Canada’s Retail Supply Chain Network Strained and Warehouses Full Amid Increased E-Commerce

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Canada’s retail supply chain network may be under strain right now due to the demand created by the COVID-19 pandemic, but for the most part, it has navigated through these turbulent and uncharted waters quite well according to one expert.

Marshall Toner, Managing Director and National Lead, Industrial – Canada for commercial real estate firm JLL, said that essential services are putting a strain on the Canadian supply chain system.

“If we look at any of our belongings at home, they are delivered by truck,” said Toner. “Keeping our drivers’ health and safety is paramount right now – otherwise the goods don’t move, even if they are available, especially when it comes to essential products.”

MARSHALL TONER

Toner emphasized that the supply chains have been doing an exceptional job at keeping grocers stocked up. He said that so far, there haven’t been apparent product shortages and that while some brands or high quantities may not be available at all times, customers are generally able to find what they are looking for.

Despite this, the outlook for non-essential products differs. Toner explained that products that are currently experiencing low or no demand may cause supply chain back-ups at multiple levels, and that suppliers may see shortages in warehouse space as manufacturers continue to ship out their stock.

Toner said, “We’re still fairly early in the outbreak to determine its impact on the supply chain network. There are no trends or historical data to compare the current situation to.”

“Usually we can base our predictions on events that have occurred in the past. In this case, there is no past event that I know of that we can use as precedent. Things change daily. People in charge of supply chain networks in Canada have done an admirable job of keeping supplies where they need to be, given the vast extremes of our country.”

Toner went on to clarify that early in the pandemic, there were some products that customers couldn’t find or were more challenging to get, but he hasn’t heard that complaint lately. “I think it’s a bit of a “wait-and-see” effect,” said Toner. “For every month this situation goes on, we’ll get a clearer idea on how our supply chain network is doing and where the strains are going to be – either at that given time, or into the future.”

Prior to the outbreak of COVID-19, the industrial real estate market across Canada was quite strong, particularly in Vancouver and Toronto, where vacancy rates were of about one percent or less. Montreal, Calgary, and Edmonton also all had pretty healthy markets.

Toner said that when Canada approaches some level of normalcy again following the pandemic, there will be a demand on the supply chain system because non-essential goods will begin to flow again.

What will companies learn through the current situation about their supply chain networks going forward?

“That’s really hard to pinpoint because I think every industry is likely looking to answer that question through a different lens,” said Toner. “In terms of essential service goods, I would say it could influence where we’re sourcing goods from or looking at having more than one supplier.”

When asked how the COVID-19 situation has affected buying patterns, he said, “We don’t know what the buying patterns are going to be like, I think it’s too early to tell. If we trend towards normalcy sooner than later, that will have an effect on how buying habits are either going to remain the same, alter, or totally change overtime. I don’t think anyone has the answer for that.”

Toner explained that companies with an e-commerce base that offer any kind of essential services are doing well now, and that their business has probably picked up. He suggested that they are probably going to see a change in the way their distribution or supply chain network works in order to meet the demand.

Toner said that overall, the supply chain network has done an excellent job of keeping the goods moving and available for consumers despite the challenges presented by the current COVID-19 crisis.

Looking forward, retail experts have suggested that many consumers have increasingly turned to online shopping, and perhaps have developed habits that will remain with them in the long term. This could impact the industrial real estate market of the future, with the availability of warehouse and distribution centre space becoming even more important.

JLL’s recent Q1 industrial research reports note that the Canadian Industrial market entered 2020 with sub three percent vacancy, double-digit rent growth, and a notable uptick in construction activity.

While the impact of the COVID-19 pandemic on the industrial market is still largely unknown, Toner says that JLL will continue to report on conditions as they evolve.

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