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On-demand warehousing: Solving storage issues

31 May 2017

Martin Elgood, managing director of Zupplychain, a web-based matching service for on-demand warehousing, explains why utilising the sharing economy which has been so successful in the B2C and C2C markets could be profitable for growing retailers needing storage.

E-commerce has grown to be the cornerstone of almost every business owners’ omni-channel strategy. According to the Office for National Statistics, 77% of the British population made online purchases in 2016, and with a higher market share than its European counterparts, the e-commerce trend shows no signs of slowing down. 

However, while this growth is advantageous, it comes at a cost. Many retailers have been forced to reconsider their own store models having cannibalised their own physical stores by offering online grocery services, leaving many to seek new ways of using space in their existing estates. 

Coupled with the vast depletion of warehouse sites in areas such as London and the South East, and with lead times of up to two years to develop, procure and deliver industrial space, many SME manufacturers and fast growing e-commerce businesses face huge challenges.

Sharing economy 

With success in sectors such as accommodation, lift-sharing and peer-to-peer lending, the ‘sharing economy’ model has proved a popular economic force over the last decade, achieving most impact in the B2C and C2C sectors. But, if applied to the warehousing industry, could it become one of the first B2B sectors to be reshaped by shared economy principles? 

The application of the model within the third-party warehousing industry has led to a new term – on-demand warehousing – and this model has resulted in new web-based businesses creating Airbnb-style sites, which match those with spare warehouse space to those in need of storage. However, unlike the common and simple ‘list and connect’ methods employed elsewhere, some on-demand warehousing sites are developing mini warehouse management systems, which allow customers to manage stock located in third party warehouses through the websites. 

Working to aid both warehouse providers and customers, on demand warehousing allows companies with too much warehouse space to rent it to those who need it – usually for structural or seasonal reasons. Likewise, manufacturers who are seasonally-biased may be storage providers for some of the year, but a user of others’ warehouse spaces during their seasonal peak. 

Reasons to require short term storage include seasonality, peak requirements, promotional stock builds, over-stocks from missed sales-forecasts and the desire to move slow moving or obsolete pallet stock from the front line. Quite simply, a fast-growing business that can’t wait for new warehousing premises can solve its problems with short-term storage. 

The model also extends beyond the dynamics of short-term storage. In addition to ‘emergency outsourcers’, there are ‘tactical outsourcers’ using on-demand solutions. There are businesses that have outgrown their warehousing capacity and instead of building or leasing new premises, they want to use on-demand warehousing for their marginal requirement without capital investment and/or ongoing fixed costs. 

Then there are those who need a low-cost, localised solution in order to grow their business - such as West Yorkshire-based cardboard tube manufacturer J Stell & Sons. A new potential Scottish-based customer requested regular deliveries of a small number of pallets but, because of the high cube/low cost nature of the product, direct shipping was going to be cost prohibitive and Stell risked losing the deal.  

Stell contracted low-cost, localised warehousing in Glasgow, via ZupplyChain, to enable 24h call offs of small pallet quantities. ZupplyChain’s stock database also gave Stell both an audit trail for invoicing the customer and a fool-proof system to remotely manage a complex product specification change, resulting in no miss-picks. Stell is now looking to target other business opportunities across the UK using the ‘on-demand’ warehousing model.

So, will on-demand warehousing radically change how businesses think about where and how they source warehouse space? With most industries still using traditional build or lease models, only time will tell. But, if it does, the sustainability implications of higher utilisation of existing warehouse space, rather than building anew, are significant – and the ambitions of businesses like Zupplychain may mean some fields in this green and pleasant land remain green.