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Situation: The recession caused many manufacturers to pull their inventories back to the source plant — minimizing the throughput, if not totally eliminating the need for a regional 3PL warehouse or 3PL truck line.

The Details: With a decrease in demand, manufacturers are having to do whatever it takes to cut costs and survive, but for 3PLs there isn’t much room for cost cutting. 3PLs base their rate structure and quotes on the cost of the building from the landlord, the cost of utilities and the cost of payroll. If they’re lucky they see a 7 to 9% profit, so they are already running on very thin margins.

What it Means: The vacancy rate for industrial space is sky high, and the industry is hanging on by a thread — from the mom-and-pops all the way up to much larger 3PLs it is going to be hard to survive, but interesting to see what will happen to the industrial real estate market.

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This post was submitted by Dustin Mattison.

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