In the second of our multipart series, we will continue discussing the impacts of the pandemic from a 3PL cold storage company’s vantage point. In this post, we will be covering the pandemic and how labor shortages affect the 3PL cold storage industry.
The labor shortage has been profound in 3PL cold storage. Several facilities declined to bid new customers requiring a high amount of labor, despite having space. While this has been common in many industries, it has been especially prevalent in cold storage.
Handling charges are a direct line of revenue that is associated with labor. The average dock worker pay has increased 20% to 25% over two years. Most storage agreements are annual. It would be wise to forecast a significant increase, specific to handling charges- as you forecast next year’s storage costs.
Cold storages offer a wide variety of services. Some services overlap with what manufacturers may normally provide at their plants. This is by design, as they are often requested as a troubleshooting option: blast (or quick) freeze, relabeling, repacking, strapping, stamping, restacking, cross-docking, and other services are often heavily dependent on labor. Several cold storages are reducing these services and focusing the available labor on the basic core functions of receiving and shipping full pallets.
Further, a reduction in applicants means that any attrition of existing staff will reduce “extra” services capabilities. Until the labor market turns around, expect further erosion of labor-intensive services. In addition to these miscellaneous extra services, one core service that is becoming hard to find is case picking. Long considered a standard offering, it’s a very labor-intensive service that not only increases the outbound labor by up to 300% - 500% depending on the density of picks/outbound. It also exposes the employees to the environment, who must exit their equipment to provide this service. Employee morale is more important than ever, and case picking is a challenge. Overtime labor is also affected in the same way. There are less employees seeking overtime hours than in the pre-pandemic work climate.