Industrial & Logistics: Moving toward a central role

A desire for improvement

Supply-chain inflation and economic instability are two of the primary facilities management (FM) procurement concerns facing industrial and logistics companies. However, organizational design is a key driver that is shaping procurement strategies for industrial and logistics enterprises.

Industrial assets are often part of geographically dispersed portfolios with autonomy from centralized real estate organizations. These enterprises can face a host of procurement challenges and often lack optimized processes for managing onsite assets like heating, ventilation and air conditioning (HVAC) or mechanical, electrical and plumbing (MEP) as well as services like cleaning, landscape/snow or waste management. This results in inconsistent capital expenditure plans, limited leverage with suppliers and little or no control of variable spend—all impacting the bottom line. Working to achieve greater alignment between procurement and FM teams can help reduce total lifecycle costs and support optimal maintenance strategies.

Decentralized industrial portfolios can amass thousands of supplier partners. This makes it difficult to maintain commercial compliance and category spend transparency, which increases risk and the amount of back-office support required. From the top down, supplier rationalization means value creation through standardization and a clearly communicated single vision for operations, with fewer operational hand-offs and reduced complexity.

Manufacturers tend to have an excellent understanding of input expenses and expect their providers to operate similarly. However, suppliers often seek substantial assistance to offset economic challenges. Understanding individual cost inputs, scope modeling and optimizing ways of working helps align procurement and FM teams to combat inflationary pressures.

ESG imperatives

Environmental, social, and governance (ESG) regulations are becoming increasingly stringent, and organizations are under pressure to demonstrate tangible progress toward decarbonization. Indirect emissions (Scope 3) include supply chain components and tend to be the largest part of a company’s carbon footprint.

In this sector, ESG concerns are significantly increasing. The task of scoping and benchmarking major sites for ESG is a significant undertaking, and enterprises that lack the necessary expertise often prefer to focus on their corporate administrative areas. With many industrial and logistics companies having the transportation of goods as a core competency, achieving carbon neutrality is particularly challenging.

Attention to ESG initiatives creates an opportunity for FM procurement to demonstrate leadership on achieving emissions reductions in line with corporate objectives at the industrial asset level. Scope 3 emissions reporting, greener sourcing, and vetted supplier networks that align with ESG criteria are just a few of the ways FM procurement teams can deliver desired outcomes for their organization.

Supplier diversity, often viewed as an important component of ESG, is also a growing focus for many industrial companies. New manufacturing sites are often located in rural areas, and the choices an organization makes will likely have a big impact on local communities.

Companies have been employing various strategies to increase supplier diversity, including outreach events, supplier mentoring programs and monitoring Request for Proposal (RFx) events to ensure diverse-supplier inclusion. In addition, many companies are expanding their diversity goals each year to provide a new baseline for reaching and surpassing diverse-supplier objectives.

A bigger role for procurement

While procurement teams can be strategic business partners for industrial companies, there is considerable variance within the sector in how well the strategies of these teams are aligned with corporate real estate strategies. Procurement was once largely siloed, but this has begun to change. More and more, procurement influences the most impactful decisions: What equipment should manufacturers invest in and when? Which suppliers and what contract terms afford the best long-term solutions? How can aging industrial assets best be maintained?

Business leaders are paying closer attention to their real estate portfolios because the built environment helps to drive supply chains, sustainability goals, cost savings and company culture. FM procurement is critical for achieving these objectives and maintaining operational efficiency amid supply chain disruptions and heightened concerns about economic stability and growth.

As FM procurement leaders seek to improve their relationships with their CRE clients, they must provide the subject matter expertise to re-design and optimize services while achieving aligned results. Taking that approach is most effective for driving cost savings, quality, and innovation while ensuring the best outcomes and long-term value creation for the individual industrial assets and overall organization.

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CBRE represents the world's largest industrial real estate platform and assists our industrial clients with managing over 9,000 sites globally and well over $500 million in third-party supplier FM services spend.