How Will Tariffs Effect Warehousing?

Inventory Management Shifts

• Stockpiling: If a tariff is announced but not immediately enacted, companies might rush to import goods before the tariff takes effect. This leads to a temporary surge in inventory, requiring more warehouse space.
• Just-in-case vs. Just-in-time: Businesses may shift from just-in-time inventory (lean) to just-in-case (buffer stock), increasing warehouse storage needs.

Demand and Throughput Changes

• Higher product costs due to tariffs can reduce demand, which slows down the turnover rate in warehouses.
• Lower turnover = more goods sitting longer = potentially higher carrying costs.

Supply Chain Rerouting

• Change shipping routes
• Require new warehouse locations
• Demand more flexibility in warehouse operations

Cost Pressures

• Increased product costs from tariffs can lead to cost-cutting elsewhere, including in warehouse operations.
  • Reduced staffing
  • Investment in automation to increase efficiency
• Alternatively, companies may pass those costs to warehouse providers if 3PLs are used.

Global Trade Zones and Bonded Warehousing

• To defer or avoid tariffs, some companies use Foreign Trade Zones (FTZs) or bonded warehouses.
• Goods can be stored in these zones without immediately incurring tariffs until they enter the domestic market.
• This can increase demand for specialized warehousing.

Complexity in Operations

• Tariffs can complicate customs compliance and documentation, leading to:
• Longer dwell times
• Increased need for trained personnel
• More investment in warehouse management systems (WMS) that can handle customs and trade compliance data