The Warehousing Landscape in 2021
As supply chains continue to adapt to a post-pandemic world, the warehousing industry is undergoing its own growing pains to meet the needs of the 21st century economy. Businesses of all sizes, from the garage start-up to international conglomerates, are expecting more from their 3PL (3rd Party Logistics) warehouse providers than just a storage space. Yet low vacancy rates are causing warehousing prices to spike, even for those offering only the most basic services.
In Q2 2020 e-commerce spiked a dramatic 45% year-over-year (YOY), making up 16.1% of total sales volume in the USA. While growth has since slowed, it is still expected to continue drawing market share from brick & mortar counterparts and create increased demand for warehouse space. There is a mad shuffle going on to meet this demand, with unused retail space being converted to warehousing, and a nationwide construction boom that will soon bring nearly 200 million additional square feet of warehouse space to the USA (half of which is already pre-leased). Amid this crunch, existing warehouses are under high pressure, in some cases operating dangerously past capacity.
The warehouse crunch is also being fueled by American companies that are increasingly looking to reshore their businesses back home to North America. With economic tensions between China and America showing few signs of settling, the decades long trend of sending production overseas is showing signs of reversing. Businesses see added benefits in reshoring by avoiding onerous tariff, enjoying improved lead times, and saving on transportation costs.
Moving production across the Pacific Ocean and building thousands of square feet of warehouse space is no small order. These are time- and capital-intensive endeavors that will not provide immediate relief. Even after the infrastructure is in place, qualified staff will continue to be in high demand. After decades of offshoring the pool of skilled logistics workers has shrunk significantly as jobs disappeared and professionals retrained for other industries. Among a survey of 3PL providers in 2021, a majority reported being impacted by labor shortages.
Despite these challenges, warehouses are being asked to do more by their clients. Many of these demands are discussed at greater length in our previous blogs; shifting towards a coworking model, offering flexible contracts, providing omnichannel fulfillment, employing sophisticated warehouse management systems (WMS) and transportation management systems (TMS) for real-time inventory data, and a variety of other value-added services to meet the diverse and changing needs of businesses of all sizes.
At thyssenkrupp, we are constantly striving to improve and satisfy our diverse set of clients. Since the fall of 2019, we have added nearly 4 MILLION square feet of flexible/month-to-month warehousing. Our nationwide warehouse network, industry experts, sophisticated technology, and large menu of value-added services is peace of mind to clients who know their business needs can change rapidly.