Warehousing & Fulfillment

The Rise of On-Demand Warehousing (and How It Can Help Your Business)

On-demand warehousing is a flexible solution for companies looking to scale up their businesses and handle inventory fluctuation.
The Rise of On-Demand Warehousing (and How It Can Help Your Business)
Jules

By Jules

 

July 8, 2020

The growth of eCommerce and consumer demand for next day shipping has forced retailers and brands to seek out new, flexible logistics and fulfillment solutions to stay competitive in a crowded marketplace. Enter on-demand warehousing.

Interior of an on-demand warehouse
Photo by chuttersnap

On-demand warehousing is a driving force in how the sharing economy has changed the logistics world. Such tech solutions fueling the introduction of shared warehousing, helps companies scale up and fulfill demand rapidly to match the quickly changing market conditions.

On-demand warehouses provide retailers and brands with flexible warehousing solutions, making it easier for companies to scale their businesses and handle inventory fluctuation. That said, shipping companies should consider adapting to this seemingly new technological wave to better their businesses. Taking advantage of on-demand warehousing companies coupled with an advanced fulfillment solutions provider, such as Easyship, is the recipe for better shipping solutions.

What is On-Demand Warehousing?

While there is no perfect definition for on-demand warehousing, it can be framed as a warehouse “AirBnB.” Retailers and brands that need flexible warehousing solutions can connect with warehouse providers with unused space through easy to use app-based tools.

This option provides eCommerce businesses with the possibility of accessing warehouse services anytime they require through a pay-as-you-go model, allowing them to avoid making long-term commitments.

How Does It Work?

On-demand warehousing rides on the concept that even with the high demand for warehouse spaces, eCommerce and shipping companies could not predict how they will use it. Whether small or established, most companies often find challenges in meeting their anticipated growth levels and cannot estimate the required storage space. At one point, there could be a surge in demand, especially following a new product launch or during holiday seasons, followed by a sudden drop, leaving warehouse spaces lying empty.

This model connects on-demand warehousing companies with excess storage space with shipping companies and retailers looking for flexible warehouse space. With the on-demand pay-as-you-go model, eCommerce businesses can easily find warehousing and shipping fulfillment solutions without long-term contracts and expensive set-up fees.

What makes on-demand warehouses promising is their unmatched agility. Unlike 3PLs (Third-party logistics) which operate under long-term leases with thousands of pallets, on-demand uses minimal pallets for a flexible time period.

Essentially the core of on-demand warehousing is to use less space in more facilities. This blurring of the line between warehousing and distribution centers enables shipping companies to fulfill their orders within a few days compared to 3PLs.

Coupled with advanced tracking and product supply chain management, on-demand warehousing has an edge in becoming the best warehousing option in a competitive marketplace.

Probably one of the best examples of on-demand warehousing is the Ware2Go application previously launched by UPS. The application connects small and medium-sized eCommerce businesses with warehouse solutions that streamline their order fulfillment. Large companies, such as Walmart, KFC, and Ace Hardware, also embraced flexible warehouses during holidays and emergencies, helping them cope with various supply-chain challenges.

While the rise of on-demand warehouses has offered more flexibility to the industry, they’re unlikely to replace 3PLs completely. 3PLs are highly adaptable to advancing technology and benefit from the experience of handling high-volume warehousing procedures., leaving flexible warehousing as a supplement that fills the pre-existing warehousing gaps.

Who Uses On-Demand Warehousing?

Various industries, ranging from businesses dealing with fast-moving consumer goods, industrial manufacturing to the hospitality industry, can benefit from on-demand warehousing. Both large and small companies seeking to upgrade their supply chains can use this model. Below are how companies can use and benefit it.

1.   Enterprises

Enterprise businesses can leverage on-demand warehousing to complement their already existing order fulfillment infrastructure. It is a great option for rolling out new initiatives, managing potential supply-chain disruptions that come with peak seasons and tariffs, and piloting new programs or product/service promotions.

2.   Digitally established brands

Online born and bred companies can also leverage on-demand warehousing for various purposes. Most online-dependent companies focus on acquiring customers and developing their business before the supply logistics, which enables them to work them to grow worrying about finding physical warehouses.

Warehouse aerial view
Photo by Marcin Jozwiak

Related post: Warehousing & Fulfillment - Definitions, Benefits, & Finding the Right Logistics Company

The Difference Between Traditional 3PL and On-Demand Warehouse Providers

There are key differences between traditional 3PLs and on-demand warehousing solutions that you’ll want to understand before making a decision for your business.

  • Central vs. dispersed warehouse network

Traditional third-party logistics providers supply central warehousing solutions in a few select locations. On-demand warehouses operate a series of dispersed warehouses and shipping fulfillment centers.

  • Upfront costs vs. flexible billing

Traditional warehousing solutions generally require significant upfront capital and long term contracts while on-demand warehouse solutions offer flexible billing and contracts.

  • Working directly with a warehouse provider vs a tech platform intermediary

With a 3PL, you work directly with a warehouse solutions provider while an on demand-warehouse provider is a technology platform that allows you to connect to short-term available warehouse space.

  • Long Terms Partner vs short term solution

A  3PL with proven logistics and fulfillment expertise offers stability and a long term partner willing to understand and grow with your unique business. An on demand-warehouse offers short term flexibility but there’s no guarantee of consistent service quality across the network.

Every eCommerce business is unique and needs different warehouse solutions to efficiently deliver their products to customers. On-demand warehousing providers offer new, flexible solutions worth considering for specific cases, while traditional 3PLs offer more stability and a long term partnership.

On-Demand Warehousing Offers a New Flexible Solution

Deciding whether flexible warehousing suits your business model or not depends on various factors. Just like when selecting an appropriate fulfillment arrangement, you should find companies that offer ample space, have the necessary tools to handle your products, and observe appropriate order distribution practices.

With costs becoming a growing concern in warehousing and fulfillment, on-demand warehousing is likely to become an established option for retailers and brands as they grow their business. On-demand warehousing attempts to solve various growing concerns of customers, such as scalability and inventory fluctuation, which is a welcome industry developmentThat said, as you consider growing your business leveraging on-demand warehouses, you should ensure that you find a solution that integrates Easyship as a shipping fulfillment solutions provider. Through this, you can be sure of a seamless shipping and order fulfillment.