Companies and warehouse providers are scrambling for creative solutions to overcome a lack of warehouse space as they revamp supply chain networks to embrace e-commerce expectations.
The amount of available U.S. warehousing and logistics space sits at a multiyear low, according to real estate researcher CBRE Group. In the fourth quarter of 2018, availability for industrial real estate fell to its lowest level since 2000, the 34th consecutive quarter of decline.
Equipment providers and startups are stepping in to supplement the traditional warehouse market, from temporary trailers to Airbnb-style matchmakers that bring warehouse space and inventory together.
Mobile storage fills the gaps
Companies like Milestone Equipment Holdings lease dry van trailers as temporary storage space. It's been an ad hoc practice in the past as a warehouse manager scrambled to accommodate inventory spikes.
The temporary trailers — which may be used for years — allow companies to scale their warehouse space based on demand. Some companies moved imports up to beat rising tariffs or geared up for holidays or promotions.
"Some inventory needs to be mobile so they're keeping it on the trailers, but then they're moving the trailers where they need them," Don Ake, vice president of commercial vehicles at FTR Transportation Intelligence, told Supply Chain Dive.
Now temporary or on-demand space is becoming a long-term factor in warehouse strategies for e-commerce, as companies revamp their supply chains to support fulfillment and fast delivery
"For our traditional customer base, it's difficult to access warehouse space, to find enough of it in small quantities across the country to meet the compressed delivery time expectations that's now transitioning into the B2B world as well," Sarah Johnson, executive vice president of mobile warehousing and storage for Milestone, told Supply Chain Dive.
Milestone has a fleet of nearly 60,000 trailers and can dispatch a storage trailer within 48 hours from one of its 25 U.S. branch locations. Trailers available for storage include 53-foot and 48-foot dry vans with roll-up or swing doors. Johnson said the cost of storage in trailers could be up to 50% less than brick-and-mortar warehouse space.
Companies are also tapping trailers for reverse logistics. One national retailer has used about 1,000 of Milestone's trailers to store returned goods.
"We're helping them think about our trailers more in terms of real estate as opposed to a trailer," Johnson said "Temporary storage represents a good opportunity for companies to try different solutions before they commit their capital or find a substantial term lease for warehouse space, which is tough to come by now.”
In response to the demands of e-commerce, retailers are reconfiguring distribution to be closer to consumers for faster delivery time. The mobile warehouses help shippers transition from large distribution centers in low-cost outlying areas to smaller sites in more expensive urban areas.
Startups make a market for idle spaces
New space-sharing companies are creating ways for facilities with available square footage to market to companies in need of temporary space.
SecurSpace uses an Airbnb-like model to store trailers at third-party terminals with empty space. The company built the digital marketplace to replace the calls trucking companies must place to terminals to find parking for trailers. The company currently has slots available at about 320 locations and booked more than 400,000 parking days in 2018, Freightwaves reported. The platform allows terminals to set their own standards for what types of trailer, containers and cargo they will allow and length of stay.
UPS launched a digital fulfillment and warehouse matching service, Ware2Go, in August to help shippers store product closer to consumers without long-term contracts. And Flowspace works with 3PLs and non-3PLs to match unutilized warehouse space with shippers within 24 hours.
"We're helping them think about our trailers more in terms of real estate as opposed to a trailer."
Sarah Johnson
Executive Vice President of Mobile Warehousing and Storage, Milestone Equipment Holdings
Ace Hardware uses the Flexe on-demand warehouse network to pre-position recovery supplies for hurricanes and other extreme weather events. Ace could handle some of the products within its own warehouse network, but bulky items like generators and empty propane tanks would take up too much room, according to a company case study.
Ace has used Flexe since 2016 for inventory overflow and expanded its program for hurricane preparation in the Southeast for 2018. Since July 2018, Ace stored nearly 3,500 pallets in the Flexe network. About 30% of the pallets were shipped out in response to Hurricane Florence and Michael. Hurricane Florence hit only two weeks after the program went live, and Ace began shipping goods to the area within 24 hours.
Trailer storage grows — but 'nobody's counting'
Nationwide, as many as 500,000 trailers may be used as temporary warehousing, but nobody knows the exact number.
"This is a wide estimation because nobody's counting these things, but if you drive around an industrial area, you're probably going to observe it," Ake said.
One of the problems with tracking the trend is that it's difficult to distinguish between trailers used for storage and trailers that are idle for other reasons.
Among other things, FTR tracks trailer production and usage, and the data show a growing gap in total dry van population compared to the number of dry vans actively used to haul freight.
The organization developed a category called low-activity trailers, and assets used as temporary warehouses fall into that category. The low-activity trailers may also be used in regional drop and hook operations when goods are moved only a short distance.
"Some inventory needs to be mobile so they're keeping it on the trailers, but then they're moving the trailers where they need them."
Don Ake
Vice President of Commercial Vehicles, FTR Transportation Intelligence
Still, as the e-commerce share of the economy grows, permanent warehouse and fulfillment space will continue to be at a premium. Particularly for retailers, SKU proliferation is a fact of life to meet consumer demand for options in sizes, colors and other factors.
A pick-and-pack operation to support e-commerce requires three times more space and at least three times the number of people compared to a pallet-only style warehouse operation, Rich Thompson, international director and leader of JLL's Supply Chain and Logistics Solutions practice, told Supply Chain Dive.
"Developers are a little more cautious right now but the demand is still there, so you're going see big-box warehouses going up to meet demand as well as need for smaller locations closer to the population centers," Thompson said.
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