Blog postsAugust 14, 2019
On-demand warehousing 101: What is on-demand warehousing?
Your guide to on-demand warehousing and fulfillment and how it can benefit your business
Gartner recently released a report about on-demand warehousing and how it’s benefiting businesses. It's been featured and mentioned in publications like Bloomberg, the Wall Street Journal and Geekwire, and touted as a key player in how the shared economy is going to impact logistics.
But, what is on-demand warehousing, what makes it so effective, and how are retailers and brands actually using it? In our on-demand warehousing 101 series, these are the topics we’ll cover—starting first with what it is and how it’s different.
For an even deeper dive, as well as marketplace pricing and trends data, download The 2019 State of On-Demand Warehousing whitepaper.
What you’ll learn:
- What on-demand warehousing is
- Why modern retailers and brands need it
- How it’s different than traditional solutions
- How businesses are using it
What is on-demand warehousing?
The rise of eCommerce made it clear that the traditional methods for managing warehousing and fulfillment weren’t going to work (more on that later). As a result, an entirely new way to manage storage, fulfillment, and retail distribution, known as on-demand warehousing, came to be.
On-demand warehousing gives retailers and brands a scalable, flexible warehousing solution. It relies on a marketplace model and transactional pricing so that retailers and brands can expand and contract their networks as needed.
The FLEXE marketplace connects warehouse providers who have excess capacity and services with retailers and brands who need flexible solutions. Through an on-demand, pay-as-you-go model, retailers and brands can secure warehousing and fulfillment solutions quickly and with no long-term commitments or costly setup fees.
“Known as on-demand warehousing, the idea is to tap into unused space in a crowded U.S. industrial real-estate market where distribution centers near population centers are fetching a growing price premium.” - The Wall Street Journal
- If you’re rapidly expanding your business and don’t want to commit a large amount of upfront capital to a logistics network that you’re going to quickly outgrow, on-demand warehousing provides a pay-as-you-go, scalable solution.
- If the looming threat of tariffs leaves you with a sudden need to forward-buy large amounts of inventory, on-demand warehousing gives you access to short-term storage so you have a place to put it.
- If you’re looking to expand into a new market and don’t have the resources to manage the sourcing and procurement process for every new fulfillment center yourself, on-demand warehousing lets you tap into a network of over 1,000 warehouses—giving you access to space in even the tightest real estate markets.
Why is there a demand for on-demand warehousing?
The way we shop has changed, but the logistics that support it have been slow to catch up. The supply chain was built for the pre-internet era where goods were sold in a centralized marketplace. Logistics networks were built to get goods to store shelves, not to customer’s doorsteps.
So, when eCommerce and omnichannel retail came along and completely changed the way we shop, it not only increased the demands on retailers and brands, but made the old way of distributing products to customers outmoded and inefficient.
With on-demand warehousing, retailers and brands can build flexibility into their logistics strategies to support the myriad of ways customers shop today. Whether it’s online, omnichannel, pop-up shop, buy-online-pickup-in-store, or some other method that doesn’t yet exist—on-demand warehousing gives businesses the ability to adapt to the demands of their customers today, and tomorrow.
What do we mean by traditional warehousing solutions?
On-demand warehousing is a new alternative to traditional solutions, so let’s first examine the old options retailers and brands had for managing their warehouses.
Traditional warehouse solutions:
- $$$$: You can build an in-network facility that you own, outfit, and operate
- $$$: You can lease your own facility, outfit it, and then operate it
- $$: You can lease space and services from a third-party logistics provider (3PL) to manage operations on a long-term, multi-year basis
Your warehousing needs will depend on your business, and some combination of these may in fact be a great solution for you. But their are some major drawbacks as well:
- Expensive: Traditional solutions come with steep upfront capital investments and costly project setup fees.
- Slow: Changes to your owned network won’t happen in an instant, and leasing space from traditional providers comes with long sourcing and implementation times.
- Limited: With typical warehouse partners, your growth is limited by their network locations and capabilities.
How is on-demand warehousing different?
With on-demand warehousing, you create a distribution-network strategy that’s as dynamic as your business. You can scale the size and capabilities of your warehousing and fulfillment network to match varying demand and manage the unexpected throughout the year.
