Emerging Uberization in Warehousing
The sharing economy is gaining ground, as owners are putting their excess capacity to good use, whether they are cars or rooms. So successful is the business model that the word uberization, after pioneering car sharing platform Uber, has been incorporated into the modern lexicon. Collins Dictionary defined uberization as the adoption of a business model in which services are offered on demand through direct contact between a customer and supplier, usually via mobile technology.
The logistics industry could well be next.
It is almost an industry given for warehouses to have some spare capacity, as operators need some buffer to cater for expansion or accommodate seasonal demand. By and large this excess capacity is left to sit idle and accounted as part of the overhead expense. These costly assets can be put to good use to generate income, much like what Uber is doing for cars and AirBnB for rooms.
Ditto for trucks; not many trucks are operating with full loads. According to research one in four trucks on US and EU roads are driving empty or only half-loaded.
Sharing within the industry is not new. Back in 1969, DHL pioneered express delivery by offering free plane tickets to private travelers in exchange for giving up their baggage allowance to transport critical shipping documents.
Technology is making it possible to scale up the concept many times over by matching supply to demand involving transactions often too small to justify the attention of traditional providers.
Significant Flexibility With On-Demand Warehousing
With the emergence of warehousing platforms such as Flexe, on-demand warehousing is beginning to take shape. The most notable in the US, Flexe has created within five years an online marketplace of spare storage space in more than 750 warehouses in over 45 markets across North America, offering better geographic coverage than online behemoth Amazon.com Inc.
Demand for space can come from companies dealing with highly seasonal products that require high storage capacity for short periods of time as well as e-commerce players.
Rather than operating their own facilities or signing on to long-term contracts with third party logistics providers in the face of variable demand, on-demand warehousing requires companies to buy the warehousing services on pay-per-use basis, similar with Uber and AirBnB. The retailers incur no upfront fixed costs and gain significant flexibility.
This enables them to be more responsive to changing market dynamics. In the world of Instagram, Snapchat and Pinterest where social media is a big influencer in buying decisions especially amongst millennial, demand for products can enjoy a sudden surge resulting in a spike in warehouse space requirement. To get the products to customers in double quick time, they can rent small units in different parts of the country to ensure prompt delivery nationwide.
With dynamic on-demand warehousing, it has obvious benefits and it is best suited to retailers with small but highly variable demand. For mid-size retailers, it can act as a buffer to handle unexpected demand, complementing a self-operated or third party based network.