When and where to use on-demand warehousing
By some estimates, up to nearly a third of warehouse space in the U.S. goes unused every day. Whether it’s because of a spike in demand that emptied the racks or a leased space losing an occupant, this space could surely be put to better use. A recent innovation in the warehousing industry aims to do just that.
What is on-demand warehousing?
On-demand warehousing allows companies to pay for storage on an as-needed basis rather than building, purchasing, or leasing warehouse space on a long-term basis. This allows businesses more flexibility and responsiveness to deal with changing market conditions and, in some cases, can save them money as well.
For businesses that don’t have the size or resources required to build or purchase a warehouse, signing a long-term lease with a company that specializes in warehousing and fulfillment has been the alternative solution. These leases often require a long negotiation process and minimum inventory levels that can make it difficult to respond quickly as the needs of a business change.
Companies that specialize in on-demand warehousing connect warehouses with unused capacity with businesses that need storage space on a short-term basis. Those businesses then pay only for the space they actually use, which can cut down on their expenses. On-demand warehousing providers may also provide additional services, such as inventory management, packaging, and shipping.
What are the benefits of on-demand warehousing?
One of the main advantages of on-demand warehousing is scalability. Because no drawn-out negotiations or long-term commitments are required, businesses are able to adjust their storage space as their needs change. For small businesses, this means that they can scale up as they grow. Large retailers can also benefit when there are sudden spikes in demand for certain products causing an unexpected change to their warehousing needs. After the demand passes, they can then easily and quickly scale down. This is also useful for seasonal products with high demand for short periods each year, such as Halloween costumes and decorations.
Another advantage is the ability to react as new geographic markets emerge. If a business whose customer base has primarily been on the east coast, for example, begins to see growing demand in California, rather than shipping goods individually to customers on the other side of the country, they can quickly secure warehouse space and even fulfillment services in that region. The savings on shipping that result from this supply chain optimization could be significant, as well as the environmental benefits of shipping shorter distances. Customers will also appreciate the reduced delivery times.
What are the risks of using on-demand warehousing?
While there are many cases in which on-demand warehousing is the ideal solution for a business, there are potential downsides as well. The convenience and flexibility offered do not come without costs. Storing goods using on-demand warehousing rather than having a traditional lease can be more expensive.
In addition to the financial costs, businesses using on-demand warehousing may experience varying levels of customer service. Each time on-demand storage space is secured, it is likely that a business’s goods will be placed in a different warehouse with a different staff. This can lead to inconsistent fulfillment experiences for customers, as each warehouse will have its own practices for fulfillment services. Even in the best case scenario, a warehouse is likely to prioritize its long-term customers’ needs. If they experience a sudden increase in orders on the same day as your business, they will always come first.
Communication can be another challenge for on-demand warehousing customers. If a warehouse loses track of some inventory, or there’s a problem with packaging, they’d have to communicate first with the on-demand warehousing provider, who would then need to contact you, creating delays in resolving the issue.
If you are considering using on-demand warehousing services, carefully consider what your short- and long-term needs are. In the right circumstances, it can improve delivery times, lower costs, and allow your business to react to market conditions with agility, but it’s not a one-size-fits-all solution.
When and where to use on-demand warehousing
By some estimates, up to nearly a third of warehouse space in the U.S. goes unused every day. Whether it’s because of a spike in demand that emptied the racks or a leased space losing an occupant, this space could surely be put to better use. A recent innovation in the warehousing industry aims to do just that.
What is on-demand warehousing?
On-demand warehousing allows companies to pay for storage on an as-needed basis rather than building, purchasing, or leasing warehouse space on a long-term basis. This allows businesses more flexibility and responsiveness to deal with changing market conditions and, in some cases, can save them money as well.
For businesses that don’t have the size or resources required to build or purchase a warehouse, signing a long-term lease with a company that specializes in warehousing and fulfillment has been the alternative solution. These leases often require a long negotiation process and minimum inventory levels that can make it difficult to respond quickly as the needs of a business change.
Companies that specialize in on-demand warehousing connect warehouses with unused capacity with businesses that need storage space on a short-term basis. Those businesses then pay only for the space they actually use, which can cut down on their expenses. On-demand warehousing providers may also provide additional services, such as inventory management, packaging, and shipping.
What are the benefits of on-demand warehousing?
One of the main advantages of on-demand warehousing is scalability. Because no drawn-out negotiations or long-term commitments are required, businesses are able to adjust their storage space as their needs change. For small businesses, this means that they can scale up as they grow. Large retailers can also benefit when there are sudden spikes in demand for certain products causing an unexpected change to their warehousing needs. After the demand passes, they can then easily and quickly scale down. This is also useful for seasonal products with high demand for short periods each year, such as Halloween costumes and decorations.
Another advantage is the ability to react as new geographic markets emerge. If a business whose customer base has primarily been on the east coast, for example, begins to see growing demand in California, rather than shipping goods individually to customers on the other side of the country, they can quickly secure warehouse space and even fulfillment services in that region. The savings on shipping that result from this supply chain optimization could be significant, as well as the environmental benefits of shipping shorter distances. Customers will also appreciate the reduced delivery times.
What are the risks of using on-demand warehousing?
While there are many cases in which on-demand warehousing is the ideal solution for a business, there are potential downsides as well. The convenience and flexibility offered do not come without costs. Storing goods using on-demand warehousing rather than having a traditional lease can be more expensive.
In addition to the financial costs, businesses using on-demand warehousing may experience varying levels of customer service. Each time on-demand storage space is secured, it is likely that a business’s goods will be placed in a different warehouse with a different staff. This can lead to inconsistent fulfillment experiences for customers, as each warehouse will have its own practices for fulfillment services. Even in the best case scenario, a warehouse is likely to prioritize its long-term customers’ needs. If they experience a sudden increase in orders on the same day as your business, they will always come first.
Communication can be another challenge for on-demand warehousing customers. If a warehouse loses track of some inventory, or there’s a problem with packaging, they’d have to communicate first with the on-demand warehousing provider, who would then need to contact you, creating delays in resolving the issue.
If you are considering using on-demand warehousing services, carefully consider what your short- and long-term needs are. In the right circumstances, it can improve delivery times, lower costs, and allow your business to react to market conditions with agility, but it’s not a one-size-fits-all solution.
