What is On-Demand Warehousing?

What is On-Demand Warehousing?

On-demand warehousing, as provided by Flowspace, is an online marketplace that allows customers to access shared warehousing and logistics services on a pay-per-use basis. By matching owners of excess warehouse space with users (generally e-commerce companies, retailers, or shippers), Flowspace boosts the utilization of its warehouse partners’ facilities while allowing end-users flexibility in an industry where demand can be uncertain, and budgets are constrained.

Let’s say you run a small e-commerce company that sells widgets. You launched a Kickstarter a year ago that did so well that you built a website to continue selling your product. Over the past year, you’ve seen incredible growth. Until now, you’ve been able to produce your product in your garage using manual techniques, and then package the goods right there on the assembly line before taking batches of outbound orders to a carrier for shipment to customers.

Today, you finally have enough orders that you are working with a manufacturer to produce your product at scale. You’ve ramped up your marketing efforts to help drive business, and are excited to start selling higher volumes. You’re receiving the first wave of inventory from your manufacturer at the end of this month, only one question: where are you going to put it all? Well, you have a few options:

1)  You can choose to work with a 3PL, or third party logistics provider. The lead time to work with a 3PL can be weeks or even months. A 3PL will want to know exactly how much space you will need, and exactly when your products will be moving out again. If you intend to be there for a longer period, they will want demand-projections and predictions on how much inventory you will be storing in six months, nine months, or one year. These questions can be hard to answer. And if your need is immediate, or short term, it often doesn’t make sense for a 3PL to work with you at all. Short term engagements are not as lucrative for 3PLs who often require 1 year minimum commitments.

2)  An alternative is to use a third party fulfillment company. Amazon FBA or “Fulfilled By Amazon” is the dominant player in this niche. This option is available on a more immediate basis, and for a less well-defined requirement, but it can be a high-cost solution. And many retailers are hesitant about handing over their critical supply chain to what is often their number one competitor in Amazon.

3)  A third option would be to lease or purchase your own warehouse and build out in-house distribution capabilities. While this path boasts an attractive layer of control and autonomy, it will involve a high, up front start-up cost and likely result in a new fixed-cost line item (either rent or building maintenance) on the company’s income statement. This is to make no mention of variable costs such as labor, warehouse equipment, and packaging supplies. This option also limits the retailer or seller to just one location, which can limit shipping speed and cost optimization.

4) The fourth, and possibly most feasible, option is using on-demand warehouse services from Flowspace. Apart from being the only cost-effective option for immediate needs, and the only variable-cost long-term option, on-demand warehousing enjoys several more advantages against traditional warehousing solutions.

To start, on-demand warehousing does not have minimum volume requirements, and yet by aggregating volume from multiple customers Flowspace can negotiate volume discounts with its partners and pass on these advantages to its end-users. No minimums and competitive pricing yields the ability to economically store goods in multiple geographies so that retailers can service stores more efficiently and ecommerce players can reduce shipping times and costs.

Finally, by eliminating fixed costs, the on-demand warehouse model reduces the risk of expanding a supply chain network. The last thing a scaling retailer or ecommerce company needs is the added stress of a rent payment or minimum payment requirement to a 3PL. We started Flowspace to enable companies of all sizes to start optimizing their supply chain today, without dependency on competitors or taking on the added risk of a long-term commitment to a lease or 3PL.

Flowspace has hundreds of warehouses around the country who can handle your inventory. Get started today!

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