The New Logistics Part 2: Dynamic Warehouse Networks
In my last post, I described one of the defining cornerstones of the “New Logistics”: Pop-Up Warehousing. In this article, I’ll dive into the other one, the Dynamic Warehouse Network. Together, they define a new, highly efficient way of handling temporary peaks in inventory volume.
Many different kinds of companies, including manufacturers, distributors, wholesalers, importers and retailers, operate multiple permanent warehouses. Usually, these are strategically located facilities entrenched with long-term leases and a full-time staff. Some companies have long-standing relationships with third-party logistics partners (3PLs) to manage this warehouse network or to extend their storage, footprint and distribution capabilities. In either case, their warehouse network is static and set up to accommodate expected inventory volumes, whether static or dynamic. But, even the most optimized warehouse network can be suboptimal in situations where inventory fluctuates. Adding pop-up warehousing where and when you need it introduces elasticity to your overall warehouse network, so you can address both expected and unexpected fluctuations with greater agility and take costly commitments out of the equation.
Historically, when organizations have faced peak volume circumstances, they’ve typically sought short-term leases to temporarily expand their capacity. But those “short-term” commitments are rarely short, the terms are rarely favorable and the approach is anything but dynamic. It takes time to find a suitable facility and leases can take an uncomfortably long time to negotiate and close. Then, once secured, the space must be adequately configured which takes time and money.
That’s why more and more forward-thinking organizations are turning to more dynamic solutions to solve their temporary capacity issues. These solutions fuse and leverage three new game-changing concepts:
Marketplace technologies enable users to quickly identify, secure and operationalize available warehouse space and services online. Through a standard web browser, the technology makes it easy to find and acquire suitable warehouse space in specific geographic areas, and manage inventory flows, visibility and operations efficiently.
A pop-up warehouse is the space you acquire through the online marketplace service. It’s called pop-up warehousing because it’s quick and easy to secure the space, it can be available for use within only a couple of days and it can be utilized for just the amount of time you require.
Dynamic Warehouse Network Planning
When you include pop-up warehousing for capacity problems, you introduce more options into your standard warehouse network planning process. Cost/benefit analyses change because dynamic solutions do not require capital outlays or long-term commitments. That means a Dynamic Warehouse Network strategy enables you to significantly reduce the costs, time and complexities involved in network expansion, opening up entirely new worlds of possibilities.
With a warehouse network that’s infinitely flexible, logistics leaders can think beyond the confines of fixed warehouse assets. And companies, big and small, can become more agile, more responsive, more competitive and better positioned for growth. If you’re not sure whether you should consider this for your business, here are a few common examples of how businesses of different types and stages can benefit from using pop-up warehousing and embracing a dynamic warehouse network strategy:
- Large-enterprise corporations that operate numerous warehouse facilities can alleviate the pressures of seasonal over-stock, bulk buys and other programs that create temporary spikes in inventory by moving excess inventory to pop-up warehouse locations until the inventory volume levels off.
- Early stage e-commerce companies that are resource-constrained or don’t yet have a clear picture of their long-term needs can use pop-up warehousing until they have enough history and data to make informed long-term warehousing commitments.
- Organizations undergoing aggressive growth can adopt a dynamic warehouse strategy to safely scale their operations in a way that keeps pace with their rapid growth. Pop-up warehousing can provide a easy-to-implement, cost-effective solution until long-term plans, locations and needs of the business can be nailed down.
If you’re interested in seeing how other companies have adopted, and benefitted from, dynamic warehousing in order to determine whether it’s a smart option for your business, review our case studies.
What do you think? What other types of scenarios exist for companies to utilize dynamic warehousing networks? Let us know!