With the national warehouse vacancy rate hovering at record lows and warehouses bloated with inventory pulled in from China during 2018 to get ahead of impending tariffs, companies can combine flexible storage options with advanced technology to create an end-to-end supply chain solution that works.
Much like your neighbors use portable on-demand storage to store their household items during move-ins, move-outs, or home renovation projects, truck trailers in yards increasingly are being used to hold goods as mobile warehouses.
This trend gathered steam last year thanks to a warehouse vacancy rate of 4.3% nationally—the lowest since CBRE began tracking that data in 1989. During the third quarter of 2018, for example, 61.5 million square feet of warehouse and distribution space was absorbed by the market (versus 49.9 million square feet delivered), while the overall availability rate declined by 10 basis points (bps) to 7.1%.
“The rise in e-commerce has caused a dramatic surge in the demand for industrial real estate,” The Real Deal reports. “But even as developers have flooded the market with new inventory, some retailers are still having trouble finding adequate, flexible space. Short-term industrial leasing, also known as on-demand warehousing, is especially helpful to retailers around the holidays, when e-commerce activity surges.”
The Momentum Continues
With demand for industrial space exceeding new supply, CBRE says net asking rents increased 1.7% during the third quarter to $7.21 per square foot—the highest level since it began tracking the metric in 1989. “The major drivers of supply-chain demand—consumer spending, business inventories and industrial production,” it reports, “all show measured growth last year.”
Expect that momentum to continue in 2019 as companies scramble to find space to store their goods, keep up with customer demand, and offset the impacts of the current (and potential) import tariffs. This could drive warehouse vacancy rates even lower in a market where many facilities simply weren’t built to accommodate e-commerce.
Not Cut Out for E-Commerce
According to CBRE, which analyzed data from 56 major U.S. markets, most facilities built prior to the mid-2000s have limitations that preclude their use for e-commerce distribution, such as low ceilings, small footprints, uneven floors, and inadequate docking.
“E-commerce has created demand for a new type of warehouse with different dimensions, locations, and capabilities than what most of the existing U.S. supply offers,” says CBRE’s David Egan. “Given that only a small portion of the overall market is truly modernized, there is a strong case for new construction and redevelopment of outdated facilities in many markets.”
Some shippers are solving that problem by applying an age-old solution to a new challenge. Up to 53-feet long and ranging in width from 8-8-1/2 feet (and 12-1/2 to 13-1/2 feet in height), these roomy vessels give companies a portable and reusable way to store their freight pretty much anywhere that it’s allowed.
Tariffs and China
“U.S. companies are so inundated with inventory that some are renting truck trailers to use for storage space,” Erica E. Phillips writes in Swamped With Inventory, U.S. Companies Turn to ‘Mobile Storage,’ “parking them on warehouse lots or behind storefronts to hold goods until a surge in imports is cleared from crowded distribution hubs.”
In the Wall Street Journal article, Phillips points to a leading transportation equipment lessor that recent launched a “mobile warehousing and storage” business as one example of how companies are finding new uses for their trailers. The company said one national retailer has used as many as 1,000 of their trailers to store returned goods, for instance.
We’ve also seen an increased yard activity in our customer base from all industry verticals.
Digital Yard Management Technology
Few would argue with the level of flexibility that mobile trailers provide to companies that need more space, but with this emerging warehousing option comes new requirements and challenges for companies that use it. Within the supply chain, for example, knowing what inventory is on hand at any given time, quickly finding where inventory is, and then tying that data to transportation and delivery—is an ongoing challenge.
For many organizations, overcoming this issue requires a reassessment of existing inventory planning processes and an approach that builds out a clearer view of inbound inventory.
Using digital inventory management, companies can begin to improve in-stock positions, minimize total inventory levels, and increase sales-per-square-foot in their warehouses, DCs, and on-demand storage options.
To be most efficient, for example, a temporary warehouse on wheels must be tagged and tracked while out in the yard or facility, with all of its contents properly inventoried and accounted for. Overlook these requirements and it won’t be long before lost inventory and unhappy customers become your two biggest problems.
Companies can get the best of both worlds—affordable storage space and high levels of customer service—by using a digital yard management system (YMS) that incorporates passive radio frequency identification (RFID) technology and real-time location systems (RTLS) to manage their yard assets.
A digital yard management system also enhances the value of existing warehouse management systems (WMS), transportation management systems (TMS), and other systems through easy integration and the provision of real-time trailer and inventory information via web API. This allows organizations to realize additional dock productivity by expediting gate appointments and automatically triggering trailer moves to the dock based on rules from their WMS or TMS systems.
Armed with this technology, shippers quickly locate storage trailers and inventory across their network. This allows them to run their traditional and flexible warehouse assets more efficiently, load and unload trailers and containers more effectively, while saving money and meeting their customers’ demands.
Matt Yearling is CEO of PINC Solutions. He joined PINC Solutions as chief executive officer in March 2013 and is responsible for the overall strategic and operational management of the company. Matt’s past roles include vice president and general manager of Encryption Products at Symantec Corporation, senior vice president of Global CRM Product Development at Sage Inc., Chief Technology Officer for Embarcadero Systems Corp (a Ports America company). As vice president of Oracle On Demand, Matt played a pivotal role in making it Oracle’s fastest growing line-of-business.