Flexible warehousing has been kind of oxymoron as Flexibility and “warehousing” haven’t traditionally gone hand in hand. Warehousing has been a fixed cost for decades—requiring resources to build and manage new infrastructure or long-term, fixed contracts with third-party providers.
That’s how traditional Supply chains have been built to cater to specific business requirements. And over time these have been pushed to be efficient by deploying extra resources and building excess capacities.
But new age businesses have realised that this is not a sustainable model in today’s business scenario and cannot be deployed to cater to the requirements of modern businesses. According to recent paper by Manhattan associates, it is no longer enough for supply chains to be efficient only, they must also be agile, nimble and supported by technology and organizational flexibility.
There is an increasing need for flexibility, both for start-ups unable to predict volumes and established players looking for flexibility to scale & support targeted marketing campaigns, or seasonality or disaster recovery events which generate localised spikes in the short to medium term.
Business requirements like these have created the need to for flexible warehousing.
4 Potential reasons causing this change!
1st the demand for flexible warehousing is being driven by a variety of omnichannel & online retailers, IT driven / enabled businesses. As the share of population living in cities grows, and ecommerce spending driving direct-to-home deliveries with aggressive lead times, the need for urban storage locations is increasing as companies seek to store products closer to customers. This is in line with Amazon and Flipkart of the world who have changed delivery expectations of customers to an hourly window. Many retailers, now, need to match it to stay competitive. This requires them to be closer to their customers and as such retailers of all sizes now need many more points of sales / shipping to cut down their transit time and shipping costs. This increased demand for near-customer warehousing is in stark contrast to a decreasing supply of available land as different sectors compete with logistics for space. As companies rethink the increasingly urban final mile, Flexible warehousing provides the perfect opportunity to better serve customers and do so without major investment in fixed infrastructure.
2nd, smaller retailers aren’t equipped to handle unpredictable forecasts and can’t always hit the minimum order requirements of larger 3PLs. Apparel & Retail clients are looking for more cost-effective ways to temporarily scale up during peak season and hence they’re looking for new options of supply chains.
3rd, the growing headache of managing ‘peak’, which have traditionally been managed with temporary rental facilities, but with rental prices rising and start-up retailers adding to the battle for space around festive seasons this is proving more difficult. Some retailers build up, temporarily for peak, accepting they will be left with empty space for some of the year. Others have no clue what to do and risk the business when peak stretches capacity. Flexible warehousing offers the chance to rethink the model.
4th, Pandemic like Covid19 has added huge variability in demand & supply and have caused a greater need for flexibility in business models. As per Marsh, the quest to be lean and agile through the miracle of global just-in-time production leaves little room for resilience in the face of new or critical disruptions such as those caused by COVID-19, with major firms worldwide reporting stoppages and slowdowns. The pandemic has completely changed the way with which supply chains used to be looked at. It has fortified the belief that strategic balance in supply chain design is a must in order to create the necessary resilience in business models especially when important elements are considered like Centralisation vs Decentralisation, Static vs Flexible, Lean vs Agile.
On-demand & Flexible Warehousing Models can provide the answer!
On-demand Warehousing platforms like Warehousity, fundamentally, changing the game for managing your supply chain. You no more need to invest in long-term leases or fixed costs and spend your crucial time of 2-3 months to make the warehouse operational. Through Warehousity, you can start within 3-5 days with lots of flexibility which is not available with traditional 3PL models.
On-demand warehousing enables companies to access warehousing and warehouse space on demand and pay as per only for what they use, unlike longer contracts with 3PLs. The options also enable Retailers, Brands & Start-up’s alike to more efficiently scale and grow at a time when rents are inching northward.
This article is contributed by Mr Mansingh Jaswal, A corporate executive turned Serial Entrepreneur & an Angel Investor, having a professional experience of over 20+ years in Supply Chain, Logistics, Transportation & International Freight and a Research Scholar in Strategy at Management Development Institute (MDI), Gurgaon, India.