A New and Disruptive Model of Warehousing is on its Way

The UK start-up, Stowga, is in the process of bringing a disruptive model to the way warehousing has been previously managed, akin to that of Airbnb. Effectively, Stowga are a non-asset based ‘match-maker’, matching companies with available warehouse capacity with those that need additional capacity without committing to long-term fixed overheads. Principally, it’s an extension of the 3PL storage model, without being constrained to a 3PLs warehouse assets. So, what does this mean for others within the supply chain and warehouse industry?

The Term ‘Disruptive’

The term ‘disruptive’ is frequently utilised in business discussions to describe ways of doing things which go against traditionally-established methods. This means the term is frequently bedfellows with businesses like Airbnb, or Amazon, or any modern business which is founded and run on principles which are vastly different from previous businesses. In such a way they can be seen to be ‘disruptive’ to the established way of doing things. They challenge and change the way things are done.

However, whilst business approaches, such as Amazon’s, have become synonymous with the term disruptive, there are others, such as Stowga, who really are disrupting things by bringing in an Airbnb-style approach and model to warehousing as well as logistics and distribution.

When looked at against the modern warehouse problems (and traditional ones), this makes sense. An Airbnb model would mean opening spare capacity in different warehouses and matching it to demand. Warehouse space, in the e-commerce era, is in immensely high demand. Maximising use of the available space to every player’s advantage, therefore, makes sense. However, using a traditional approach to this would be unheard of, and impossible to put in to practice. With the right technology and an Airbnb-model, it is possible. In so doing, a new marketplace is therefore created.

Traditional Warehousing

Traditionally, warehousing involves holding vast physical properties in your possession, or through a 3rd party logistics provider, in a limited number of locations. With such warehouses, businesses have high overheads and fixed costs, which don’t change with the fluctuations in the business success and economic climate they’re in. Warehouses in many ways are a risky undertaking. They can wallow empty, or not be fit for purpose, yet you are stuck with little chance of changing things in the short to medium term. The problems with this traditional model are further exacerbated by the fact that goods have to be transported from one location to another in vast distribution chains. This involves significant cost – in terms of money but also resources, time, and the environment.

A New Warehouse Model

Conversely, Stowga, and their competitors such as Flexe, use technology which matches warehouse ‘sellers’ of space with those needing to ‘buy’ space. You can therefore flex and adapt your warehouse usage according to in-the-moment requirements and thus reduce the risks and overheads. The warehouse is no longer seen as a liability but instead is the tool that it should be.

This ‘disruptive’ model is really part of the sharing economy. It stands to benefit many different partners in many different ways. Warehouses will no longer be liabilities, but instead, be a resource to be exploited and harnessed. This gives hope to run-down industrial zones as well.

It’s Not Just Warehousing

At the moment we’re predominantly seeing changes in the warehouse industry. However, there’s really no limit to this disruptive and sharing economy concept. We are likely, in time, to see further similar models emerging in every aspect of the supply chain from logistics to manufacturing. In this way, businesses will operate on a more modular basis and operate more effectively at the local level.

However, for now, it is exciting to see what is happening in warehousing because traditionally this has been a problematic area for supply chains. If we see the success of the disruptive model in the warehouse arena, then we will see it elsewhere too (read our article Get Ready for Logistics Disruption in 2018 and Beyond). The warehouse will go from being a fixed and expensive cost to a variable one.

What this also contributes to is a significantly more agile model. Demand can be quickly adapted to without overwhelming difficulties. Agility is essential in the e-commerce marketplace and so the trend is likely to continue in the same manner.

How Does this Work with Automation?

Of course, we’re all watching as the likes of Amazon bring greater automation to warehousing. Do the two agendas conflict?

In reality, they should go hand in hand. If the automation makes the warehouse system worthwhile it will offer warehouse space in high demand with those looking to benefit from both the space and the technology and robotics available. Smaller businesses should, in theory, be able to benefit from similar automation to giants such as Amazon. This would enable them to compete on a more level playing field when it comes to aspects such as just-in-time deliveries. For example, if the products are in numerous sites meaning they are close to customers, they will be able to get them to the customer more quickly improving the customer experience.

This model should also be better when a business is experiencing a reduction in demand. For example, if Brexit hits your demand in such a way you no longer need the same UK warehouse space, (read our article Brexit and the Future of the UK Warehouse) then you’d be able to walk away without placing the business at risk due to fixed overheads. It’s a flexible model which adapts and changes as you do. Liability is reduced.

The Impact of Brexit on this Model of Warehousing

It’s actually good news that this Airbnb-style approach is new. Otherwise, the impact of Brexit would be even greater. Retailers can sell spare capacity now without facing such a dire impact if they have over-capacity. They can rent it out as an asset in itself.

It goes beyond this too. There are always different political and geographical influences causing change in supply chains. At the moment labour costs are also on the rise in China. Along with increased logistics costs due to a rising oil price, this may ultimately mean that goods once produced in China are produced elsewhere – notably at a more local level. This will only be possible with a new model of warehousing.

At present, Stowga is just based in the UK. However, it’s likely that we’ll see their expansion, along with that of competition, elsewhere. What we’re seeing is the beginning of a bigger change.

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