Picture this: your warehousing operation is in the midst of a peak, straddling the precarious line between having a little bit of warehouse space available and absolutely no warehouse space available. Ostensibly, operating so close to capacity can be an unnerving situation, especially when your normally well-oiled machine now includes the need to fulfill more orders than ever before.
It’s a catch-22 that companies the world over could only *hope* to face; an unexpected surge in business can only mean more cash to pay the bills and even innovate. But, on the other hand, just because the orders are spilling in doesn’t mean that the warehouse will have the capacity or people-power to fulfill these orders in a timely manner – or, in the most stretched cases – at all.
So, what’s a warehouse to do? Well, it turns out that the on-demand workforce isn’t the only thing available on demand these days. Today’s most popular option for operations in this very situation is to put an on-demand warehouse space to work. At their heart, on-demand warehouse spaces take on the “rent it when you need it” philosophy that we see so often in personal transportation (Uber, Lyft) and traditional accommodation alternatives (Airbnb), except that it gives companies the power to pick, pack, and ship on flexible, on-demand bases.
In an interview with Logistics Management, Executive Director for the Center for Global Supply Chain Management (CGSCM) at USC Marshall, Nick Vyas, sings the praises of this fairly-new innovation. “On-demand warehousing is a game changer for the supply chain. It makes better use of underutilized warehouse assets for companies that need a home for inventory on a flexible basis,” Vyas says.
Despite its virtues, though, executing an on-demand warehousing plan is not always the smoothest of procedures for all operations. As a matter of fact, experts assert that the option is anything but ‘one-size-fits-all’, making it particularly important for all fulfillment-based operations to make stringent assessments before adopting the model. That’s why we’ve compiled a list of the helpful pros and potential pitfall cons that come along with the trend.
Pros of On-Demand Warehouse Space
Let’s begin on a positive note by kicking things off with the pros:
- The model allows for total flexibility – Depending on the current needs of your business, you can take advantage of a series of on-demand warehouse models. Typically, most on-demand warehouse space firms offer up one of the three following options: 1) the space holder also fulfills orders, 2) the space holder allows the client to use its own workers for fulfillment, and 3) the space holder is part of a consortium that handles everything, including transportation, picking, packing, and more.
- Long leases are a thing of the past – For operations that are establishing themselves, require flexible capacity, or, frankly have uncertain futures, on-demand warehouse space can be a godsend. According to Datex, the average warehouse lease can be upwards of 5 years, a lofty cost, considering the space does not expand or contract according to the company’s given inventory situation.
- It gives companies the freedom to innovate and expand – Because warehouse space is notoriously expensive and difficult to secure, some retailers have had to pay the price by shelving ideas that could be hindering their success. But, with on-demand warehouse spaces, these same retailers need not make risky commitments while they innovate. In this sense, on-demand warehouse spaces are a slam dunk for brands and businesses preparing to make major moves in the spaces of inventory and fulfillment.
Cons of On-Demand Warehouse Space
Inevitably, there are a few cons that come along with this new trend in warehousing. They are as follows:
- The potential of decreased control – While many on-demand warehouse spaces come with fairly flexible fulfillment, handling, and transportation options, they are, effectively, not much different from 3PLs in the sense that the contracting client must give up at least some process control. Naturally, this is something that can be, at first, attractive about the model, but if the operation is not controlled by savvy professionals, inevitable inventory disasters could occur.
- Less streamlined IT – One of the benefits of keeping inventory completely in-house is that some on-demand warehouse spaces might not have the same infrastructure to record, plan, and report on inventory. This fact alone can create a huge headache, sometimes making it necessary to adopt separate systems – or even go back to paper and clunky spreadsheets in the interim.
- Potential for issues with stakeholders – It’s no secret that stakeholders tend to get nervous when operations are switched up – especially when the model is a fairly new one. Of course, stakeholders should not be placated 100% of the time, but lowering stakeholder confidence can come with a slew of issues that might require a fair amount of explanation on the part of management. How can you avoid this? Know that the adoption of on-demand warehouse space could ruffle feathers, so gather the necessary supporting data prior to making the announcement.
Whether or not your operation chooses to integrate an on-demand warehouse space into your inventory management and fulfillment plan, knowing that it is, in fact, an option is a powerful truth that can set you free. Just remember to always do your research before you make a commitment. And when you need extra hands on deck to deal with your increased warehouse volume, on-demand staffing goes hand-in-hand. Here’s to innovation with flexibility!