Flexible Warehouse Space Models Help Solve Last Mile Delivery ChallengesUsing Creative Solutions for Warehouse Space Helps Solve E-Commerce Fulfillment Challenges
In an atmosphere fraught with uncertainty, supply chain businesses are struggling to keep pace. From the booming e-commerce industry to the U.S. manufacturing recession, pop-up tariffs and raging trade wars, companies across the supply chain are trying to find temporary solutions to major challenges.
As the United States continues to flex its economic muscle, exercising its prerogative to initiate tariffs across the globe, many companies are finding it difficult to make long term distribution, technology and real estate investments and partnerships. As Amazon and its competitors are pushing to increase the speed of fulfillment to a next day or even same day standard, fulfillment centers, warehouses and distribution centers are trying to find ways to meet the need for speed without escalating costs.
As online sales continue to climb, more final mile distribution centers are needed across America. To succeed in today’s world, flexibility and an innovative spirit are needed. The industrial real estate market has innovated a new alternative to the traditional long-term warehouse model, one which meets the need for flexibility and provides a short-term option to traditional warehouse properties, including properties for lease.
Conventional warehousing typically involves multi-year contracts for an entire warehouse, capital investment for purchasing technology and equipment and monies for the hiring, training and retaining warehouse workers, maintenance, utilities and more. The traditional warehouse model is stagnant but predictable.
The Rise of Flexible Warehouse Space Operational Models
What one trait do businesses need to be successful in this century? Flexibility. Agility. The ability to adapt quickly to change can help supply chain logistics businesses weather the storms of uncertainty, rapid evolution, adoption of new technologies and other factors. With the rampant shortage of warehouse space near population centers, it can take up to a year to find warehouse space and negotiate the lease or sale. In addition, contracts for warehouse space may be up to 15 years in length. As the rest of the supply chain has adapted to the need for more rapid change, warehouse space remains tied down.
In the past two to three years, the need for flexibility has greatly increased. Consumer needs and expectations, the global economy and political forces have combined to create a world that now undulates with change from one side of the world to the other, and back again. From changes in exchange rates, new tariffs and trade wars and competitors clamoring for the attention of consumers, supply chain partners such as retailers, manufacturers and the distribution centers, fulfillment centers, warehouses and 3PLs that serve them must be able to change rapidly and with little notice.
Retailers that have available warehouse space sometimes want to use the space to provide additional income. Warehousing-as-a-service can be an effective solution for this. A service works with a retailer to refine the parameters of what is needed in terms of space, duration and location. With warehousing-as-a-service, the retailer can agree to terms as short as one month. Payment is typically on a “pay as you go” basis, on demand. The warehouse-as-a-service model enables the retailer to take advantage of a suite of other warehouse services which can be scaled up or down as needed.
From new product launches to early import of goods to prevent being charged for impending tariffs, having the flexibility to scale warehouse space and services up and down could be a game changer. This can help to open up new business models, enabling fulfillment away from large centralized hubs to numerous smaller locations across a wider area. This can help to reduce delivery times and costs and provide a better customer experience.
Who is the big winner in the WaaS space? Usually third party logistics providers. 3PLs typically use technology and have experience servicing and billing multiple clients, each under their own contract terms to their own specifications. For a 3PL, WaaS is not such a big jump. 3PLs also have another advantage. Third party logistics providers that already service retailers are accustomed to their practice of moving goods to forward locations to facilitate rapid delivery and may have experience with new product launches and other common practices.
Some 3PLs such as XPO Logistics have begun to offer a network of warehouses and last-mile delivery hubs with shared space distribution capabilities as an alternative to regional fulfillment centers that operate at fixed costs. Using this model, XPO Logistics can stockpile inventory within a one-or two-day delivery radius of 95% of the U.S. population. Using both traditional warehouse and distribution models in combination with warehousing -as-a-service can provide a retailer with the maximum flexibility needed to execute a successful e-commerce retail and delivery strategy.
Creative Micro-fulfillment Options
Using a network of very small warehouse space, operators can distribute within a small local area. This may mean using alternative space for warehouse storage such as:
- A network of trailers, tents, shipping containers or other alternative spaces in strategic locations
- Utilizing unused storage or office space in local stores or bodegas for mini-distribution centers
- Using vertical space available after implementing taller racking systems in warehouses
What is Co-warehousing?
Following popular trends in office and retail space, multiple companies that have inventory management and warehousing needs contract for space and services within one warehouse.
Companies such as Flexe locate available warehouse space for companies that need storage capacity without the demands of a long-term contract or need to build.
- Pay-as-you-go for only the space you need
- Month-to-month control over your budget
- Ability to change storage to meet your changing needs
- Eliminates or reduces capital outlay for technology and equipment
Co-Warehousing Platforms Help Solve Last Mile and Final Mile Delivery Challenges
The uptick in demand for final mile distribution, that last link in the global supply chain connecting consumers to the supply chain is often the costliest leg of the journey. With the tremendous emphasis on speedy delivery, having final mile warehouse space in optimal locations near populated areas has proven to be an increasingly complex obstacle.
Enter co-warehousing platforms and facilitators. All across America there are warehouses with varying amounts of available space that can be utilized to solve this problem, especially in 3PL warehouses. Leveraging the expertise of co-warehousing facilitators with that of experienced 3PLs is a winning combination, filling unused warehouse space and enabling greater efficiency of labor. As the foremost occupiers of industrial space, notably for warehouses, fulfillment centers and distribution centers, 3PLs are more likely to turn to co-warehousing facilitators to fill spare, available space to boost revenues.
Some space is designed around the specific needs of e-commerce businesses. For example, CLIK Collective in Australia provides co-working space for e-commerce retailers, loading bays and warehouse space, photography studios and showroom facilities all within the same footprint.
No matter if you are a retailer or e-tailer looking for warehouse space in San Francisco, Fort Lauderdale, San Antonio or South Carolina, industrial real estate, more specifically warehouse space is hard to find close to urban areas. From Los Angeles to North Dakota, everyone is bemoaning the inability to find available warehouse storage space.
Whether your business is a startup, lacks distribution assets or is a large retailer that needs to add flexible warehouse space to its bag of tricks, new warehousing models are available to try on a short-term basis. Designed to be a “win-win” scenario for both warehouse operators and clients, the new warehousing models allow clients to have more control over the flexibility of their warehouse space and services.
Try removing the limits of only searching for “warehouses for rent” to “warehouse space for lease” and open up your options to include creative space planning, perhaps in a micro-fulfillment space scenario or vertical space, depending on your inbound and outbound requirements. Consider crossdocking options and make sure that the warehouse operator provides WMS that can schedule appointments for dock doors.
Make sure you give proper consideration to positioning fast moving SKUs for ecommerce fulfillment when dealing with alternative warehouse space. Doing some innovative planning, working with a co-warehousing facilitator or Warehousing-as-a-Service provider may bring flexibility and cost savings and help ensure overall success.