Instead of building a business around the infrastructure you have, on-demand warehousing offers a low-risk way to test new strategies and keep up with rising customer expectations. The variable cost model negates the need for fixed, long-term contacts or short-term contracts with sky-high premiums.
What can on-demand warehousing do?
On-demand warehousing can support a wide range of use cases, but the three major solutions are inventory overflow, eCommerce fulfillment and retail distribution.
For planned seasonal peaks or unexpected excess inventory, on-demand warehousing allows retailers and brands to quickly add additional capacity as it’s needed. It’s a turnkey solution for recurring storage problems.
On-demand warehousing for eCommerce fulfillment gives retailers and brands the flexibility to scale their fulfillment networks, as needed, to enhance their direct-to-consumer strategy. Retailers and brands can pop up warehousing and fulfillment networks to improve their delivery promises, test new markets, and create short-term product promotions.
For brands who distribute their products to retail partners, on-demand warehousing helps sellers offset inventory storage fees and shorten last-mile transportation by storing goods closer to intake centers.
How can retailers and brands use on-demand warehousing?
For enterprise businesses, on-demand warehousing complements your existing distribution infrastructure. It’s the perfect solution for piloting programs and promotions, rolling out new strategic initiatives, or managing supply chain disruptions like peak seasons or tariffs.
Here’s an example of the path enterprises can take to fully optimize their logistics operations:
- Enterprises often start with a pilot inventory overflow project to more flexibly handle supply chain disruptions or unforeseen circumstances. One recent example of this is a renewable energy and efficiency company that used FLEXE to store a large quantity of solar panels they imported ahead of the U.S. tariffs.
- From there, they often expand into pop-up or retail distribution, enabling them to do things like position fast-moving or in-demand SKUs close to the markets where they are needed. Ace Hardware, for example, positioned items needed for extreme weather emergencies near areas that would be impacted. Then they were able to automatically replenish those regions when items became out of stock.
- Finally, enterprises can add on eCommerce fulfillment to increase their delivery promise and make one-day or even same-day delivery possible. Walmart used FLEXE eCommerce fulfillment during their peak holiday season to handle the huge volume of orders they received during that time.
Digitally native brands
Businesses that were born online, whose first channel was direct-to-consumer sales, often use on-demand warehousing as their entire logistics network—letting FLEXE handle the logistics, while they focus on customers and growing their business. On-demand warehousing gives them the ability to expand their logistics solution as demand grows.
Here’s an example of how a digitally native brand could grow with FLEXE:
- eCommerce brands typically start with eCommerce fulfillment, popping up one or two nodes near their target demand region. High-end cookware company, Great Jones, was able to quickly get up and running with one eCommerce fulfillment warehouse to support its growing brand.
- As digitally native brands mature, the next step is often to add more fulfillment centers to shorten delivery times and enter new markets, or expand their reach with a retail distribution partnership. eCommerce mattress retailer, Lull, was able to reduce their delivery times by 51% and shipping costs by 30% by positioning inventory in fulfillment centers closer to demand.
- When a digitally native brand has grown their business enough, they can then leverage inventory overflow solutions to handle any supply chain disruptions, peak season demands, and other overflow needs. A direct-to-consumer shoe company, for example, uses overflow storage for their returned merchandise.
Why choose FLEXE?
FLEXE isn’t the only warehousing solution out there, but it is the first and largest on-demand warehousing solution (1,000+ locations and growing) focused on transforming the logistics industry through a more modern approach to warehousing and fulfillment.
We believe there is a better way to manage distribution so that every business can optimize the global delivery of goods. And, it’s our job is to help our clients delight their customers and deliver better experiences across the board.
The key tenets of FLEXE are our technology, network, and team or experts:
- One platform, unlimited reach: The FLEXE technology platform connects you to the warehouse providers in our network. All of your data is in one place, and you can add locations and services with unprecedented speed and flexibility.
- A new world, a new model: Your business is dynamic, your distribution network should be too. With FLEXE, there are no startup costs and you pay only for what you use. Adding fulfillment centers is simple and cost-effective, so you can be where your customers are.
- Dedicated team, continuous improvement: Stay focused on building your brand and growing your business, we’ll manage the warehousing and fulfillment logistics. From daily operations to strategic planning, we’re here to support every stage of your growth.
For more on-demand warehousing insights, as well as marketplace pricing and trends, download The 2019 State of On-Demand Warehousing whitepaper: