Every day people come to FLEXE because they either have more inventory than they have space, or more space than they have inventory. As a result, we hear a lot of stories about capacity, inventory peaks and the search for the ideal extra space. Those stories led us to want to learn more. So, this summer we commissioned a Warehouse Capacity Economics and Trends Survey. The results are in and they are compelling.
To start, our clients aren’t the only ones seeing inventory fluctuations throughout the year; a large swath of the entire industry across many verticals appears to experience the same phenomenon. 75% of study respondents report experiencing "significant" fluctuations. Perhaps even more interesting is that over 90% respondents see these issues continuing or increasing over time. That means nearly every organization is dealing with challenging capacity issues at some point in the year and don’t see that ending any time soon.
We were interested in what was driving these fluctuations. Overwhelmingly, you responded that seasonality is the biggest trigger. But that said, there were a number of other significant drivers as well, including forward (or bulk) buying, lead time variability, product promotions and other factors.
The survey also sought to understand what kind of solutions were brought to bear on these issues. Perhaps most alarming is that 70% of respondents that reported having extra capacity at some point during the year acknowledged they have no solution for that problem. They simply accept the extra capacity as sunk costs. For those with extra inventory, there were more solutions cited. These are led most notably by obtaining short-term leases, (though as we all know these can be notoriously difficult to reliably find) followed by shifting inventory across distribution centers, selling off inventory and long-term leases. Interestingly, less than 20% of respondents use their 3PL to secure short-term space.
The data above is just a quick look at what we learned from the survey. The information was so telling that we decided to write a white paper to further illustrate some of these trends. We will be releasing that paper at the end of September. Not only does it include data from the survey, but it will also include a second exercise – Dynamic Capacity Modeling. Here we build on the survey results to translate findings into actual utilization levels and cost comparisons. This produces a compelling look at the bottom line business impact of inventory fluctuations and the solutions our industry uses to manage warehouse space.
It was an eye-opening summer. Much of what we learned from our survey confirmed the operational realities we hear from our customers. Some of what we learned really advanced our understanding of the problem. Taking all of those trends and applying economic models begins to measure how our contemporary environment affects supply chain management. Whether it is driven by increasing customer expectations or the growing practice of omnichannel sales or simple seasonality – warehousing must become more adaptive.
We will continue to share the data and insights from this work throughout the remainder of the year. Stay tuned for the release of the white paper next week. You can download it for free from our site. Then we will continue to release more insights after that in our newsletter and blog.