Warehouse space shortage will continue but 3PLs can help

If there is one word that supply chain professionals are tired of hearing, it’s “shortage.” There are labor shortages, driver shortages, equipment shortages, and warehouse space shortages from coast to coast. In this article, we’ll take a closer look at warehouse space shortages: their causes, when we can expect them to subside, and how 3PLs can help.

 

CSCMP panel has unwelcome warehouse space shortage outlook

warehouse space shortageA recent DC Velocity article summarized the perspectives of real estate executives at the recent Council of Supply Chain Management Professionals’ (CSCMP) Edge conference. Their outlook is not what supply chain stakeholders are hoping to hear.

At the start of the pandemic, industrial developers put an “extreme pause” on new site construction due to market uncertainty. But the recent demand for industrial real estate has been at historic highs. As a result of this supply demand imbalance, the backlog of industrial construction projects that will not be cleared for at least 18 to 24 months.

There are additional challenges that are delaying warehouse construction at the moment. These include:

  • Community pushback against suburban construction
  • Staffing shortages affecting municipalities and inspection agencies
  • Supply chain shortages and delays of construction supplies

 

Primary causes of increased warehouse space demand

Construction delays for industrial space is never a good thing, but it’s especially disconcerting when demand for that space has never been greater – and availability of existing warehouse space has reached 40-year lows. Space is even scarcer near ports and major urban areas.

In the wake of the COVID-19 pandemic, companies require an ever-increasing amount of warehouse space, primarily for the following reasons.

eCommerce sales have skyrocketed since the pandemic. B2C sales increased an incredible 32.4% in 2020 compared to 2019. These increasing sales have necessitated increased warehouse space to store product. But it’s not just inventory space that B2C companies require. eCommerce fulfillment is a much more space-intensive operation than retail fulfillment, with ample space needed for pick and pack services.

Companies are keeping more inventory on hand. Prior to the pandemic, just-in-time (JIT) delivery was widely adopted by companies to reduce the amount of inventory they carried. The pandemic, however, brought myriad supply chain delays and disruptions as well as a high degree of uncertainty. To guard against these disruptions and uncertainty, companies are keeping more safety stock on hand – which requires greater amounts of warehouse space.

 

3PLs can provide needed warehouse space

Companies looking to buy or lease warehouse space on their own are going to struggle to find existing space that meets their needs and may have to wait a while for new space to be built. There is, however, another option: partnering with a third-party logistics (3PL) company that already has available space.

3PL providers often have logistics campuses with several warehouses and can offer shared or dedicated warehousing options. With shared warehousing, the warehouse is occupied by the products of multiple companies – each paying for only the space and services it needs. With dedicated warehousing, a 3PL will typically devote staffing and resources to operate a warehouse solely for one customer.

Kanban Logistics is an East Coast 3PL that offers both shared and dedicated warehousing at our Eastern North Carolina campus, where we have over 1 million square feet of warehousing. In addition to dedicated and shared services, we offer rail transloading, FTZ services, inbound logistics services, drayage, and many value-added services. We also have the ability to expand to accommodate your business growth – something you won’t find in urban areas. To learn more about our North Carolina warehouse space and 3PL capabilities, contact Kanban today.

 

 

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