Article

How faster deliveries could open the door to on-demand warehousing

As retailers and logistics firms aim to become more agile to deliver goods in line with today’s consumer expectations, on-demand space is catching on within warehouses.

April 15, 2019

As the pressure mounts on retailers and logistics companies to meet ever-faster delivery times, the idea of on-demand space within warehouses is gaining traction.

Online booking systems to give companies access to the space they need for limited periods of time are already in operation across Europe and in the U.S.

In the U.S., UPS recently launched its on-demand concept, Ware2Go, while California’s flowspace and Seattle-based FLEXE continue to expand.

In Europe, Stowga has developed a presence across the UK and Swiss firm Log-hub’s marketplace covers some 38 countries globally. In the Benelux region, on-demand start-up, Stockspots has backing from listed logistics developer and manager Montea.

“It’s about agility,” says Jon Sleeman, EMEA Logistics & Industrial research director at JLL, pointing to the extra pressure on delivery caused by seasonal highs. “Retailers need to be able to scale up and down and have highly variable requirements – be that Black Friday, Christmas, or sales season.”

On-demand warehousing has potential for businesses working on a local scale as well as those with international distribution networks looking to reduce their capital expenditure or build their network in certain areas. 

Smaller retailers, for example, could consider stripping back their occupancy to a “core network” and using on-demand facilities more, says Sleeman. It could also support the growth of smaller businesses – particularly e-commerce firms, who have lower budgets but still need to meet consumer expectations for fast delivery times.

“For bigger retailers, using on-demand warehousing to supplement rather than replace their existing facilities is logical,” Sleeman adds.

And while the numbers of warehouses offering an on-demand service are growing, Sleeman believes it will be some time before large-scale use becomes common.

“For on-demand warehousing – known also as warehousing as a service – to go mainstream, a change in mindset from users will be required,” he says.

Thinking flexibly

It’s not just companies who could benefit from more flexible space solutions: Warehouse owners could find their assets more utilized – with the ability to lease out empty, underutilized space in their portfolios.

“You could argue a lot of warehousing replicates and duplicates,” he says, pointing to the similar needs that tenants have when taking space.

However, some warehouse owners are reluctant to adapt to the changing needs of their tenants, says Sleeman, with traditional leasing structures the main stumbling block.

“It’s a big step from secure income, medium or long-term leases to what is essentially a “pay-as-you-go” model,” he says. “Most landlords want a more certain income stream –a tenant to sign, stay and commit. It’s easier.”

Practical issues, such as the risk of mixing up of stock from multiple tenants or delays in moving goods, may also be a concern.

Yet as the warehouses blazing a trail in on-demand services start to address such considerations, more traditional industrial real estate owners could start to see its potential. New technology could help. In the U.S., start-up OLIM, for example, has launched an online platform that includes daily warehousing on demand across the country.

“On-demand warehousing platforms have to be supported by substantial data on the inventory of buildings, the requirements of companies and the volatility of their activity.” Sleeman says. “

Thinking flexibly

It’s not just companies who could benefit from more flexible space solutions: Warehouse owners could find their assets more utilized – with the ability to lease out empty, underutilized space in their portfolios.

“You could argue a lot of warehousing replicates and duplicates,” he says, pointing to the similar needs that tenants have when taking space.

However, some warehouse owners are reluctant to adapt to the changing needs of their tenants, says Sleeman, with traditional leasing structures the main stumbling block.

“It’s a big step from secure income, medium or long-term leases to what is essentially a “pay-as-you-go” model,” he says. “Most landlords want a more certain income stream –a tenant to sign, stay and commit. It’s easier.”

Practical issues, such as the risk of mixing up of stock from multiple tenants or delays in moving goods, may also be a concern.

Yet as the warehouses blazing a trail in on-demand services start to address such considerations, more traditional industrial real estate owners could start to see its potential. New technology could help. In the U.S., start-up OLIM, for example, has launched an online platform that includes daily warehousing on demand across the country.

“On-demand warehousing platforms have to be supported by substantial data on the inventory of buildings, the requirements of companies and the volatility of their activity.” Sleeman says. “

Booking more than just a warehouse

The on-demand concept could also extend to other essential components of the supply chain, with innovative solutions such as truck booking offering a solution for those in a rush. Germany’s TimoCom offers both warehousing and freight sharing.

In Australia, the CLIK Collective is a new co-warehousing concept with a co-working space attached, designed specifically for local e-commerce businesses in Melbourne.

For now, the use and offer of on-demand warehousing is, modest, says Sleeman.

“But with the wider cultural shift to more shared services impacting real estate in areas such as offices, it’s likely to grow in the coming years.”

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