Taiwan is in many respects a fully modern society, with a well-developed market economy that well serves its millions of sophisticated consumers. One of the most trade-dependent economies in the world, Taiwan exports industrial products while importing high-quality consumer goods to meet domestic demand.
Surprisingly, though, these goods are generally stored in warehouses that are often poorly designed, of substandard condition, or even illegally constructed. With land values at a premium, industrial-zoned land is too valuable to be used for warehousing, which generally offers a lower return on investment than a factory. Industry experts estimate that 70% of the warehouses in Taiwan consequently are illegally situated on agricultural land, were erected without the proper building permits, or are being used for unauthorized purposes. Because such warehouses are at risk of being torn down by the authorities, owners invest few resources to ensure that quality standards are met.
Often these facilities lack adequate ventilation and firefighting systems, and the goods inside frequently can’t be fully insured against damage. Should any accident occur due to poor safety or fire-prevention conditions, there is a real risk to a brand’s reputation, even in cases where warehouse operations are outsourced. Moreover, these facilities are often too small or lack a sufficient number of truck access doors, making them inefficient and adding to clients’ costs.
Now, finally, Ally Logistic Property (ALP) is filling this gap in the market by offering modern warehousing and logistics services hubs. ALP was established just a few years ago, in 2014, with US$1 billion in investment from Cathay Financial Holdings Corp., one of Taiwan’s largest financial firms. But already it is well on the way toward its goal of building and managing one million square meters of modern smart warehouse and logistics infrastructure. Under its Logistics Republic brand, ALP has already constructed a 171,400-square-meter Phase 1 smart warehouse and logistics hub in its Taipei Park located at Ruifang, as well as a 43,550-square-meter facility in the Taoyuan Park in Dayuan.
By 2018, ALP will have completed Phase 2 of the Taipei Park facility, adding a further 74,215 square meters. Along with another site in Taoyuan, in Yangmei, of 99,910 square meters, and one in Taichung, at 83,820 square meters, that will bring the company’s total of sophisticated smart and green warehousing and logistics infrastructure up to 473,000 square meters.
Why hasn’t warehousing caught up with the rest of Taiwan’s high-tech economy until now? Charlie Chang, managing director of ALP, says the two main factors that have stymied growth in the sector are the high price of industrial land and the 30-year timeframe to see returns on investment. “That’s a long time to tie up your capital,” he notes. Unlike most construction firms that operate on a build-to-sell model, earning their capital back in short order, Cathay through ALP is looking for stable, steady long-term returns on investment – a benefit that warehousing and logistics is well-suited to provide.
Also important is business perspective. The inadequate warehousing situation has existed for so long that importers and distributors “just got used to it,” Chang observes. “It takes someone from outside the industry to question why the situation is like this,” he says, alluding to his previous experience in construction and development. “We approach this business as a start-up. We’re innovative in our facilities and in our business model.”
Through Logistics Republic, ALP brings a total modern logistics solution to Taiwan. ALP’s logistics parks are large enough to store merchandise for brands or importers and distributors/retailers at the same location, which reduces the distance that goods must be transported, reducing transportation costs and times and increasing the utilization rate of delivery trucks.
ALP offers flexible leasing terms ranging from three to 30 years, as well as all other facilities that require capital investment, including racking, forklifts, and many others. Warehouses can be customized to meet the needs of specific customers, for example with temperature and humidity control systems to preserve the quality of high-value perishables such as wine and tobacco, or even frozen foods.
ALP also offers financing based on the customers’ inventory, office solutions with modern work spaces, and even food and refreshments for busy workers in the logistics park through its Logistics Republic Café. “We allow our customers to be asset light,” says Chang.
Beyond these tangible benefits, modern warehousing provides a range of intangible advantages as well. ALP’s sites are constructed with environmental sustainability at the fore, with low-power consuming LED lighting throughout, and high-efficiency HVAC systems. ALP further plans to add solar panels to all of its warehouse roofs over the next year. The Taipei and Taichung sites have already been certified Silver by Taiwan’s equivalent of LEED.
The need for modern smart warehousing and logistics solutions is apparent in the number of customers that are already operating out of ALP’s current sites. Merchandise stored in ALP’s facilities include those of 3M, H&M, Bosch, Diageo, Estee Lauder, Decathlon, and Unilever, and DHL and LF Logistics partially operate out of ALP’s warehouses.
“We are not only creating state-of-the-art warehousing facilities, but also setting up a network of logistic infrastructure in Taiwan so merchandise can be efficiently stored and distributed throughout the island,” says Chang.