Stemming the Rising Tide of Shipping and Warehouse Costs
The e-commerce juggernaut continues to roll without any sign of a slowdown, and available warehouse space keeps on decreasing. The Wall Street Journal reported that CBRE Group’s latest quarterly commercial real estate report showed warehouse vacancies falling for thirty-three consecutive quarters, with a vacancy rate of only 7.1%. As vacancy rates decrease, prices increase. Logistics managers stocking up in advance of the holiday season or other anticipated demands are finding themselves paying dearly for hard-to-find warehouse space.
At the same time, trucking companies have been steadily raising their prices. Truckers have been struggling for several years with a labor shortage, and have raised prices in part to cover the higher wages needed to recruit and retain drivers. With continued strong demand from shippers, major trucking businesses are seeing revenue increases of more than 30% year over year. Combined with the increasing cost of warehouse space, logistics managers are feeling a serious budget squeeze.
Shipping costs can always be managed through efficient ordering – locking in trucking prices well in advance, shipping only full loads, and anticipating spikes in demand to avoid last-minute high-priced shipping. But increasing warehoused inventory means increased real estate costs, wiping out any savings from a carefully-managed shipping plan.
Completing the bad-news picture is consumer resistance to higher prices. Retailers, even those in e-commerce, find themselves in a downward pricing spiral as consumers shop for the lowest price, whether it’s in-store or online. Manufacturers and retailers are unable to pass along their increased costs, knowing they will be undercut by a competitor willing to take the financial hit, at least in the short term.
The good news: Cost-saving measures can be greatly enhanced by efficient storage systems. Expand available storage space without expanding the storage footprint, by installing racks that take advantage of warehouses’ high ceilings. Uniformly-packaged products can be stacked to the ceiling on pallet racks, and single-unit e-commerce picking can be elevated with multi-level mezzanine racks. Likewise, vertical carousel systems move packages and products off the warehouse floor and store them overhead, keeping the storage footprint small and, as a bonus, reducing the strain-and-sprain injuries so common among warehouse workers.
For logistics managers looking for ways to save money in the face of rising costs, improved storage density can provide some budgetary daylight, allowing them to implement a cost-effective shipping plan without having to expand into additional expensive warehouse space. It’s a winning formula.
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