As global supply chains have been stalled by the coronavirus (COVID-19) pandemic, industrial sectors around the world are now aware of the weaknesses arising from the just-in-time inventory management strategy. Amid increased risks stemming from the resurgence of COVID-19 and trade war, the world's leading manufacturing companies have also begun to adjust their supply chain strategy by increasingly adopting the just-in-case inventory management system.
KResearch expects that supply chain management based on the just in case system will help boost demand for warehouse spaces in the industrial sector by approximately 69,000-165,000 square meters or 7.8-18.6 percent in 2021, as compared to those before the COVID-19 crisis, led by users in the electronic industry.
As a result, warehouse entrepreneurs catering to the industrial sector are advised to align their strategies with the needs of this customer segment by offering supplementary services such as vendor managed inventory (VMI) – an inventory delivery service to the customers' factories. Warehouse entrepreneurs can benefit from the VMI service as it can be offered to customers with a pooled warehouse. Meanwhile, aside from the enhanced efficiency in inventory management, the VMI service can boost income and build added value to the users, as well.
Regarding the overall picture of the warehouse business, it is not necessary to expand warehouse spaces in order to meet increased demand in the industrial sector at this time because the current warehouse spaces that have been rented out account for 84 percent of the total warehouse spaces. This means that there are sufficient warehouse spaces of about 719,000 square meters to meet the increased demand.
In addition, utilizing IT technology to create a business, using a pooled warehouse, will not only allow entrepreneurs to enhance the efficiency in inventory management, but also save their warehouse spaces, representing better options than just expanding warehouse spaces alone. It is projected that demand for warehouse spaces in the industrial sector as a result of the adoption of the just-in-case system will increase over the near term (1-5 years). However, there is risk, and it is not necessary to invest in expanding warehouse spaces over the long term (5-10 years) as there are some adjustments foreseen in global supply chains such as the relocation of production bases out of China.
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