The New Normal of Managing Corporate Real Estate Suppliers
The COVID-19 pandemic has disrupted the way we work, shop, and live. Almost overnight, companies around the world were forced to completely reassess how their employees continue their day-to-day job responsibilities while restructuring their real estate supply chains to consider resiliency along with efficiency and costs.
The pandemic is unique in that it has had a significant impact on service providers, retailers, and businesses independent of industry or geography. Underscoring this, a Resilience360 and Business Continuity Institute report titled, COVID-19: The Future of Supply Chains, highlights the overwhelming pandemic impact whereby 73 percent of organizations encountered a damaging effect on their supply side.
Such widespread impact has forced these same service providers, retailers, and businesses to accelerate their digital strategies by incorporating new, innovative software platforms to augment pre-existing roles or operations initiatives that historically required an on-site presence that may no longer be needed.
Agility is Paramount for Future Success
During such a unique time, and moving into the future, organization and supply-chain agility will no longer be a “nice to have” but, rather, a fundamental requirement for business resiliency and continuity. What does agility look like in corporate real estate (CRE) supply chains? It starts with fundamentally understanding a business’s real estate portfolio as well as the composition of assets that are directly tied to operational uptime, environment hygiene, location, and overall operating expenses.
While not a novel concept, the high degree of variability across portfolios and loss of building-asset information over time has resulted in many organizations lacking a fundamental understanding of their asset registries in terms of composition, age, forecasted expense, and other important site-specific data. To fully embrace a technology-enabled operations environment, companies must intimately understand their portfolio composition to truly unlock the various CRE-technology applications that are now widely available in the market.
Once technology-driven operations are enabled at a portfolio-wide scale, organizations will be in a position to clearly understand and predict future costs, to identify problem areas in real time as they occur (e.g., poor indoor air quality), and to assess areas of opportunity such as downsizing or space augmentation. Each of these opportunities garnered from a technology-enabled strategy allows a company to quickly develop a comprehensive plan that drives measurable impact to the organization’s bottom line while ensuring employee safety and health.
Resiliency is the Other Critical Factor
A key to success in safely reopening a workplace ties to the ability of an organization to track and manage who comes in and out of its workplace or business environment. Recognizing that fact, it’s equally as important to have a resilient supply chain that can maintain and service the critical assets and equipment within a CRE leader’s portfolio. But do CRE leaders know the impact of their tier-1 and -2 suppliers, and do they have a resilient plan for the future to ensure their corporate spaces will continue to function during the current and potential pandemics, threats, or disasters?
COVID-19 has not just affected the way CRE portfolios are managed but how companies source goods and services from their external supply chains.
Tier-1 suppliers are hired directly to deliver goods and services to a company. They engage and are reliant on tier-2 suppliers (e.g., subcontractors) to deliver their goods and services.
According to Dun & Bradstreet, of the Fortune 1000 companies, only 163 had tier-1 suppliers in the Wuhan region of China at the time of the outbreak while 938 had one or more tier-2 suppliers located there. Some CRE leaders look to their service providers to integrate services and have historically relied on them to manage subcontractors.
Given the potential for continued phases of workplace re-entry based on COVID-19, the reliance on a single, self-performing supplier becomes a risky proposition to a company’s supply chain. While there are hundreds of service providers that can serve a building and its occupants, there are few to no outsource providers that self-perform all services. The reliance percentage changes from service provider to service provider and market to market, globally. But if a company relies on a preferred partnership and does not have tested back-ups for each vendor, this becomes an unacceptable risk to a company’s supply chain.
To illustrate the point, according to the Federal Emergency Management Agency, 40 to 60 percent of all small businesses do not reopen following a disaster. If all of us were 100-percent reliant on receiving food from local restaurants, this would have been a challenge when we were asked to shelter in place. Many of us began or increased our usage of online marketplaces such as Amazon; we might move to the physical grocery stores as governmental restrictions loosen. The same scenario holds true for building-facilities services. The future will require companies to think two to three vendors deep for business continuity and resiliency. This will require the use of a real- time marketplace that can deliver just-in-time responses for needed services and with transparent pricing.
With the increased focus on resiliency, localization, and technology, we are also experiencing a heightened awareness on the increasing importance of diversity (e.g., minority-owned firms). Companies are increasing their spend to diversify suppliers given that they understand consumers make purchases that reflect their values and, in turn, share their purchasing habits on social media. Managing these complexities will be part of the new skills required for real estate managers.
As companies focus on business and digital transformation to help improve the bottom line, outsourcing, resiliency and technology are growing in importance. By tapping into the diverse and growing base of property-technology-related software platforms, organizations will gain the foresight and visibility to develop predictive-management strategies In partnership with technology-enabled operations, as companies restructure their supply chains to execute on the aforementioned go-forward strategies, marketplace- focused sourcing and supplier diversity will be key drivers in ensuring the agility and transparency required for the post-pandemic new normal. Such macro factors provide a good opportunity for CRE managers, technology leaders, and suppliers to open the dialogue of how to serve in both the short and long term.
