In 2019, the role of warehousing in the supply chain is evolving to meet new consumer expectations. At the same time, shifting macroeconomic pressures and market demands are impacting how warehouses look and operate.
This comes at a juncture when industrial and logistics real estate is more scarce than any time since the late 90s. According to CBRE, warehouse real estate space absorption per quarter is currently outpacing new construction by about 57 million square feet.
As the nature of warehousing changes, the warehouses themselves are changing locations, shape, and functionality, taking on new roles, and running on more advanced technologies. What does that mean for the warehousing 2019 outlook?
Smaller is faster
Increasing consumer demand for next day delivery necessitates more dynamic and agile warehousing strategy. Following Amazon’s lead, ecommerce retailers are setting up regional hub warehouses near city centers to manage quick fulfillment turnarounds.
These regional nodes coordinate with last-mile shippers (and often manage their own small last-mile fleets) that deliver locally from just outside the population core of a city. To perform at this rate of speed, they need to be located in higher density areas, where existing industrial and logistics real estate costs more. The necessary result is a smaller, smarter, and faster warehouse.
The DC archipelago
While warehouses are getting smaller in size and closer to cities where their customers live, they still need to process a lot of inventory.
Gone are the days when a company like Sears or JC Penny would establish a 2-million-square-foot rural distribution facility to handle catalog order fulfillment for vast swathes of territory. Modern warehouses are designed to hold less stock closer to the consumer for faster turnaround. To work seamlessly, that means a number of smaller facilities perform many of the former functions of an exurban DC — depalleting, storage, pick and pack, inventory management, returns, and much more — in a fraction of the space.
These smaller regional hubs are powered by advanced inventory management software that moves stock from location to location to meet customer needs as demand shifts. Pallets are tracked from container to customer using RFID tracking and IoT devices that are connected to big data software to streamline its journey and power advanced analytics.
As more warehousing is done near the urban core, density becomes an issue. Following the lead set by high density residential and office buildings, warehouses and fulfillment centers in cities like San Francisco, Seattle, and New York are going vertical.
Right outside Seattle, Prologis broke ground on a three-story, 589,615-square-foot fulfillment center complete with advanced freight elevators, and ramps that connect trucks with second-floor loading docs. The facility is similar in design to two existing warehouses — a carpet outlet turned last-mile logistics hub located in the Bronx and three-story Brooklyn-based ecommerce hub — that are powering next day delivery in the Big Apple.
Logistics pros are still coming to grips with many of the challenges that vertical warehousing presents. The modern fulfillment hub is powered by advanced picking and packing processes that aren’t yet well tuned to a multi-dimensional storage schema. The movement of materials handling equipment between floors presents a major challenge in particular.
Repurposing legacy warehousing stock
Getting large scale warehouses up to speed with current consumer demands is another ongoing challenge for logistics pros. Traditional DCs were often built adjacent to highways and rail infrastructure, where the growing popularity of rail as part of intermodal transport could make them valuable as transport hubs.
Firms like Russo Development in New Jersey are bringing outdated warehouses into line with modern company expectations and demands. In addition to new technology, that means renovating or replacing buildings to reach higher ceiling heights.
Reducing the retail footprint
Big box retailers are becoming more reliant on ecommerce to reach customers. This transition from brick-and-mortar to digital presents a difficult situation for businesses that occupy a large, costly physical footprint.
A number of retailers are using their existing footprint to enable omnichannel fulfillment strategies that allow customers to pick up product in-store within hours of purchase. By adding inventory management software to their fulfillment stack, retailers can dynamically manage stock to turn big box locations into micro-hubs.
The importance of warehousing as part of a robust logistics infrastructure shouldn’t be underestimated. Unfortunately, investment in warehouse footprint and evolving tech isn’t easy to come by. A lot of companies are finding solutions through third-party partnerships with organizations like Globecon that manage port-side warehousing and can scale to meet demand.
Smaller warehouses can only carry so much backstock. 3PL warehouses can store additional cargo stateside, where it can be accessed with quick turnaround to meet unexpected increases in demand. This is especially valuable for retailers that sell furniture, appliances, and other bulky merchandise.