With the e-commerce boom showing no signs of slowing, demand for storage space is high as online retailers expand their product variety. On-demand warehousing platforms can help match supply and demand, providing agility and flexibility and creating a more fluid, cost-effective supply chain.
It was called the ‘Great Chicken Crisis’ of 2018. In February, KFC had to close more than three quarters of its UK retail locations for several days – the chicken restaurant had run out of chicken. Already struggling to overcome teething problems with a new logistics partner, the fast food chain was rocked when two major road accidents near its partner’s only dedicated depot left it struggling to supply restaurants.
Enter Stowga. The London-based start-up is one of several companies shaking up the logistics sector as an online marketplace for warehousing space. After being approached by KFC, it alerted a nationwide network of warehouses and inside two days, eight locations were operational. Shortly after, supplies were on their way to its 900 UK stores: the Great Chicken Crisis was over.
Sharing economy for logistics
After revolutionising transportation with Uber, and holiday rentals with Airbnb, the sharing economy is now impacting logistics. The premise is simple: companies like Stowga, or US-based counterparts such as Stord or Flexe, create an online database of warehouse owners and renters that enables them to share their empty space as and when they have it.
With online shopping continuing to boom, demand for logistics space has led to extremely low industrial vacancy rates. In the United States, it sits at an all-time low of 4.8% – half of what it was in 2010 – according to a recent report from real estate investment company JLL. In Europe, too, vacancy rates are below 5%.
But these warehouses aren’t actually full all the time. The industry is characterised by long-term rental agreements, meaning companies are tied to deals they know will cover their peak periods. During the base periods, many find themselves sitting on empty storage space. Meanwhile, other business opportunities may go unrealised due to a lack of available space.
More fluid supply chain
Take a chocolate maker: at certain times of the year, like Christmas or Easter, it has a huge spike in demand. It needs space to cope with these peaks. Meanwhile, a new camping equipment company is looking for extra space in the summer months to keep its stock. On-demand warehousing can bring the two parties together, matching supply and demand. The camping company opens a tender on the online marketplace and the chocolate maker can bid for the business, offering its warehouse space for those busy periods and enabling a more fluid, cost-effective supply chain.
Of course, as the KFC example shows, the service can also be used for unexpected emergencies like handling a large number of product recalls or extreme weather in certain regions. And it isn’t just about storage capacity – other services related to the movement of inventory are often included, from pallet handling to picking and packing.
Geography also plays its part. A growing need for speed in online shopping means warehouses need to be as close as possible to customers. On-demand platforms enable retailers to activate distribution hubs close to their clients when needed and deactivate them when demand falls.
Demand increasing for flexible storage
So far, the model is proving successful. Stowga can now call on a network of more than 4,000 warehouses. At the end of 2017, it agreed a deal with CBRE in which the global real estate giant provided an equity investment and agreed to act as Stowga’s strategic advisory partner. “Demand for flexible storage is expected to increase, fuelled by the growth of omni-channel retailing and other trends,” said Martin Samworth, CEO, EMEA at CBRE. “CBRE will transact ‘on demand’ and short-term logistics requirements for clients through Stowga’s platform.”
In the North American market, Stord has already worked with multiple Fortune 1000 clients and says it mission is to “build a global distribution network that brings cost savings and technology to warehousing.” That will take time, but with agility and flexibility increasingly the name of the game in logistics, warehousing is finally catching up.