On-Demand Warehousing 101: What Is It?
This is your ultimate guide to on-demand warehousing and fulfilment services and how your business can benefit from it.
What is on-demand warehousing, what makes it so effective, and how are businesses actually using it? In our on-demand warehousing 101 series, these are the topics we’ll cover—starting first with what it is and how it’s different from traditional warehousing.
- What on-demand warehousing is
- Why modern businesses need it
- How it’s different than traditional warehousing
- How businesses are adopting it
What is on-demand warehousing?
The many shifting market conditions and supply chain disruptions from the recent years made it clear that the traditional methods for managing warehousing were no longer enough for the businesses’ needs. As a result, an entirely new way to manage storage, distribution and fulfilment networks, known as on-demand warehousing, came to be.
On-demand warehousing gives businesses a scalable, flexible warehousing solution for companies looking to scale up their businesses and handle inventory fluctuation. It relies on a marketplace model and transactional pricing so that businesses can expand and downsize their networks as needed.
The Wareflex Platform connects warehouse providers who have available capacity and services with businesses who need flexible solutions. Through an on-demand, pay-as-you-go model, businesses can secure warehousing and fulfilment solutions quickly and with no long-term commitments or costly setup fees.
“The demand for warehousing space is increasing dramatically as consumer’s purchasing power is hiking up as the year (2022) comes to a close.”
- If you’re rapidly expanding your business and don’t want to commit a large amount of upfront capital to a warehouse network that you’re going to quickly outgrow, on-demand warehousing provides a pay-as-you-go, scalable solution.
- If the US-China trade war leaves you with a sudden need to forward-buy large amounts of imports, on-demand warehousing gives you access to available storage so you have a place to put it.
- If you’re looking to expand into a new market and don’t have the resources to manage the sourcing and procurement process for every new warehouse and fulfilment centre yourself, on-demand warehousing lets you tap into a network of hundreds of warehouses—giving you access to space in even the tightest logistical real estate markets.
Why is there a need for on-demand warehousing?
The way businesses sell and other businesses and consumers purchase their products has changed, but the logistics operations that support it have been slow to catch up or barely changed. The supply chain was built around old practices where goods were stored and sold via a central warehouse or a small network of warehouses. Logistics operations were built to distribute goods without extensive network considerations, not to mention, even worse, without the inputs of customer’s expectations.
So, as the several changes in market conditions, such as the rise of e-commerce, trade war, pandemic, digital transformation, etc, evolved and completely changed the way we buy, it not only increased the demands on businesses, but made the traditional way of distributing products to other businesses and customers outdated and inefficient.
With on-demand warehousing, B2B and B2C businesses can build flexibility and agility into their logistics strategies to support the multiple ways their customers purchase today. Whether it’s online branded shops, e-commerce marketplaces, brick-and-mortar stores, direct-to-consumer (D2C), regional distributors, cross-border, or some other methods — on-demand warehousing gives businesses the ability to adapt to the demands of their customers today, and tomorrow.
What do we mean by traditional warehousing?
On-demand warehousing is a new alternative to traditional warehousing, so let’s start examining the old options businesses had for managing their warehouses.
- Option 1 – Owned warehouses:You build a network of warehouse facilities that you own, outfit and operate yourself; Cost range: $$$$
- Option 2 – Leased warehouses:You lease facilities from a warehouse owner, outfit it and then operate it; Cost range: $$$
- Option 3 – Long-term, outsourced logistics:You lease space and services from a 3rd party logistics provider (3PL) to manage operations on a long-term, multi-year basis; Cost range: $$
In fact, your warehousing storage and services’ needs depend on your business requirements, and some combination of these options may be a great solution for you already. However, there are some significant cons as well:
- High cost: Traditional warehousing solutions require steep upfront capital investments and expensive project setup fees.
- Slow time to value: Changes in your own network don’t happen in a short time, and leasing space from typical providers comes with long sourcing and implementation cycles.
- Limited network reach: With traditional warehouse operators, your business growth is constrained by their existing locations and capabilities.
How is on-demand warehousing different?
With on-demand warehousing, you create a logistics network strategy that is as dynamic as your business requires. You can scale the physical capacity size, adjust operational capabilities and expand locations of your warehousing and fulfilment network to match the varying customer demands and manage any unexpected situations that arise throughout the year.
Instead of building your business around the logistics infrastructure you have, on-demand warehousing offers you a low-risk alternative to test new strategies and keep up with the rising customer expectations. Fixed, long-term contracts and short-term agreements with premium charges are no longer necessary under this variable cost model.
What can on-demand warehousing do for your business?
