Warehouse growth driven by e-commerce is running smack into the reality of nearly full employment.
That projected demand for 2018-19 exceeds the industry’s job growth since 2013 of 180,300 new positions a year, an acceleration that reflects the growing volume of e-commerce sales.
Retailers, delivery companies and third-party logistics firms can react to the labor crunch in any or all of three ways, according to CBRE. These tactics are: recruiting more workers from other industries; investing in automation to enhance labor efficiency; and expanding into markets with ready and available workforces.
CBRE says analysis of federal employment data identifies multiple U.S. markets that offer advantageous combinations of availability, quality and cost of labor for warehouses and distribution. Those metropolitan areas are led by Memphis, Louisville, Oakland, CA, California’s Inland Empire, Denver, Indianapolis, Atlanta, Nashville and Dallas-Fort Worth, among others.
“Increasingly, development of e-commerce warehouses is contingent not only on close proximity to large customer populations but also on finding increasingly scarce labor,” points out David Egan, who serves as CBRE’s global head of Industrial & Logistics Research.
“Warehouse users will want to ensure that access to qualified labor is a priority in their considerations for expansion,” he adds, which should increase demand for locations in more populous metropolitan areas. “Several markets, especially those with strong population growth, offer ideal conditions for staffing up distribution and fulfillment centers.”
CBRE came to its projection of demand for another 452,000 warehouse and distribution workers in 2018 and 2019 by applying a ratio of one employee per 1,000 square feet of e-commerce distribution space to its forecast for warehouse-construction completions in the U.S. this year and next.
Solving the Labor Crunch
CBRE’s report addresses two additional tools for solving the labor crunch. First, investing in more automation—robots in the warehouse and autonomous trucks—can help mitigate labor scarcity by boosting the productivity level of an existing workforce. Some studies forecast the productivity gain in the transportation-and-distribution industry to be as much as 46%, the company observes.
Second, CBRE asserts that recruiting workers from other industries (churn) has worked well for the warehouse-and-distribution sector in recent years, and should be looked at more closely.
Government data shows that the 66% increase in workers moving to the transportation-and-warehouse sector from other industries from 2011 to 2015 exceeds the gain rate of any other industry. However, that inflow of labor supply isn’t enough to meet demand driven by e-commerce growth. That shortfall underscores the importance of targeting markets with ideal labor metrics, CBRE says.
The company explains that a one million-square-foot fulfillment facility dedicated to e-commerce can require up to 4,000 workers. Effectively full employment and a warehouse workforce where 18% of current workers are nearing retirement age exacerbates the problem facing employers.
“Site selection for today’s warehouse users and developers is a complex exercise of weighing trade-offs, including speed-to-customer, transportation costs, location incentives, real estate economics and labor,” says Adam Mullen, Americas leader for CBRE’s Industrial & Logistics business.
“The most intelligent site selection efforts never lose sight of the fact that labor accounts for more than 20% of total supply chain cost, and up to 75% in final-touch distribution. Its importance can’t be overstated,” he adds.
Kristin Sexton, senior managing director of CBRE Labor Analytics, says, “Employers often face significant challenges in assessing a given labor market and how its many facets might apply or not to their companies’ needs.”
But you can be sure to count on one thing, Sexton stresses. “Labor is a critical resource for most modern employers, especially those in the rapidly expanding and evolving field of distribution and warehousing. Effectively operating in this industry will require smart analysis of labor sources for many years to come.”