January 4, 2022

A 3PL’s Guide to the US Warehousing Shortage

As consumer demand continues to put the squeeze on the global supply chain, warehouses around the country are rapidly reaching capacity.

The Wall Street Journal reported that the average industrial vacancy rate in the United States recently fell to 4 percent, the lowest rate on record. While the U.S. used 800 million square feet of industrial storage space in 2020, companies used more than 1 billion square feet by December 2021.

With companies forced to compete for remaining space around the busiest national ports, warehousing rental prices are rising to new heights. Rental rates for industrial space increased in 2021 by more than 10 percent year-over-year, according to real-estate firm CBRE.

Approaching the holidays, businesses are seeing an abnormal seasonal surge escalating the already-severe warehousing and supply-chain issues. Here’s what you need to know about the root causes of the space shortage and why companies are turning to third-party logistics partners (3PLs) to minimize disruptions.

How Pandemic-Era Problems Disrupted the Industrial Supply Chain

When the COVID-19 pandemic first hit the U.S., consumer spending fell sharply. But it rebounded over the course of the year. McKinsey found that the national savings rate increased by nearly 20 percentage points in 2020, leaving some households in better positions to spend.

Despite accelerating inflation, consumer spending rose by 1.3 percent in October, which doubled the increase of the previous month, according to data from the U.S. Department of Commerce. Without the infrastructure to support the sudden surge, ports became backlogged and wait times for vessels to unload jumped from two to eight days.

The ports at Los Angeles and Long Beach, California — responsible for nearly half of the country’s imports — broke seven records in less than four weeks of September. On a particularly busy Friday, the ports had 147 ships between the two locations, reported Business Insider.

As a result of the rising consumer demand and consequent delays, companies are stockpiling more goods in their warehouses to keep their sales and production on track. Competing with retail giants like Amazon for more storage space is out of the question for small- to medium-sized questions.

That’s where logistics providers come in.

Why Growing Companies Are Tagging in 3PLs for Supply-Chain Support

Now more than ever, companies are benefiting from the assets and expertise of third-party logistics providers to overcome the nationwide supply-chain struggles. There are three key reasons why companies are choosing to outsource some or all of their warehousing to a third-party provider:

1. Partnering with a third-party partner for storage is more cost-efficient than renting or buying space.

As long as demand continues to exceed available space, companies will struggle to find new warehouses to house their products and materials. More than 500 million square feet of storage are already in development, so it may also be difficult for companies to find the time, space or resources to build new warehouses.

Instead, leaders can immediately access available space by partnering with a 3PL. Not only does this ensure that companies avoid the rising leasing and construction costs, but it also allows companies to leverage the state-of-the-art technology that a 3PL can provide.

2. A 3PL can deliver turnkey solutions to minimize downtime.

Third-party logistics partners have decades of experience streamlining warehousing processes for companies of all sizes. A 3PL works to create custom solutions that maximize efficiency and keep businesses on track, even amid these unprecedented delays. While the 3PLs navigate the current complexities of the supply chain, company executives can stay focused on their operations.

3. Logistics partners give companies access to a coast-to-coast network ready for mobilization.

A nationwide labor shortage makes it increasingly difficult for companies to secure the staff needed to manage their warehouses. In July, the warehouse and transportation industry had nearly 400,000 openings, according to Forbes. Add in the holiday hiring rush, and the outlook is daunting for companies staffing their own spaces.

Third-party logistics providers already have nationwide networks of owned assets, experienced staff and vetted partners they can quickly mobilize. 3PL partners’ highly-trained teams ensure you don’t have to worry about ramping in new employees. With the support of 3PLs, companies across industries can effectively grow, scale and adapt to changing trends.

Armstrong is the largest asset-based provider of commercial services in the country. Keep your business running smoothly by leaving your logistics, warehousing and fulfillment to our experts. Get started today by calling 800.288.7396 or requesting a free quote online.

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