The what and why of warehousing-on-demand
Warehouses are big spaces, often in the middle of nowhere, storing goods in optimal conditions for months on end. Capacity utilization in a warehouse depends on the product and time of year.
Selling umbrellas and raincoats? You’ll stock up just before monsoons. Is Christmas coming? It’ll be hard to find space in any warehouse, anywhere in the US.
It’s a problem that manufacturers have grappled with for decades.
However, given the renewed focus on reducing costs, optimizing processes, and delivering better customer experiences, coupled with the democratization of technology, a new solution is emerging: Warehousing-on-demand.
In an exclusive interview with Charlie Pool, CEO, Stowga, TechHQ dives deep into the specifics of warehousing-on-demand and how it can help businesses.
Pool worked for a company that owned warehouses all over Europe and quickly learned that for parts of the year, every warehouse was under-utilized.
When you take all that space and add it up, it comes to millions of square feet of space.
“That’s space costs businesses money to own or rent when it could be generating income,” said Pool.
Demand for warehousing has never been greater, and hence, warehouse-on-demand providers are trying to use technology to unlock that “spare” space.
By giving retailers access to space, but without forcing them to commit to a long-term lease, new-age providers allow them to take space on-demand on a pay-as-you-go basis.
Switching the fixed cost of a lease to a variable cost means retailers can scale up or down their warehousing needs in line with their business needs, only paying for what they use. It seems like a far more efficient model and gives enormous financial and operational advantages.
Data collected from Stowga’s own warehousing partners suggests that the average warehouse is 75 percent full. That means, 25 percent of warehousing space is not being used and can be made available to on-demand players.
“When you multiply that number by the number of warehouses across the world, that is a mind boggling opportunity,” exclaimed Pool.
Almost every man made object will have gone through a warehouse at some point in its life. Often several times. As a raw material, then through manufacturing, then ready for retail.
Warehouses are the backbone of global trade and logistics is one of the few genuine trillion dollar markets yet to be disrupted by tech. Billions of square feet represent billions of dollars – it is an opportunity that is there for the taking.
Creating fluid supply chains
A supply chain is made up of two core elements: storage and transportation.
Transportation is the planes, trains, and automobiles that move the goods around. These things tend to be short term requirements – perhaps the longest being the six weeks or so it will take a ship to travel from China to Europe.
On the other hand, a warehouse lease will be years – often over ten years for larger warehouses.
That is a long term to be committed to a single facility and a single location. You have to design your business needs around the restraints of what that site offers, and your logistics around that location.
What if your customer base changes over that time? You are stuck, confined by the long-term static nature of the warehouse.
The warehouse is the weak link in your supply chain because everything else is short-term and can be moved around, whilst the warehouse is long-term and static.
Now imagine you remove the constraint of the commitment to a single site for years.
You switch your warehouse to a variable cost model and your entire supply chain becomes variable. Pool, who’ll be speaking at the Tech. event in London next month, believes this is a game-changer.
Suddenly, a world of possibilities opens up to your business by creating the option to build supply chains in seconds not months, and the ability to get out of contracts at short notice means you are free from the restraints of the old model.
You can test new products, new markets, and new business models, then scale up or down as required. In short, you embed agility into your supply chain.