U.S. warehousing employment continues to decline, with more layoffs expected in 2024

The hiring boom in the U.S. warehousing industry is continuing to cool, with corporate strategic focus shifting from network expansion to supply chain efficiency improvements.

Preliminary data from the U.S. Bureau of Labor Statistics shows that employment in the warehousing and storage industry fell to 1.85 million in December 2023, the lowest level since November 2021.

The industry will face more layoffs in 2024. Multiple retail brands, e-commerce companies, and third-party logistics providers have disclosed facility closures and layoff plans starting earlier this year, involving more than 2,800 employees related to warehousing and distribution operations.

During the COVID-19 pandemic, supply chains remained volatile and companies were busy coping with surging demand, with operational costs and efficiency issues not receiving equal attention. Now, companies have re-examined this strategy and begun to take a deep look at their own operations, assessing how to cut expenses while improving efficiency, leading to layoffs and network layout adjustments.

Randal Kenworthy, senior partner in West Monroe's consumer and industrial products practice, illustrated this trend with a mid-sized consumer goods client. The client said: "Now is the time for us to reassess from a supply chain perspective." Kenworthy said they are comprehensively integrating manufacturing operations and third-party logistics (3PL) resources, and using this opportunity to restructure their network.

Operations concentrate in new facilities

Network consolidation may mean moving operations from older, outdated facilities to more modern locations to achieve more efficient handling and transportation processes.

A spokesperson for sports apparel retailer Fanatics told Supply Chain Dive that the company will cut 218 employees at a fulfillment facility in Jacksonville, Florida, because it will move operations to a new building equipped with newer technology and infrastructure. In an email, the spokesperson said: "Reviewing our current real estate portfolio, the Commonwealth facility in Jacksonville, Florida, is one of the oldest buildings we operate, which creates ongoing challenges as we continuously update to meet fan needs and new requirements."

Saks is also taking similar measures, cutting jobs at a fulfillment facility in Pennsylvania while shifting volume to more advanced fulfillment facilities. Newell Brands, according to its spokesperson, will close a distribution facility in Ohio serving its home fragrance division as part of its supply chain consolidation and optimization efforts.

Other companies' consolidation efforts involve handling and transporting goods from non-traditional locations. Ahold eCommerce Sales Company will cut 454 jobs at a facility in New Jersey in March that provides fulfillment and distribution services for supermarket chain Stop & Shop. A company spokesperson last Novembertold New Jersey 101.5that Stop & Shop has decided to fulfill online orders through stores and third-party distribution partners.

Choosingstore fulfillmentoropening micro-fulfillment centers, rather than relying on more large warehouses, has become a popular strategy for companies to reduce transportation costs and keep inventory closer to delivery destinations.

Stephanie Rodriguez, national director of industrial services at real estate giant Colliers, said: "Companies are no longer just building large distribution centers or leasing more facilities at full capacity, but are reassessing their supply chains and how to get products to the end consumer."

3PLs lay off workers due to client changes

A large number of layoffs in warehousing and distribution are related to third-party logistics providers. As clients switch to new suppliers that offer a cost and service balance for their current operations, this work is likely to move to competitors.

GXO's layoff plan at a facility in Memphis, Tennessee, stems from the termination of its partnership with a local client. A company spokesperson told Supply Chain Dive in an email that affected employees can apply for open positions and transfer to nearby GXO sites serving other clients.

Brendan Heegan, CEO and founder of fulfillment company Boxzooka, said brands often seek to switch to a new 3PL in the months after the holiday peak season if existing partners fail to maintain service levels during demand surges. Heegan said: "We are currently in the deep water of the peak sales season."

A string of mergers and acquisitions over the past few years has also prompted companies to simplify their 3PL portfolios. If a newly acquired business uses a different 3PL, the company is likely to shift to the parent company's logistics provider. West Monroe's Kenworthy said: "3PL consolidation is both cost-effective and easier to manage."