On-demand warehousing is disrupting logistics supply chains
The logistics industry suffers from two key problems; it’s reliant on razor-thin profit margins and, dependent on the commerce partners on its members’ books, business can be largely seasonal.
These two issues are magnified as e-commerce giants like Amazon and Alibaba beginning to dominate retail. Building its own factory-to-door supply chains, which now include automated warehouses and air hubs, Amazon is becoming a logistics giant in its own right.
For smaller players, it’s becoming a hard task to drive a profit at peak times, but when seasonal sales declines mean logistics resources and warehouse space is increasingly left idle, staying profitable can be asking the impossible.
Airbnb for warehousing
In today’s digitally-empowered world, though, broken business models can be reimagined. Wherever there is a surplus, there is the opportunity to redistribute to meet demand elsewhere.
In logistics, there have emerged startups that are able to offset seasonal impact and give warehouse providers a fight chance against e-commerce titans. These are on-demand warehousing platforms, and essentially serve as Airbnbs of warehousing— an overused analogy, but one that sums up their model most neatly.
Equipped with easy-to-use software and API-based integration– logistics firms are turning to these new platforms to transform unused warehouse space into on-demand, short-term stock-storage solutions for merchants.
Serving as middlemen, on-demand warehousing platforms can give retailers and commerce partners access to pop-up storage for stock to suit their demands and locale– chopping back on hefty next-day, last-mile delivery costs– while logistics companies monetize idle space.
Flexe is one such leader in the US– whose partners have included Staples, Toms and Ace Hardware. Deloitte named it the fastest-growing company in Washington state last year, a testament to the gaping demand for resource redistribution in logistics.
Flexe says it set out to solve a “crisis of agility while trying to meet rising consumer demand”. It estimates that between 20 to 30 percent of warehouse space is unused at any one time. One-thousand partners have bid on warehousing space in the last year, the company says, which now amounts to a footprint of 30 million square feet through its network.
Unlike Amazon, shipping with companies like Flexe, partners have the additional benefit of shipping in their own packaging, at a lower cost, without sharing their data, while third-party logistics firms handle the heavy-lifting, storage, and delivery.
Flexe is not alone here. Surplus warehouse space is quickly been identified as a commodity and startups are flocking to exploit it.
On-demand warehousing on the rise
In the UK, another early success story is Stowga, which offers warehouse space under categories such as ‘overspill’, ‘temperature-controlled’, ‘grey space’ and ‘contingency planning’.
Waredock, meanwhile, markets itself as offering access to “hyperlocal” on-demand fulfillment centers.
Reflecting the global growth of e-commerce and mounting pressure for next-day delivery– and fostered by the leveler of digital technology– the on-demand warehousing market is emerging across the world.
“There has always been a demand for flexible storage and terminals in the traditional logistics industry,” said PingHooi Lim, COO of Malaysia-Indonesia based on-demand warehousing firm Mospaze, speaking to TechHQ. Up until now, however, the industry has been unable to make it happen.
Flexibility in logistics
When looking to lease space, the first question asked would be whether the retailer wanted a six month or year-long contract. The logistics provider would need detail on volume and sizes, and the quote would be offered at a fixed cost.
“In the offseason, warehouse providers know there will be 20 to 30 percent of space available within their sites,” said Lim.
“While one industry is in the midst of an offseason, another will be in peak season– the latter will always want to find overflow warehouses for the short-term, but they can’t access this without paying a fixed cost.”
Instead, on-demand warehousing platforms will are built around flexible storage. “If you have 200 pallets, for example, we’ll charge for 200 pallets,” said Lim. A retail partner will send a request for a location and volume required, and relevant warehouse providers will receive an alert on their phone or computer, allowing them to check their availability and accept if possible.
“You’re not paying a fixed cost which includes management fees– if you’re using a three-percent of a warehouse, you pay for three percent of the warehouse.”
Mospaze targets customers on the supply-side are ‘tier-two’ providers– or those that typically don’t have (or can’t afford) a high level of in-house technology or digital know-how.
On the demand side, however, the ‘pay-what-you-use’ model is catching the attention of large FMCG firms, such as Unilever and P&G, which work to the tightest of margins. There are clearly big opportunities for disrupting traditional logistics.
Of course, while each party using on-demand warehouse platforms may never directly interact with each other, like any other sector of the sharing economy, trust is still a great differentiator in the service each party receives.
For Mospaze, providing support to bring its partners up to the level required is a crucial part of the onboarding process. Capabilities and facilities to fulfill flexible orders are checked before a logistics partner is accepted. It even sends a ‘logistics expert’ to provide training if required.
“We audit them, we bring them up, and we put them in the system, we have to ensure the quality of services,” said Lim.
“The customer just needs to make sure they deliver on time.”