The Labor Shortage Effect on Warehousing

By on May 9, 2018

As more and more companies look to optimize their distribution network and implement the transportation and inventory saving strategies outlined in their Network Optimization studies, they would be well advised to evaluate the dynamics of the proposed local labor market before finalizing site selection.

Labor, or better said the availability of labor, has become scarce for all business sectors but particularly so for the warehousing and distribution sectors. With the current U.S. unemployment rate of 3.9% (the lowest rate in nearly 50 years) and the recent passage of Trump Tax Plan (reducing the U.S. Corporate Tax rate from 35% to 21%), continued labor shortages and significant increases in hourly wages can be expected to continue as the economy accelerates.

The improving economy will cause added demand for labor and greater challenges for companies. The ecommerce effect is also playing a big role in the demand for warehousing and distribution workers and all companies recognize the immediate and far reaching impact that an ecommerce facility for companies such as Amazon, Wal-Mart or Apple can have on a given market. Ecommerce providers are currently responsible for approximately 9.1% of all retail sales in the U.S. However, ecommerce is growing very quickly and of all industrial warehouse leasing in 2017, approximately 23% was attributable to ecommerce companies. As a result, finding space is becoming more challenging, but finding labor is by far the greater challenge. When a new ecommerce provider enters a marketplace, they can drain the availability of all workers for other distribution centers. As a result, AUTOMATION should be strongly considered by those companies that are planning for the future and have a strong balance sheet. Automation has already taken off in the U.S., largely in the ecommerce area, and has been rampant in Europe for years, where finding available labor pools has been an issue.

CRA’s process includes assisting with Network Optimization Studies as well as carefully analyzing the labor market in a client’s target area. Please contact us to schedule your consultation.

Topics: Industrial

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