Inland Empire Leads Southern California in Warehouse Growth
The Inland Empire led Southern California in construction of logistics and freight-related warehousing real estate, according to a report released from the Los Angeles County Economic Development Corp.
While just released June 12, the data is based on 2015 numbers. The report found logistics-type construction in the Inland Empire dwarfed the other counties, with 20.8 million square feet of space added in 2015 and another 16.7 million square feet under construction that year, according to the report.
In comparison, 3.6 million square feet of related real estate was added to Los Angeles County in 2015, with another 2.8 million under construction at that time.
It’s best to position warehousing, logistics and wholesale trade facilities closer to population centers to provide quicker delivery times, especially with e-commerce, said Shannon Sedgwick, an economist with the LACEDC.
“The demand for large-scale warehousing operations has been continually increasing,” Sedgwick said by phone June 12. “The Inland Empire, with its relatively cheaper real estate and more industrially zoned land, a freeway network, and a built-in pool of potential workers, has driven the growth of the trade and logistics industry in the region.”
The study reveals that 598.3 million tons of freight valued at $1.7 trillion moved throughout the region in 2015. That equated to a daily average of 1.6 million tons valued at $4.7 billion.
Needless to say, all of that activity fueled lots of jobs.
A driver of employment
The LAEDC report shows that the region’s trade and logistics sector employed 580,450 direct payroll workers in 2015, a 9.7% increase since 2005. An additional 273,840 jobs were supported through indirect effects and another 310,490 were supported by induced effects, creating a total employment impact of nearly 1.2 million jobs.
Indirect jobs include workers who don’t directly produce goods or services but make their production possible or more efficient. Induced jobs take into account employees who work at local restaurants, gas stations, supermarkets and other businesses where trade and logistics workers spend their money.
The Inland Empire supported about half of those jobs and Los Angeles County supported another 40%.
Average wages are good
The pay isn’t bad. The average annual wage in the trade and logistics industry in 2015 was $63,130, about 14% higher than the $55,310 average annual wage for all other industries in Southern California.
Wages were much higher in certain segments of the industry. Those involved in support activities for water transportation earned an average of $111,120 a year, for example, and others who work in air transportation earned an average of $75,710 a year.
A significant economic impact
Trade and logistics in Southern California generates $224.6 billion in economic output annually, sustained by direct spending of $131.9 billion, which includes $43.5 billion in labor income paid to its employees, according to the report. Industry-related expenditures indirectly generate $47.2 billion in spending at supplier businesses in the region, and compensation paid to employees fueled additional spending of $45.6 billion.
But while wages are good, the ports of Los Angeles and Long Beach, Calif., are increasingly integrating automation in their operations — and that’s displacing workers. Trade and logistics industries are looking to become more capital-intensive versus labor-intensive through the use of new technologies.
Local ports integrating automation
The Port of Los Angeles has been transforming its TraPac terminal over the last several years by outfitting it with massive robots. Some are tasked with moving shipping containers from ships and stacking them nearby, and others load the stacked containers onto trucks for the next leg of their journey.
“We have eight terminals here and one is TraPac,” port spokesman Phillip Sanfield said. “It’s the only automated terminal and it was very expensive. The Port of L.A.’s investment in TraPac was more than $400 million. We’ll get that back and more over the course of their lease, but it’s very expensive to do this. And it takes years for a company to plan and get the environmental approvals to build an automated terminal.”
The Port of Long Beach has also been outfitting its Middle Harbor terminal with automated equipment, which is expected to be operative by 2020.
Self-driving trucks are also being used in warehouses in the form of autonomous forklifts. More recently, the truck transportation and drayage (shorthaul) industries are looking at self-driving trucks as a way to reduce costs and boost their profit margins. But that’s not going to happen right away.
“Regulations have to catch up with the technology,” Sedgwick said. “That kind of technology won’t be widespread until that issue is resolved.”
The federal government has yet to establish laws that deal specifically with autonomous vehicles. But several states have opted to enact their own statewide laws. Another major hurdle to widespread adoption is the public’s innate fear of seeing self-driving trucks on the road.
Automation in warehouses
Automation is also widespread in warehouse operations. Amazon is known for its orange Kiva robots, which transport shelving and bins to workers, who then pick the products. Several new startups are also poised to enter and transform the warehouse robot space. San Jose, Calif.-based company Fetch Robotics has created industrial robots that simplify warehouse product handling by following pickers to catch their selected items.
Fetch Robotics spokesman Tim Smith explains it this way: “Our robots are almost like moving pallets. “They don’t necessarily replace jobs, but they can do the worst part of a job.”
When workers retrieve merchandise from the shelves in the warehouse they can place them on a Fetch device, which then takes the items to wherever they need to go in the building. That eliminates the need for an employee to walk miles and miles throughout the day to deliver the products.
“A map of the environment is created when a robot is installed and that usually takes two or three days,” Smith said. “We have about 15 customers all over the world. One is in Livermore and others are in Asia and Europe.”
Drone deliveries
The LAEDC report also notes that delivery drones are being readied by several companies — including Amazon, Google and UPS — to make deliveries to remote areas or areas with heavy traffic congestion more efficient.
But drones without direct supervision of a person are not currently legal in the United States. Until they are, delivery drones will still require a human component.
Technology isn’t the only game changer in the trade and logistics sector. Labor issues, including disruptions and domestic outsourcing, have the potential to negatively affect the Southern California-based industry in terms of growth for trade volumes and wages, the report said.
