Amazon has changed customer expectations for good – how can retailers meet today’s demand for instant gratification and production innovation, without incurring untenable business cost?
From same day delivery to low risk business expansion, every aspect of the retail model needs flexibility and agility. And, while supply chains have been radically improved in recent years, it is becoming imperative to rethink dated warehousing models. Charlie Pool, CEO, Stowga, explains how warehousing as a service is enabling a distributed warehousing model that can meet customer demand and enable low risk expansion.
In a responsive retail business, supply chain optimisation has become a continuous process. In a bid to meet customers’ continually increasing demands for rapid delivery, diverse delivery locations and simple returns processes, companies are modelling transportation routes and costs, assessing customer locations, the costs of fulfilling customer demands and, of course, the cost of storage. Yet while many aspects of the supply chain process are incredibly flexible, especially with the arrival of innovative delivery providers, there is one aspect of fulfillment that is placing a significant and costly constraint over essential retail innovation: warehouse location.
Over the past few decades, organisations consolidated warehouse space, opting for a small number of highly efficient locations that offer great economies of scale. Now, however, that model is less and less appealing as a result of the rise in direct to consumer delivery and in store click and collect – fast, low cost and efficient fulfilment simply cannot be achieved from one or two distribution locations.
Retailers clearly need to move back to the distributed warehouse model that dominated decades ago. Larger numbers of warehouses located closer to the customer will enable fast fulfillment to meet customer expectations. In addition, the model offers the chance to cut fuel costs, emissions and reduce driver hours. In every way, the approach is a win: win.
The problem, however, is that traditional warehouse space is hard to acquire and demands a long term commitment. When it takes as long as 12 months to locate and negotiate a lease for new warehouse space, a retailer is going to struggle to achieve a distributed warehouse model any time soon. In addition, this approach needs to be inherently flexible – from changing business plans to evolving customer demands, retailers cannot risk being constrained by multiple five, ten, even 15 year warehouse leases. Add in the cost of managing relationships with potentially tens of warehouse owners, and it is no wonder that, despite the clear benefits of a distributed warehouse model, few retailers have yet to make the change.
The only way retailers will be able to make the fast shift towards this essential, optimised supply chain will be to adopt an on demand approach. With warehousing as a service, retailers can quickly locate and secure warehousing anywhere across the UK. The marketplace service matches a retailer’s demands to available spare space and, from size to location and duration, the entire process is totally flexible – a retailer can commit to as little as one month and payment is on demand, on a ‘pay as you go’ basis. In addition to storage, this on demand model also provides access to a raft of other warehousing services, including the movement of inventory, which can also be scaled up and down as required.
Critically, by managing the relationships with all the warehouse operators, this approach provides a retailer with a single interface to all the warehouse space. From one invoice to a single set of reports via a dashboard, warehousing as a service transforms not only locating but also the cost of managing warehouse space.
Warehousing on demand opens the way to fundamentally transform the supply chain, to optimise the logistics process to meet customer expectations for rapid, flexible delivery and returns. In addition, it also provides a chance to embrace new market opportunities and trial new ideas with minimal investment and minimal risk. Distributed warehousing is set to be the key transformation for retailers in 2018, not only to meet the demands for instant gratification but to provide retailers with essential options for low cost, low risk innovation and expansion.