E-commerce and online marketplaces have entirely upended the way people shop and receive the goods they purchase.
In terms of customer expectations, e-commerce creates significant challenges when compared to a brick and mortar retail location.
Prior to the days of e-commerce, a retail distribution network could get by on a relatively low number of distribution centers in regions where they expected to sell the most product.
However, e-commerce shipments are typically comprised of small quantity products that are shipped directly to the customer, wherever they may be.
According to Annual State of Logistics Report, compiled by the Council of Supply Chain Management Professionals, of the $1.45 trillion spent on warehousing and shipping in the United States, $900 billion was spent on shipping and transportation costs.
The substantial cost in transportation comes from the increase of e-commerce shipments to customers who do not live nearby the warehouse that handles the physical distribution.
The obvious answer to this dilemma is to redistribute the product to a warehouse in close proximity to the customer, therefore reducing how far the shipment needs to travel to reach its final destination.
Need for On-Demand Warehousing
For many small to medium size businesses, restructuring an entire distribution network to service a small number of far-flung customers is rarely a feasible business strategy.
Warehouses and third party logistics providers typically lease out warehousing space by the square foot. Which is generally only profitable when leased in large sections over several years.
Businesses who utilize an e-commerce marketplace have little need for massive, sprawling warehouses to store and distribute gross amounts of inventory, let alone the need to lease one year after year.
This creates a gap between businesses who wish to distribute limited amounts of inventory and warehouses which have too much space to be filled by any one business.
On-Demand Warehousing & E-Commerce
On-demand warehousing is the innovative new warehousing and distribution model. It connects available warehouse space with businesses who only need a small amount of space, for a short amount of time.
It enables retailers to dynamically deploy different inventory volumes to different warehouses across the country in little to no time. It expands the retailer’s previous distribution network into a comprehensive and responsive supply chain that is ideally suited to the ever-changing e-commerce marketplace.
The Solution to E-Commerce Fluctuations
In this way, an e-commerce retailer can adjust their distribution network according to the variable demand conditions without having to lease more than the required amount of space.
By doing so, a business insures their revenue stream against variables other than a simple change in volume or demand, such as:
Regional Demand Fluctuations- The demand for a product in a certain region can swing drastically, especially for e-commerce products that are often subject to social media trends and buying patterns.
On-demand warehousing enables a business to quickly increase their warehousing and distribution capacity in regions expecting a drastic increase in demand, or the opposite should they be expecting a drastic drop in demand.
Price Fluctuation- The general cost of operation can cause fluctuation from month to month, and region to region. On-demand warehousing is uniquely suited to enable businesses to scale back inventory levels in accordance with the variable cost of doing business.
Inventory Supply Fluctuation- Suppliers can come and go causing inventory levels to fluctuate drastically.
On-demand warehousing enables businesses to easily scale back inventory levels with one supplier and switch to another without the exorbitant price of changing warehouses to accommodate variable inventory supply caused by flaky supplies.
On-Demand Warehousing Here To Stay
If the warehousing and distribution industry has learned anything over the last decade, it’s that they are going to have to be flexible to meet the needs of their customers.
On-demand warehousing fills a desperate need for e-commerce businesses, but more importantly, it enables businesses to readily respond to demand without exerting the extra cost, time and effort of securing a warehouse for their inventory that was never intended to suit their specific needs.
The need for on-demand warehousing will continue to grow exponentially as more businesses sell products online, and as the need for geographically dispersed products increases.
Flowspace has hundreds of warehouses around the country who can handle your inventory. Get started today!
Written By:
Allison Champion
Allison Champion leads marketing communication at Flowspace, where she works to develop content that addresses the unique challenges facing modern brands in omnichannel eCommerce. She has more than a decade of experience in content development and marketing.
