backdrop, there is a need to explore strategic responses and new approaches to navigate both current challenges and future uncertainties.

Land Shortages: Maximising Efficiency in a Crowded Landscape

The phenomenon of urban sprawl, particularly along Australia’s eastern seaboard, has significantly impacted food and beverage, retail, wholesaler, and spare parts supply chains. With more than half of Australia’s population residing in just three cities on the eastern coast along with a significant spike in ecommerce, the demand for land in these urban centres has soared, creating severe land scarcity. As a comparison, in the UK or US this proportion of the population would instead be spread across approximately 9 and 27 cities respectively.

The situation is most acute in Sydney, where a CBRE report found that there was only a 0.2% vacancy rate for buildings of 5,000 square metres or more during the first six months of last year. This is the lowest rate recorded globally. CBRE said rents in Sydney are highest at $215 per square metres, compared to $119 per square metre in Melbourne, where the vacancy rate was also higher.

The congestion in Australia has not only inflated the cost of available land but has also necessitated a rethink in how suppliers manage their logistics and distribution networks to service increasing demands of their customers.

Innovative Solutions for Urban Congestion

Food and Beverage

When specifically focusing on grocery retailers, it becomes apparent that a high-density population combined with high real-estate costs has led to a transition to smaller footprint metro stores. This is so retailers can stay closer to their customers and better service their needs of convenience in our major cities.

The shift towards these smaller stores, with more distributed networks, requires strategically located facilities and the need of getting the most out of the limited land available. By co-locating and integrating warehouses with existing manufacturing sites, the food and beverage industry aims to streamline operations, reduce transportation needs, and ultimately mitigate the impacts of urban congestion.

When considering their logistics footprint, food and beverage suppliers must implement optimised solutions that not only enhance economies of scale but also maintain agility in response to fluctuating market demands, without sacrificing performance. It's imperative they leverage their existing land footprints to achieve increased storage capacity, heightened throughput, improved facility velocity and greater overall value, ensuring every square inch contributes to operational efficiency and effectiveness.

One leading solution used for this logistics requirement is an Automated Storage and Retrieval System (AS/RS), which offers a way to significantly enhance storage efficiency within the limited available space. Combined with the capability of automatically loading and unloading trucks, this solution provides a fast, accurate and cost-efficient storage and delivery solution.

Because automated warehouses do not need to accommodate manual access, they can be a high bay configuration that takes up less cubic space for the same amount of storage — typically 25% to 35% more storage density over traditional warehouses, and with heights typically 30 -35 m (and up to 45 m) then can deliver 200% increased storage in the same land footprint. An AS/RS provides the high-density, high-capacity storage for pallets in a fully automated solution and at a high speed, which also helps to reduce reliance on labour during a time of low worker availability. With an AS/RS solution, stock cannot be lost or forgotten, as the system provides complete and real-time visibility of overall inventory.

The Diageo AS/RS System in Huntingwood exemplifies this approach, integrating high-density warehousing right next to its Sydney manufacturing centre. This strategic move not only improves storage efficiency but also reduces the logistics footprint by eliminating the need for multiple storage locations, minimising truck movements and manual operational touches between facilities.

Retail, Wholesalers and Spare Parts

With the rise of ecommerce, consumers have grown accustomed to expedited shipping options, and many now expect their orders to arrive rapidly. As a result, retailers are increasingly using speed as a competitive differentiator. In markets like Korea, companies such as Coupang have set the bar high by offering lightning-fast 2-hour deliveries. This trend not only reflects the surging expectations of consumers but also serves as a glimpse into the future of retail logistics. As competition intensifies and consumer expectations continue to soar, the ability to deliver orders quickly, accurately, and reliably is vital for retailers seeking to stay ahead in the ever-evolving retail landscape.

Today, the strategic positioning of distribution centres close to stores and consumers has become a critical factor for success. This facilitates faster order fulfilment, streamlines transport and logistics, and reduces the need for extensive backroom store operations.

For wholesalers and spare parts operations, proximity to their business-to-business (B2B) customers is necessary to meet the demands of a quick turnaround market. Whether it's mechanics repairing vehicles, mining operations maintaining heavy machinery, or builders overseeing construction projects, the ability to access parts quickly is essential for ensuring uninterrupted operations. By locating distribution centres near their B2B customers, wholesalers can streamline their supply chains, reduce delivery times, and provide the level of service necessary to support their clients in meeting their own deadlines and commitments.

Retailers, as well as wholesalers and spare parts operations, are also further optimising their supply chain footprint, overcoming current labour availability challenges and ensuring that products reach their intended destinations quickly and efficiently, through automation. Solutions such as the Dematic Goods-to-Person (GTP) Multishuttle system, AutoStore™ systems, and Autonomous Mobile Robot (AMR) picking systems are capable of enabling high capacity eaches picking, which is ideal for retail, wholesale and spare parts distribution centres.

The choice between Dematic GTP-Multishuttle., AutoStore or AMR picking solutions depends on various factors, such as a company's business model, supply chain structure order profiles, products handled and constraints such as building footprint and height. For instance, businesses with very high order volumes may benefit from the fast throughput capabilities of GTP-Multishuttle solutions. Companies operating with limited warehouse space may find AutoStore's high storage density more suitable for their needs. While companies with limited headroom and high order volumes may benefit most from an AMR Bin-to-Picker, and those with lower order volumes most suited to an AMR Shelf-to-Person solution.

Rising Energy Costs: Embracing Efficiency and Sustainability

Another pressing challenge for supply chain operations across industries is the rise in energy costs. In recent years, wholesale energy prices have risen at record rates. The default market offers for 2023-24 determined by the Australian Energy Regulator (AER), increased by approximately 50%.

While the rate of increase for the current year isn’t as high as the peak that was seen in 2022, predictions for ongoing future rises in retail energy prices, coupled with the high energy consumption characteristic of these sectors, have highlighted the urgent need for more energy-efficient warehousing solutions.

This is particularly pertinent for cold chain logistics where energy efficiencies are lost due to footprint and ineffective use of the available cube.

The Path to Energy Efficiency

High bay warehouses in cold chain logistics environments represent a significant advancement towards addressing energy inefficiency. By optimising the use of cube and minimising overall footprint, these facilities can reduce energy consumption by more than 50% compared to traditional, larger footprint warehouses. Energy efficiency is achieved through maximising storage density in the cube, minimising open spaces, reducing energy lost through the floor and ceiling and deploying a lights out operation, with smart automation that can optimise energy consumption through on/off operation and electrical energy regeneration capability.

The move towards more energy-efficient warehousing solutions is not just about cost savings; it's also about positioning the Australian food and beverage industry as a leader in sustainable practices. With consumers increasingly valuing eco-friendly supply chains, the focus on energy efficiency serves as a key differentiator in the market, enhancing brand reputation and customer loyalty.

Leveraging Innovation and Efficiency to Overcome Challenges

As the food and beverage, retail, wholesaler and spare parts industries look to the future, they face a landscape marked by rapid change and increasing complexity. The challenges of land shortages and rising energy costs necessitate a strategic approach that balances immediate needs with long-term sustainability.

The pivot of these industries towards innovative storage solutions and energy-efficient practices highlights a commitment to overcoming these challenges through adaptability and foresight. By optimising the logistics footprint and embracing sustainable operations, the sector is not just responding to current challenges but is also preparing for the future.

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