“And go round and round and round, in the circle game.” – Joni Mitchell
The industrial part of Queens, New York is known for its warehouse buildings. For many years when I drove past these buildings, I noticed that many of them were empty.
That is no longer true.
What a difference three years makes! Gone are the “For Sale” and “For Lease” signs. In their place are signs for companies distributing a wide variety of food and industrial goods. Now empty warehouse space in Queens is a rarity.
This has also become a national trend. According to a recent article in the New York Times, warehouse real estate is becoming as scarce as mythical hen’s teeth. The current U.S. industrial vacancy rate stands at only 3.6 percent. And it’s expensive, too. CBRE reports that companies that signed 5-year leases in 2016 can expect a whopping 25 percent increase as they come up for renewal, requiring them to either pony up or relocate, neither of which is very desirable.
However, companies are finding new ways to manage storage, distribution, and delivery systems. For example, many organizations are signing deals for new space even before construction, heading off potential bidding wars before the concrete is poured. Other companies are looking for space outside their original locations. These secondary sites can be much less expensive.
A lot of them are reaching into the past for ideas, while also leveraging technology. In urban areas space has always been at a premium. Here, companies are considering building taller warehouses and mechanizing them to increase throughput while minimizing the number of pallets per square foot. They are also using nontraditional locations such as storefronts that have recently been vacated due to Covid-related closings. Others are considering reconditioning older, multistory industrial buildings for warehouses, while upgrading the technology and using robotics. Many department stores built such warehouses over 100 years ago. Here in Queens, Bloomingdale’s had such an 8-story warehouse. It still exists and is now operated by the New York City Housing Authority (NYCHA). Parts of it feature VNA, or very narrow aisle technology (pallet width + 6 inches).
We are seeing companies offer additional services that improve productivity. Some 3PL’s are offering “Drop and Hook” services to trucking companies that are delivering containers. The driver delivers a full container and can pick up an empty for the return trip. Contract carriers can drop off a full trainer and pick up another full trainer as well. This saves considerable wait time and keeps drivers on the road.
As post-Covid supply chains adjust to new realities, supply chain professionals are solving an entirely new set of challenges. As the demand for warehouse space increases, we can improve through innovation. Leveraging modern technology with older, established ideas is one way to deliver service improvements. What is old is new again, but with a twist.
For What It’s Worth is a column written by Gary Smith, CPIM-F, CSCP-F, CLTD-F, that examines current issues in Supply Chain. Gary welcomes your comments and feedback. You can email him at gary@supplychainmavens.net.