Experts predict the U.S. will need to add anywhere from 330 million to 1 billion square feet of warehouse space over the next few years, as companies look to expand their distribution networks to meet growing consumer demands. The increased industrial real estate demand, combined with ongoing labor shortages and extended construction and manufacturing lead times, is creating additional challenges for companies seeking out new facilities.
Site selection is often the most challenging and time-consuming part of the facility location planning process. With industrial real estate in such high demand, many companies may be tempted to jump straight into search and selection mode. While it’s vital to act fast to secure a desired property, it’s also important to have a proper strategy and design in place to ensure the facility is capable of meeting current and future operations requirements.
As disruptions continue to impact every aspect of the supply chain, here are a few additional factors for companies to consider during the facility planning and selection process:
Labor. As demand for warehouse workers continues to increase, more and more companies are providing highly competitive compensation packages. Amazon, for instance, is offering an average starting wage of $18 per hour, while United Natural Foods Inc. (UNFI) and Uline are offering wages up to $28 an hour — plus sign-on bonuses and attractive benefits packages.
When evaluating potential facilities and communities, it’s important to look at the current labor availability and costs, as well as which other major players are located in that area. This can also help determine whether automation can assist with any labor limitations or costs.
Transportation. Unrelenting port congestion has prompted some retailers to go as far as chartering their own private ships. How far is the site from major highways, airports, railroads and ports? In addition to infrastructure access, it is also important to understand carrier cut-off and pickup times as this can greatly impact service levels to customers.
Lead times. Steel and labor shortages continue to cause massive manufacturing delays, with lead times currently four to six months or longer for most material handling equipment. Average installation and training time may vary based on specific solutions, so it’s important to look at lead times during the vendor selection process and execute those contracts as soon as possible to avoid any additional delays.
Outlook:
During these unpredictable times, it’s important to select a site that is close to your customers and can accommodate flexible designs to help minimize disruptions and ensure operations can meet current and future needs. In today’s challenging real estate market, facilities can go on and off the market in a matter of days, so it’s vital to plan quickly so you can act fast once the right facility becomes available.
