All Commentary
Monday, January 2, 2017

A Tribute to the Warehouse

It's a cloistered world that is a driving force for progress

Online commerce is trending toward 10 percent of all retail, and it is growing rapidly. We click and pay, and, if it’s not a digital good, the good arrives at our home a day or two later. Hardly anyone remembers “allow six to eight weeks for delivery.” Everything comes fast. And if it isn’t in stock, we are notified. When it is shipped, we are notified. We can track our packages online, following them stop by stop.

The warehouse has been a feature of the commercial world since the most ancient times.The goods go straight from the manufacturer to the warehouse and then to our homes, eliminating the display racks, store fronts, retail outlets, salespeople, and everything else in between those stages. The most unassuming stage — and the stage that is increasingly important in modern commerce — is that warehousing stage, where products rest and wait for consumer volition to awake them from their slumber.

The warehouse has been a feature of the commercial world since the most ancient times. Jesus even has a parable that involves a grain warehouser who amasses ever more grain without selling any and then finally dies. Yes, that’s how the story ends.

The warehouse in our times is assuming ever-greater importance. The globalization and digitization of commerce has turned the warehouse from a useful institution into the very heart of commercial life.

Awesome Technology

The technology that drives the warehouse has undergone upheaval over the last ten and even five years. Once it was all about faxes and typewriters. Now, web services in the cloud can connect warehouses around the world to a dozen different shippers and hundreds of retail websites, all communicating with each other in a fraction of a second.

The time between the end user’s purchase and the printing of the label on the box is down to minutes. It is entirely possible to order at 8 p.m. and receive the goods the next day, even without paying for the rush.

The warehouse is a world as cloistered as a medieval convent. Despite this incredibly modern technology, the warehouse is a world as cloistered as a medieval convent. Its underlying purpose is not the salvation of souls in the afterlife but the betterment of mankind in this one.

Cities around the country have reported gigantic increases in the demand for warehouse space. The orders keep becoming ever more stunning: 10,000 square feet; 100,000 square feet; and even 650,000 square feet. Whole communities are emerging from coast to coast that consist of nothing but huge metal buildings with loading and unloading docks.

The same is happening in China, India, Malaysia, and Latin America. Formerly uninhabited spaces — warehouses tend to emerge in low-price areas — are being converted by the day.

Remarkably, most people will never enter a warehouse and never experience their strangely busy-but-contemplative environment, which is unlike any other on this earth.

Our Cathedrals

The lighting is lower than one might expect and peculiar because it exists in a giant windowless space sealed tightly on all sides. The only natural light one can see is from the dock for loading and unloading, a space that gives the otherwise directionless cavern a spatial orientation and purpose.

The ceilings are unnaturally elevated, with shelf after shelf soaring up to ominous heights. The visual orientation is equally weighed vertically and horizontally, like an old European cathedral, and the employees are as comfortable navigating one direction as the other.

They can speed from one point to another as quickly as they can leap into the air on their specialized machines. Their digital charts might indicate a need for a pallet 150 feet up, and they will traverse the space and come back with their prize — it could weigh several thousand pounds — in what seems like seconds.

They do this without comment or even notice from anyone else. They are nonchalant about the feats that amaze visitors. Indeed, the employees in the warehouse do not talk without purpose. And when they do speak, they use a language that is entirely about their craft. It seems like a code, but they all understand each other. The volume of their voices is low, and they speak in quieter tones than one would expect.

The temperature varies based on the season, but the warehouse is tightly sealed on all sides but the dock. It can be bracingly cold in the winter, employees wearing heavy coats and gloves indoors — and uncomfortably warm in the summer — but always to a lesser degree than the world outside.

Its orderliness — nothing is unaccounted for — conforms to one ancient definition of beauty itself.Nothing in the warehouse is designed to be beautiful, but the sheer utility of every physical thing in it creates its own beauty. Its orderliness — nothing is unaccounted for — conforms to one ancient definition of beauty itself.

And its cleanliness is also unexpected. Surely a space this gigantic, used only for storing things, would have its pockets of dust and grime. Not so. A white glove can touch anything in the best warehouse and come up sparkling white.

The noises one hears are almost entirely mechanical: beeps, hums, grinding conveyor belts, stamping machines, trucks coming and going. They can be random and loud; but for those who work there, nothing is startling. You begin to discern all movement within the space by the sounds alone, same as you can tell what people are doing in your own house by the noises they make.

What about the people who work here? There are permanent employees and temporary workers who specialize in helping out in high-volume seasons. There are bosses, owners, strongmen, accountants, managers, packers, and the inevitable geek who is running and managing software behind the scenes.

They stick to the task all day, but mingle very well socially during lunch and other break times, which come as regularly as prayer times in monastic life. During these times, they talk about anything but business. They revel in the differences in their eating habits, talk about movies, share tips on places for happy hour, and generally find commonalities in the usual joys and sufferings of daily life.

Then the clock signals that it is the time to begin the work again, and the place starts humming with the coordinated and orderly mechanism of machinery, software, and human effort: a dazzling integration of all forms of motion possible in this world.

Think of this: every item stored in a warehouse is seemingly idle in an economic sense, not currently employed in consumption or production. Everything is held here on the presumption that at some point someone will purchase it. This cannot be known for sure. It is a speculation, an entrepreneurial judgment that could be right or wrong.

Imperfect Information

No government mandates caused these warehouses to come into existence.If there were perfect information about the future, the warehouse wouldn’t exist at all. All goods would be manufactured on a need-be basis only, with no storage needed or necessary. Despite its stillness and orderly calm, then, the warehouse embodies a wild leap into the unknown — a physical monument to the human capacity to imagine a future we cannot see.

This isn’t a bug of the system. It is a feature. And it’s the same with banking institutions of old, which served a warehousing function as well. The money wasn’t idle, contrary to what the opponents of the gold standard and pushers of fractional-reserve banking said. Not at all. It was a service that came to terms with the reality of uncertainty of the future.

No government mandates caused these warehouses to come into existence. In fact, we the consumers have caused this, not with direct demands but with subtle market signals derived from interpreting profitability spreadsheets.

Hayek would use the term “spontaneous order” here, but the warehouse puts the emphasis on order. They are a prime example of how a market operating on its own, with no one in particular in charge, can create these cells of coordination — symphonic exhibitions of productivity in the service of humanity.

Rooted deep in history and yet uniquely modern, the warehouse has emerged with its own culture, shape, and conventions, all created and shaped by market signaling and entrepreneurial insight.

This piece ran at Mises Canada