When new tech businesses are looking to get off the ground, they often talk in terms of
‘disruption’: in other words, how new methods can revolutionise old business models. We’ve
seen the effects of a user-drive, on-demand approach with Uber and the taxi industry, and
Airbnb and the rentals market. Now technology is coming for the humble warehouse – and the
surprise is that it’s good news for everyone concerned.
The application of the concepts behind the ‘sharing economy’ – essentially a digitised, peer-to-peer rental market – to warehousing is not a new idea, but it is gaining real traction. As both the
demand for warehouse space and the number of facilities rise, new methods are needed to
make efficient use of existing space, and optimise these new facilities. On-demand warehousing
is the most widely touted solution, and has the potential to level the playing field between
eCommerce giants and smaller businesses.
Old ideas, new spin
On-demand warehousing is essentially flexible, rentable warehouse space. Ideal for stock
overspill, stockpiling or an influx of stock to fulfil sudden demand, on-demand warehousing
caters to all sorts of scenarios. Its success is partly down to fulfilling a previously untapped need
– but it also shouldn’t be too much of a surprise. After all, this is essentially the same concept as
Amazon’s Fulfilment By Amazon (FBA) scheme, whereby Amazon keeps stock from its
marketplace sellers for instant distribution.
Amazon’s FBA has been rolling out across the world in recent years, with Amazon Prime
delivery now available in ten countries worldwide, and its distribution centres improving delivery times in neighbouring territories. The total warehouse space leased or purchased in the UK increased by more than 100 million on the previous decade to March 2018, with Amazon a key driver. The company’s footprint across its offices, stores, warehouses and data centres is now 253 million sq/ft, rising 43% between 2016 and 2017 alone.
Prime has now established a consistent demand for speedy delivery, with customers expecting
one-day or two-day delivery from every seller, despite not having the logistical clout that
Amazon possesses. Combined with an increasing concentration of populations in major cities,
well-positioned and flexible warehouses are becoming more critical to success in eCommerce.
As a result, smaller businesses need a way to get a leg up on the competition – and on-demand
warehouses offer a sensible solution.
Space on demand
In many ways, on-demand warehousing is an overdue development for the age of eCommerce.
The staccato nature of online sales – and the fact that shipments are going out to customers
rather than brick and mortar stores – means that online businesses are more reliant than ever on warehouse space. Yet rising demand also brings with it rising costs, which can quickly eat into a small business’ bottom line in a way that doesn’t affect the big players. Many small and medium sized businesses have had their growth stunted by the storage they could afford to buy outright.
While users of other on-demand warehousing solutions won’t benefit from Amazon’s own
distribution network, they also don’t have to sell through Amazon, with all the costs that entails.
Instead, they can sell at a higher profit through their own website or platform, or use the stock to fulfil demand from crowdfunding or other channels. There’s also the possibility of negotiating warehouse space for a lower per item or flat fee, particularly according to seasonal demand.
The flexibility this affords is useful for all sorts of businesses. On-demand warehousing can be a
stop-gap between a move to a bigger warehouse space, or a temporary home while work is
being undertaken to expand your existing facility. Equally it’s great for businesses with highly
changeable stock volumes, who may be wasting excess storage space at certain points in the
year, or prone to overflow at other times.
A great example is businesses undertaking crowdfunding campaigns (e.g. Kickstarter) or
launching products with uncertain demand. One example is the popular crowdfunded card game Exploding Kittens, which famously planned to pack everything at a launch party, before receiving more than one million orders. As a result of this sudden and unprecedented demand, they used on demand warehousing to receive the orders, and hired extra staff to ship them.
While every warehouse aims to be efficient, on-demand warehouses have an added impetus –
and some very different demands. Depending on their clientele, they can often require supreme
flexibility, with the capacity to receive and store different types and sizes of stock. Location is
also key, with demand growing for shipping to compete with the speed of Amazon Prime. An
influx of on-demand warehousing in the UK has been focused on the ‘Golden Triangle’ in the
East Midlands, where goods can reach 90% of England and Wales in four hours or less.
High density storage is critical to satisfying the growing demand for on-demand storage, with a
range of flexible and relocatable racking and shelving options to cater to this. For food or other
perishable items, this might be a ‘first in, first out’ (FIFO) system; for more durable goods, a
‘push back’ system might be used to store limited quantities of stock in the same area of the
warehouse. What’s critical is to provide enough space for access – particularly when you’re
shipping and delivering many products simultaneously – while also maximising your storage
Some facilities are using this opportunity to experiment with robotics and autonomous transport, using high density AS/RS storage. The use of computer systems can greatly simplify the receipt and execution of orders from multiple businesses, while the use of guidance systems to locate frequently-changing stock (as opposed to staff having to learn the location of new goods) makes retrieval more efficient. Specially designed vehicles also allow for narrow aisle racking in some instances, providing an even higher density storage option for smaller goods.
Warehouse providers and logistics companies are already jumping into this space, and beginning to compete for the attention of businesses. US delivery giant UPS has launched its Ware2Go platform to facilitate the entire process, finding the warehouse space for you and
arranging storage, fulfilment and two-day delivery. Warehousing and fulfilment company Flowspace meanwhile recently secured $2.2 million in seed funding, with the goal of providing similar services to small and medium-sized businesses.
The march of Amazon is relentless, but no business is infallible, and small businesses are famously resilient. As the eCommerce giant continues expanding into other areas such as on-demand video – and people become more conscious of the need to support local businesses – the advantages of on-demand warehousing should allow its competitors to make up the difference.
This post was written by Invicta Pallet Racking. For over 25 years we have been at the forefront of the archive storage industry throughout the UK and Europe, designing and installing some of the largest racking and storage systems currently found on the market.