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GXO Logistics to Lay Off 144

GXO Logistics will close a warehouse in southeast Wisconsin in September following a customer’s retooling of its real estate footprint.

The logistics giant notified the Wisconsin Bureau of Workforce Training last week of the permanent closure at its Sturtevant, Wis. facility, which was first reported by industry trade FreightWaves.

The closure impacts 144 workers there, according to the filing, including freight loading and unloading vehicle operators, material handlers and customer service positions.

GXO said it is working with those employees on possible job placements at other company locations in the area, which is also set to see the opening of a new facility later this year.

“Building on our successful partnership, our customer has made a strategic decision to relocate its warehousing operations to northern Kentucky later this year to be in close proximity to its manufacturing,” a spokesperson said in a statement provided to Sourcing Journal. “While we look forward to continuing to work with them as they relocate their operations, GXO remains committed to being an employer of choice in southeast Wisconsin.”

Greenwich, Conn.-based GXO, with a market cap of about $5 billion, spun off from XPO Logistics last August to focus solely on the contract logistics business, while XPO continued on with providing transportation services.

GXO’s portfolio consists of about 200 million square feet of space across 900 facilities. Companies hire GXO to manage their warehouse fulfillment operations, with e-commerce helping drive the business in recent years.

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The company’s shares closed up 6 percent on Tuesday, after GXO said it struck a deal to use fulfillment robotics company 6 River Systems‘ robots to help warehouse employees with tasks such as picking and sorting.

GXO executives told analysts earlier this year during the company’s first-quarter earnings call, it’s been boosting the amount of automation in its facilities in more recent years and automated warehouses have helped drive a big part of its U.S. business.

The pandemic drove rapid change in companies’ supply chain strategies and many are now looking to keep pace with yet another shift in demand trends influencing how fulfillment networks are being structured.

“We are clearly in an environment where supply chains have become far more complex and will require a much greater scale and innovation,” GXO ceo Malcolm Wilson told analysts in May.

The environment is clearly undergoing a correction in industrial real estate footprints, although many remain bullish on their long-term outlooks.

Prologis, the world’s largest owner of industrial real estate, noted Monday in its second-quarter update a normalization of the market as it relates to demand for its distribution centers and warehouses compared to the frenzy that occurred during the pandemic’s e-commerce boom.

Still, demand for industrial real estate is expected for “years to come” as Prologis chief financial officer Tim Arndt told analysts Monday, with companies’ continued focus on supply chain resiliency and inventory availability.

Elsewhere in the market, Amazon said earlier this year it would be rightsizing its own industrial real estate portfolio following the doubling of its warehouse space in response to the changing tides of demand compared to what was seen during the height of the pandemic.

Still others see COVID as the start of a movement towards U.S. reshoring, which could also hold implications for the country’s industrial real estate market.

“Global supply chains remain stressed two-plus years after the COVID outbreak, struggling to handle economic stops and starts,” UBS analyst Chris Snyder said in a note to investors this month. “We think the continued disruption supports our call that the pandemic could serve as a catalyst for U.S. reshoring and broader investments in supply chain resiliency (i.e. automation).”

The analyst pointed out corporate reshoring about doubled in the first quarter compared to how companies operated before the pandemic.

“Our view is that the benefit of outsourcing is in structural decline (cheap labor) and the cost is more apparent than ever (supply chain risk), tilting the scales in favor of domestic production,” Snyder’s note said.