Excess inventories require additional—often unforecasted—storage solutions. The challenge: Industrial storage space is at a record low.
Key Takeaways
- In 2021 and early 2022, retailers and brands increased inventory levels to circumvent long-standing shipping challenges and match consumer demand. Some retailers saw inventory levels expand as much as 43%
- Excess inventories require additional—often unforecasted—storage solutions. The challenge: Industrial storage space is at a record low amid import surges and uneven demand
- Companies struggling with excess inventory turn temporarily to ad hoc solutions. Some retailers and brands create ad hoc solutions by storing goods in truck trailers or shipping containers
- Traditional supply chains aren’t built to adapt quickly. And they aren’t built for flexibility. Yet, retailers and brands recognize speed and flexibility are key to manage inventory surpluses and capacity shortages
- Leading organizations augment existing, fixed networks with Flexe Logistics Programs. These programs tap into North America's largest warehouse network and integrate seamlessly with existing logistics infrastructure
Why are retailers and brands looking for additional storage right now? #
In 2021 and early 2022, retailers and brands increased inventory levels, circumventing long-standing shipping challenges and matching consumer demand. Some retailers saw inventory levels expand as much as 43%. Now, economic uncertainty, excess inventory, congested ports and tight industrial capacity challenge organizations ahead of peak season.
June import volumes hit record numbers as companies prepared for peak, and locations like New York/New Jersey received 10% more YoY volume. Charleston and Houston saw 20% increases.
Simultaneously, consumer shopping patterns shifted due to rising inflation and economic uncertainty. Consumers favored cheaper alternatives in some categories—food and beverage and consumer packaged goods for example—as economic concerns grew. While consumer confidence rose in August after an early summer slowdown, the lag in sales means some retailers and brands must either hold inventory longer or find other strategies to offload goods.
Excess inventories require additional—often unforecasted—storage solutions. The challenge: Industrial storage space is at a record low. Rent rates continue to spike. The average asking rate hovered at $9.40 per square foot in Q2 2022—a new record.
It’s kind of one of the tricks in the bag, if you will, for temporary short-term [storage]. ‘Hey, can I just park some of my trailers somewhere until I can get some of this pile of inventory moving down the supply chain?’ We get asked that a lot.
Retailers and brands deal with excess inventories via ad hoc capacity solutions #
Retailers and brands struggling with excess inventory turn to ad hoc solutions. Some store goods in truck trailers, parking lots or shipping containers.
Karl Siebrecht, CEO of Flexe, described this trend in The Wall Street Journal:
“It’s kind of one of the tricks in the bag, if you will, for temporary short-term [storage]. ‘Hey, can I just park some of my trailers somewhere until I can get some of this pile of inventory moving down the supply chain?’ We get asked that a lot.”
Ad hoc capacity solutions work short-term and help companies avoid new facility construction or costly leases. Converting truck trailers and shipping containers create new supply chain issues, however, since trailers and containers are not reintroduced into transportation pools.
How long will excess inventories last—and when will there be available warehouse capacity? #
Record low capacity, slow capacity expansions and a glut of excess inventory means the warehouse capacity crunch will extend through 2022 and into early 2023.
In the meantime, retailers and brands reevaluate existing inventory to reduce capacity crunches in their networks. Many already discounted products, liquidated inventories and canceled outstanding orders. Nevertheless, inflated inventories will not disappear overnight—and many organizations still forecasted and purchased peak season products.
What is a more strategic approach to manage excess inventory? #
Leading retailers and brands plan for uncertainty. How? They invest in supply chain flexibility, increase supply chain visibility, diversify their networks and test hypotheses in real time. For example, companies store inventory in secondary and tertiary markets while adding logistics service providers (LSPs) to boost capacity.
Time is running out: How Flexe Logistics Programs bridge the gap #
Traditional supply chains aren’t built to adapt quickly. And they aren’t built for flexibility. Yet, retailers and brands recognize speed and flexibility are key to manage inventory surpluses and capacity shortages.
Leading retailers and brands augment existing, fixed networks with Flexe Logistics Programs. These programs tap into North America’s largest warehouse network for B2B distribution and B2C fulfillment programs, integrating seamlessly with existing logistics infrastructure.
Even with warehouse capacity at record lows and inventories at record highs, leading retailers and brands access urgent capacity and expand distribution and fulfillment networks. They meet customer expectations while preserving capital, reducing risk and avoiding long-term agreements.
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