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OM in the News: Warehousing Adapts to the E-Commerce Boom

March 22, 2018

Prologis, the largest provider of logistics real estate in the U.S., is building the first multi-story warehouse in the U.S. in Seattle

The e-commerce boom is reshaping the entire supply chain, creating both demand for warehouse space and changing the way businesses store goods, reports Supply & Demand Chain Executive (March 13, 2018). In the past, warehouses have generally been on the outskirts of cities, isolated from high population density, partially so that goods could be moved without hindrance. But now warehouse space is at a premium, especially closer to population centers to facilitate next-, or even same-day shipments. “In the previous model you didn’t need to move things all that quickly,” said one industry expert. “In this compressed dynamic, you’ve got to push into cities and places where people live.”

Warehouse design also is changing. The average new warehouse built in the U.S. from 2012- 2017 is 143% larger and 3.7 feet higher than the last construction peak. Multi-story warehouses, popular in Asia and Europe, have joined the U.S. warehouse landscape to maximize space. Mega-warehouse markets have also just gotten bigger.

There has also been an increase in facilities called inland ports that are used to get freight closer to population-dense areas faster and cheaper. Inland ports are inland intermodal rail terminals that allow for less-expensive over-land rail transit from seaports before a container moves to a truck. Storage rates inland are also cheaper.

Some warehouses are physically changing as well. Fulfillment operations take up more space than traditional pallet and bulk storage and often require new equipment like conveyor belts and sorting or packaging machinery. It also requires additional labor resources working throughout the day to pick, pack and ship orders.

Classroom discussion questions:
1. Why is there interest in multi-story warehouses now?

2. Why have they been popular in Europe?

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