Kenco discusses the slowdown in warehouse development despite the boom in e-commerce. They emphasize the importance of careful planning when closing a warehouse. Kenco speaks on the importance of legal compliance, empathy towards employees, and the importance of a well-defined closure plan that considers the needs of all stakeholders.

With the explosion of eCommerce options over the last few years, for quite a while it seemed as if the narrative around warehousing was how quickly companies could construct a building – or even repurpose older buildings, such as aging malls, into distribution facilities.

But for multiple reasons, some big retailers have cooled the jets on warehouse development. It could be sales aren’t high enough to support so many facilities, or the retailer is consolidating/moving facilities to improve shipping times. Although Amazon continued to grow rapidly in 2022, it also announced it was closing or cancelling nearly 100 new facilities. And the Bureau of Labor Statistics found warehouse employment in December 2023 was at its lowest levels since November 2021. It’s a good reminder that the logistics marketplace still faces plenty of growing pains.

For shippers that do decide to shutter a warehouse, their management must be careful and work closely with their 3PL partners to cross all their I’s and dot all their T’s. The impact of closing a warehouse is felt far beyond the bottom line. It will be felt by employees as well – and the process can involve legal action if executed improperly. Here are a few tips businesses should keep in mind when closing a facility:

Communications with warehouse employees

Laying off employees is a difficult task, period. Emotions can run high understandably, and if it’s not approached with care, it can leave a shipper and the 3PL they hired open to lawsuits. The Federal WARN (Worker Adjustment and Retraining Notification) Act requires businesses with at least 100 employees to provide a 60-day notice before commencing layoffs of at least 50 employees. The gap gives employees a chance to look for new work or begin reskilling. In every contract between a shipper and 3PL, it’s essential to allow for more than a 60-day notice that a warehouse will be closing. If 3PLs fail to give their employees 60 days’ notice, they may be liable for two months of severance and benefits for each employee affected (read more about the WARN Act here).

The 60-day notice may have the effect of reducing employees quickly – employees could begin to leave as soon as they find new work, and warehouses may struggle to complete their final orders. Shippers that expect to be in this situation can offer retention bonuses as an incentive to keep employees on the job longer. They can also offer severance so the employees who stay aren’t left without an income stream post-closure.

When the warehouse is only changing hands – not closing: one special case, especially if a 3PL provider is involved, is when a warehouse is remaining open but under a different operator. Management is changing hands, and new product is potentially entering the facility, but the picking/packing team will remain the same (assuming the new 3PL wants to hire the employees of the current 3PL). Both the 3PL provider taking over the facility and the 3PL provider leaving the facility should collaborate on a continuity plan – employees shouldn’t be left in the dark because the operators aren’t communicating with each other. Set up meetings to discuss new expectations and new benefits, and demonstrate to employees how their commitment is key to a successful transition.

It’s more than a shuttered warehouse

The most important tip employers should remember when closing a facility: lead with empathy. Any conversation an employer has with its stakeholders should demonstrate the business understands hardships brought on by the closure/move and offer feasible solutions that reduce any burdens. Likewise, laid off employees are thrust into uncertainty on top of a job hunt – so employers shouldn’t do the bare minimum under the WARN Act. They should be ready to answer employee questions, offer severance and benefits to make the transition easier, if they can, and provide access to reskilling opportunities that can open doors to a new career.

When an employer has a step-by-step closure plan in place that takes all involved parties’ needs into account, shuttering a facility – and potentially launching a new one elsewhere – will be a far easier, more empathetic process.