Overview of on-demand warehousing
In the present era, brands and retailers have been pushed to find flexible fulfillment and logistics solutions due to the growing demand for next-day shipping by both customers and eCommerce businesses. This has led to the entry of on-demand warehousing which allows sellers to stock inventory without setting up their own warehouses. Naturally, such a middle-road comes with a ton of benefits in the competitive eCommerce industry.
Tech solutions such as on-demand warehousing are driving forces in fueling the expansion of shared warehousing, which helps companies meet demands and match the rapidly changing market requirements. On-demand warehousing has thus become a key player in the world of logistics.
With on-demand warehousing, companies have a variety of flexible warehousing solutions to select from, which allows them to handle fluctuating market conditions with ease. The concept has caught such attention, that shipping companies today must acquaint themselves with this revolutionary tool if they wish to keep up in the industry.
If you run an eCommerce business and are looking for detailed information on shared warehousing, on-demand warehousing and other related concepts, worry not. We are here to introduce you to the entire ecosystem so that you can better understand if it is right suited for your needs.
Let’s begin by understanding what exactly on-demand warehousing is.
What is On-Demand Warehousing and why do you need it for your eCommerce business?
Though there is no perfect or exact definition for on-demand warehousing, experts choose to define it as being somewhat of a warehouse “AirBnB”. With on-demand warehousing, retailers who require flexible warehousing solutions can connect with fulfillment providers and can easily avail unused space via app-based tools.
On-demand warehousing allows eCommerce businesses to access warehousing solutions as and when needed, without making a long-term commitment, through a pay-as-you-go system. Further, they provide an opportunity to create a dynamic distribution strategy, using which, your business can scale up and accommodate unexpected demand and changing market conditions smoothly.
You no longer have to create an infrastructure for your business on your own. On-demand warehousing accommodates your consumers’ increasing demands and provides you with an opportunity to experiment with new strategies. It has a variable cost that cancels out the requirement of any long-term or short-term contracts.
Let’s dig deeper to get a better understanding of how on-demand warehousing works and why it is preferred over traditional warehousing methods.
How does On-Demand Warehousing work and what are the benefits of using it over traditional warehousing methods?
The concept of on-demand warehousing is solely based on the fact that although there is an increasing demand for storage spaces as large as warehouses, eCommerce businesses, retailers, and shipping companies can’t predict how such spaces will be used. Regardless of whether you are a small start-up or an established company, quite often, the real challenge lies in facing the demands of customers and estimating the requirement of storage space. For example, there could be a surge in demand during the holiday season or when a new product is launched, which is generally followed by a drop leaving the warehouse empty.
The on-demand warehousing model connects with shipping companies and retailers who are looking for excess storage space or temporary flexible storage. This model can facilitate warehousing solutions for eCommerce businesses without the hassles of contracts and setup fees.
The core motive of on-demand warehousing is to make use of less space in more storage facilities. As compared to third-party logistics providers (3PLs), shipping companies can now fulfill orders within a shorter period because the line between distribution and warehousing is blurred in this model. In the current marketplace, on-demand warehousing is giving an edge to businesses along with its supply chain management and advanced tracking.
A good representation of on-demand warehousing solutions is the Ware2Go application, which was initially launched by UPS. It networks and streamlines order fulfillment for small and medium-sized eCommerce businesses that are looking for warehousing solutions.
Unlike traditional warehousing methods that require a large amount of capital to set up, on-demand warehousing is accessible at a much lower and more economic price. With the traditional system business growth being limited for most, often the selected few warehouse partners can’t meet all the demands. However, on-demand warehousing networks connect warehouse spaces across multiple locations. Additionally, the changes made to a network and space owned by your business are comparatively longer in comparison to on-demand warehousing, where storage space is accessible and flexible.
Now that you have a basic understanding of on-demand warehousing solutions, let’s explore a few factors to consider while switching over from one solution to another.
What are some of the most important factors to consider when choosing an on-demand warehousing provider for your business?
Listed below are 5 important factors to consider:
1) Number of Storage Keeping Units (SKUs)
Before selecting an on-demand warehousing provider, you must have clarity on the specific requirements of your business; this includes the type of storage required and how much space is required. Generally, warehouses use SKUs to calculate the estimated storage space needed, and accordingly, the necessary costs.
