May 12, 2020 | Industry
We live in an on-demand world. Thanks to streaming services like Netflix, we no longer need to wait a week to find out what happened after a cliffhanger episode of our favorite TV drama. When we’re hungry, Uber Eats will deliver just about any meal to our doorstep in record time. We’ve grown to be impatient, and that translates into high expectations from the companies we give our business to. That’s where on-demand warehousing comes into the picture.
Sky-high consumer expectations combined with massive supply chain disruptions and lightning-fast changes in demand brought about by the COVID-19 pandemic have brought to light how challenging it is for supply to meet demand at all times and in all places. Suddenly, people began hoarding basic goods like soap, toilet paper, and diapers, and retailers have struggled to keep the shelves stocked. Even Amazon has been unable to keep up with demand for nearly any form of hand sanitizer, disinfecting cleaner, nitrile gloves, paper towels, and more. Sidewalk chalk, washable paint, and other goods to keep kids busy have been flying off the shelves (both physical and virtual) like never before. We’re experiencing an unprecedented shift in demand, and the companies who pivot fastest are the ones who will come out on top.
While COVID-19 has caused a sudden surge in need for short-term storage facilities, Matt Walaszek, Associate Director, Industrial & Logistics Research at CBRE, said that on-demand warehousing is not entirely new; “This (on-demand warehousing) was already happening, but the recent disruption to the economy has accelerated the trend.”
The pandemic will end. Stores will reopen. Shelves will be restocked. While this time of crisis has been an exercise in extreme demand shifts, trends will still happen. Every Chrismas, there’s one hot toy that takes off as “THE gift” and exceeds all expectations and sales predictions - most of us remember Hachimals, Tickle-Me Elmo, and Furby showing up on auction sites at many times their original selling price. Social media influencers have been instrumental in creating sudden surges in demand for products like cosmetics, skincare, fashion, and more. When Kate Middleton decides to wear a Zara dress to a public engagement, it sells out in minutes. Shift happens… and it happens quickly!
It’s amazing to see just how fast demand can change… but can the supply chain keep up? Warehouse space is costly, and keeping slow-moving inventory is a surefire bottom-line killer. On-demand warehousing is a concept whereby companies can lease out their excess warehouse space to businesses who need it. It enables “3PLs and others to offer premium warehousing space to those who need it now” (Supply Chain 24/7). Some freight forwarders with warehouses have extra space available due to unexpected fluctuations in demand and could now offer this space to local retailers that are receiving orders from suppliers but are not able to open their stores yet. Wholesalers with their own warehouse and products can diversify and offer free space to anyone, creating an additional revenue stream and boosting their resilience in the face of challenging times. When it’s done well, on-demand warehousing allows companies who need warehouse space to quickly scale up when needed without all the overhead of owning and managing their own locations or committing to long-term contracts. PracticalEcommerce puts it in layman’s terms: think of it as, “a kind of Airbnb for logistics.” For 3PLs and other logistics companies, leasing out temporary space is a great way to add an additional revenue stream and maximize the return they can get on their precious space. Plus, they can often charge a premium for on-demand warehousing services.
What do logistics companies need to successfully diversify into on-demand warehousing?
Ready to get your start in the world of on-demand warehousing? Magaya has everything you need to be successful. Contact us today to speak with one of our supply chain experts and learn more about the best practices of on-demand warehousing.
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