It’s been called “the uberization of the supply chain,” and it’s certain that 3PLs will be encountering this trend throughout the year ahead. On-demand warehousing is one of the latest iterations of the gig economy, and it may well change the way the cold chain operates. Here, we’re exploring some of the biggest pitfalls our member 3PLs should keep an eye on, and some of the prospects that could give a boost to your business.
On-demand warehousing came about in the same way most other gig economy businesses have: because of consumer demand. As the Amazon Effect began to spread throughout the supply chain, consumer habits - and expectations - shifted. Suddenly, customers - both retail and wholesale - understood that companies had the ability to meet their needs more quickly and efficiently than ever before… and they seized the opportunity. Today, when you order a product online, it’s normal to expect that product to arrive in less than 48 hours - a timeline that would have been unthinkable not much more than a decade ago. To meet these changing expectations, suppliers began looking at smaller, regional warehousing spaces, to keep inventory closer to its final destination.
While this business model works for behemoths like Amazon, many companies don’t have the budget to build or lease multiple new warehouses in different locations. And that’s where on-demand warehousers have identified a gap… and jumped to fill it.
When Uber burst onto the scene in 2009, it wasn’t offering a new service. Taxis and driving services had been around forever. The difference was that Uber offered an age-old service in an entirely new way. By commoditizing the carpool and letting anyone with a vehicle launch their own business, Uber made transportation easier, affordable and - the big key - more accessible. Users who would have had to schedule a cab well in advance, plan for long waits and pay hefty fares suddenly had drivers at their door within minutes. And the taxi industry? It was left foundering, losing profits and scrambling to rebrand in an industry that had already moved on.
Though that precise scenario isn’t as likely in our industry, the advent of on-demand warehouses will certainly have an impact. Small and medium businesses that can’t afford long warehouse leases or don’t need as much storage space may turn to on-demand warehouses to meet their needs, and their budget. While that may not mean major business loss for 3PLs, it could eventually add up, or lead to missed opportunities with startups or promising new brands.
Who’s in Charge?
In the same way you don’t know much about the person behind the wheel when you get into an Uber (outside of ratings), customers can’t be guaranteed that on-demand warehousers are offering industry experts. And while some warehousers offer nothing more than square footage, others offer more specialized services, like temperature control, inventory management, customer service and more. If, as a 3PL, you find yourself in need of a warehouse that can give you short-term storage for product overage, you might have a hard time vetting an on-demand warehouser, or trusting that they will meet the specific and necessary mandates regulating the cold chain.
Of course, most on-demand warehousers have knowledge of the industry. UPS, in fact, recently launched an on-demand warehousing platform where they will match brands and 3PLs to the facilities that meet their needs. As with any service, it’s important that 3PLs do their due diligence in researching on-demand warehousers.
While on-demand warehousing brings a major shakeup to the industry, and it pays to be cautious, this development also has the potential to act as a catalyst for positive growth and new opportunities.
For instance, on-demand warehouses can give 3PLs an affordable way to meet customer demand and offer faster, more transparent shipping to the brands they serve. By allowing them to store inventory regionally, 3PLs could use on-demand warehousing as a cost-effective and scalable way to store and ship more efficiently, creating more benefit to clients.
On-demand warehousing also gives 3PLs the possibility of adding a revenue stream. Unused warehouse space sucks money, but by providing rental space to other 3PLs, what was once a waste becomes an opportunity for additional income.
As we head through 2019, it becomes more apparent that trends like on-demand warehousing will create shockwaves that will be felt across the cold chain. While many of these trends may be a flash in the pan, others have the potential to change the course of the industry. Stay tuned to our Cold Connection blog for all the latest info and updates on the biggest changes impacting the cold chain, and check out this piece [URL] on the top trends of 2019.