On-demand warehousing can support a number of use cases, but here we have 4 major scenarios, which are: Inventory overflow, B2B distribution, Omnichannel retail and E-commerce fulfilment.
For expected seasonal peaks or unplanned excess inventory, on-demand warehousing allows businesses to rapidly add extra storage near to current location as it’s needed. It’s a turnkey solution for recurring capacity problems.
For companies with nationwide coverage and special requirements, such as cross-docking operations for high volume replenishments, cold storage for frozen and chilled products, or satellite warehouses in tier-2 cities and near port areas for intermittent demand throughout the year, on-demand warehousing supports businesses to allocate their capacity in a more flexibly way.
For retailers with brick-and-mortar stores, online stores and marketplace presence that requires centralised management of inventory visibility, order tracking and the overall customer experience, on-demand warehousing offers the convenience of accessing multiple warehouse profiles and shorten last-mile transportation by storing goods closer to intake centres.
On-demand warehousing for e-commerce fulfilment gives businesses the flexibility to scale their fulfilment networks, as needed, to enhance their last mile delivery and customer experience strategy. Manufacturers can capture more margin through a direct-to-consumer strategy. Retailers and brands can add warehouses and fulfilment centres to their logistics networks to improve their next-day or even same-day delivery, test new markets, and create short-term product promotions. Grocery chains can have an urban logistic network that responds to the demand signals within a matter of hours, to ensure their quick commerce promises.
How can businesses use on-demand warehousing?
For enterprise businesses, on-demand warehousing complements your existing logistics network. It’s the perfect solution for piloting operational programs and/or marketing campaigns, rolling out new strategic initiatives, or managing supply chain disruptions like peak seasons, tariffs or shipment delays.
Here’s an example of the path enterprises can take to fully optimise their logistics operations:
- Enterprises often start with a pilot inventory overflow project to more flexibly handle supply chain disruptions or unforeseen circumstances.
- From there, they often expand into pop-up or retail distribution, enabling them to do things like position fast-moving or in-demand SKUs close to the markets where they are needed.
- Finally, enterprises can add on eCommerce fulfilment to increase their delivery promise and make one-day or even same-day delivery possible.
Small and medium businesses (SMBs)
For SMBs, on-demand warehousing gives the opportunity to them to access enterprise grade logistics services without the long term commitments, hence improving their competitive advantage in the market. It’s ideal for market expansion and to manage seasonality and overflow issues, while minimising overhead costs.
Here’s an example of how Wareflex can help SMBs to leverage on on-demand warehousing model:
- SMBs usually lack the resources to invest in additional warehouse infrastructure, which makes it appealing to use on-demand warehousing during seasonal periods.
- As they plan to expand their market across the country, they can leverage on the network and expertise of Wareflex in the new region to avoid costly mistakes.
- Finally, the idea of completely outsourcing the logistics operations makes sense to free up the internal resources to focus on the growth of the core business.
Digitally native brands
Businesses that were born online, whose first channel was direct-to-consumer sales, often use on-demand warehousing as their entire logistics network—letting Wareflex handle the logistics, while they focus on customers and growing their business. On-demand warehousing gives them the ability to expand their logistics solution as demand grows.
Here’s an example of how a digitally native brand could grow with Wareflex:
- Online brands typically start with direct-to-consumer fulfilment, popping up one or two warehouses near their target demand region.
- As digitally native brands mature, the next step is often to add more fulfilment centres to shorten delivery times and enter new markets, or expand their reach with a retail distribution partnership.
- When a digitally native brand has grown their business enough, they can then leverage inventory overflow solutions to handle any supply chain disruptions, peak season demands, and other overflow needs.
Why choose Wareflex?
Wareflex isn’t the only warehousing solution out there, but it is the first on-demand warehousing platform in Vietnam focused on transforming the logistics industry through a more modern approach to warehousing and fulfilment. And we aim to be the largest network of connected warehouses in the Southeast Asia region, by 2030.
We believe there is a better way to manage distribution so that every business can optimise the global delivery of goods. And, our job is to help our clients delight their customers and deliver better experiences across the board.
The key pillars of Wareflex are our technology, our network, and our team of experts:
- Our technology: The Wareflex Platform connects you to the warehouse partners in our network. Your data is unified in one place, and you can connect new locations and services with remarkable flexibility and agility.
- Our network: Your business is dynamic, your distribution network should be too. With Wareflex, there are no startup costs and you pay only for what you use. Adding warehouses is simple and cost-effective, so you can be where your customers are.
- Our team of experts: Stay focused on building your brand and growing your business, we’ll manage the warehousing and fulfilment services. From daily warehousing operations to strategic network planning, we’re here to support every stage of your growth.