2) Type of Product
Not all warehouses are equipped to handle products with specific storage requirements. For instance, if you’re selling cold storage, then you must consider a warehouse fulfillment provider that can provide you with a freezer large enough to store your products. Additionally, there are warehouses available that provide other services such as processing, assembling of products, labeling, and packaging of products, order fulfillment, inventory tracking, and insurance for the products.
The location of your warehouse is certain to have a direct influence on your supply chain, especially in determining the speed at which your goods will be manufactured and delivered. Selection of a warehouse that is close to transportation facilities in big cities will help with getting a quicker and more efficient order fulfillment. Not only this, it will also help in meeting the expectations of your customers regarding delivery timelines.
4) Technology and Software
You must take into consideration the technology the warehouse is equipped with. Select a warehousing facility that has the technology to help you track your shipments better. An effective eCommerce fulfillment software will take the load off you and automate processes, thus providing you with time to focus on other aspects of your business.
5) Products stored along with your products
Usually, warehouses store a range of products, from clothes to flammable chemicals. This is why it is essential to ensure that the product allocation at the warehousing facility doesn’t affect the quality of your products. Before selecting a physical warehouse, ask the provider about which product will be stored next to yours just to be doubly sure.
So far we have covered the concept of on-demand warehousing, how it works, and the benefits and factors to consider before selecting a warehouse provider. Let’s move on and find out how to ensure your requirements are met by the on-demand warehousing provider.
How can you ensure that your on-demand warehousing provider meets all of your specific needs and requirements?
Here are some systems you can implement within your operations to ensure that your on-demand warehousing provider is meeting all your requirements.
1) Inventory Management System
By ensuring there is an inventory management system in place, you can automate and optimize the supply chain process along with receiving real-time insights on inventory counts, and accurate data for accounting of inventory.
2) Track Inventory Metrics
Monitor metrics and translate them into data that can be used to get a competitive edge against competitors. Especially if inventory is being stored in multiple warehouses it is important to manage and monitor all the important distribution metrics.
3) Run Inspections
Prevention is better than cure. By conducting regular inspections of the warehouses you have tied up with, you can avoid unnecessary hassle and incorrect inventory. Additionally, periods of inventory audits will detect an imbalance in the inventory and prevent it from happening in the next round.
There are bound to be some challenges in every aspect of a business. Listed below are a few ways you can avoid common challenges when working with an on-demand warehousing provider.
What are some of the common challenges businesses face when working with an on-demand warehousing provider, and how can you avoid them?
1) Accidental Redundancy
When the same operation is accidentally being repeated more than once, it increases labor costs and wastes time. To avoid this issue, ensure that the warehouse provider invests in the latest technology, which will help to automate processes and reduce redundancy.
2) Sloppy Warehouse Layout
It is quite common for warehouses to not have enough storage due to the ineffective use of space. The only solution to this challenge is to maximize the vertical and floor space, simultaneously leaving room for workers to walk by. Additionally, make products more accessible and categorize them systematically, ensuring maximum space and safety.
3) Poor Damage Control
Mistakes in a warehouse are inevitable, however, we can control our reaction to them. To reduce damage and handle it in a better way, you can urge your fulfillment providers to install protective gear, ensure the passageways are well lit, and take all possible measures to protect employees.
How does on-demand warehousing help reduce costs for eCommerce businesses?
With on-demand warehouse integrations, as quick as two-day deliveries are being offered and this has caused an increase in cart conversion rates by nearly 25%. With this system, merchants are now able to advertise their promise of fast shipping, in turn attracting more customers to their brand.
Additionally, the flexibility of the on-demand warehousing system allows businesses to convert fixed costs into variable costs, thus reducing the business’s exposure to risk, and reverse paths if a new venture seems unprofitable.
Whether or not on-demand warehousing solutions suit your business is based on various factors, similar to finding an order fulfillment process that works. Ensure that your on-demand warehouse provider has the latest technology, offers ample storage space, and has efficient order distribution practices.
On-demand warehousing is most likely to become the preferred choice for retailers and brands because of increasing costs and growing concerns about warehousing and order fulfillment. With the on-demand warehousing system, you can tackle issues such as inventory fluctuation, scalability, and the dynamic demand of customers.
Time for you to give on-demand warehousing a try and let us know whether or not it worked for your business.