Logistics and supply chain operations were already being transformed by the explosive growth of ecommerce and the ‘on-demand economy’, which brought new players onto the field and changed existing dynamics.
It isn’t just business to consumer (B2C) sales either. Business to business (B2B) ecommerce has also grown as wholesalers, manufacturers, or retailers exchange products and services online and there has even been a significant rise in consumer to consumer (C2C) trading as well as online marketplaces take off.
Then a sequence of local and global events, from Brexit to Covid and supply chain disruption, accelerated the process, driving a shift across supply chain verticals.
The supply chain is evolving
Traditionally, two-thirds of warehouses have been occupied by retailers, and retailers have committed to long-term leases – up to several decades long. And while it’s been possible to make some dynamic adjustments to the supply sources and shipping, warehousing and distribution operations haven't been so flexible. Historically, most warehouses had been left partially empty, because buying or building space that exactly fits forecasted needs has been almost impossible – driving excess capacity and leaving little room for further expansion or contraction. As the market has evolved to become a fast moving industry, it left retailers trapped in an old school, inflexible, logistics model.
All around the world, people are changing the way they shop. Ecommerce is growing at breakneck speed and customers are expecting faster and faster delivery – from next-day to same-day fulfilment. So the need for agile supply chains has never been felt as urgently.
On one hand, many retailers who are long on space are now looking to monetise that spare capacity – and turn a liability into an asset by renting out their spare capacity for short-term and on-demand use. And others are redesigning their warehousing network to make use of more regional multi-centres, fulfilment-centres or “dark stores”, to get closer to customers. Dark stores are basically a brick-and-mortar locations that have been completely or partially closed to the public and turned into a centre for fulfilment operations, including curbside pickup, in-store pickup, or home or last-mile delivery. For locations that have struggled to serve an in-person market, this approach extracts more value from under-used space and is a trend that is increasingly driving the Warehousing-as-a-Service model.
On the other hand, the shift across supply chain verticals is seeing the 3PL sector occupying space on behalf of retailers and manufacturers that want to reach customers directly. This increase in competition for warehouse space in urban areas consequently impacts upstream logistics, driving greater need for economic and environmental efficiency across interconnected supply chains. Transforming warehouse operations
The first major change was building a fulfilment strategy to meet 3PL customer demands wherever and however they sell. For many 3PLs, this began with transforming warehouse operations into ecommerce fulfilment centres in order to cater to an omnichannel fulfilment strategy.
In the 2021 Third-Party Logistics Warehouse Benchmark Report from 3PL Central, it was noted that nearly 85% of 3PLs experienced order volume growth in 2021. However, warehouses that offered omnichannel fulfilment saw the highest percentage of order volume growth at nearly 92%.
The on-demand warehousing and logistics makes sense as it allows rapid prototyping of new business models and products with a low-cost go-to-market approach. With ‘uncertain times’ becoming normal, when volatility is higher, it gives retailers the ability to scale their operation up and down to flex with their business demands.
Meanwhile, 3PLs continue to diversify their services, adding inventory management and order picking, packing, and shipping with yet more warehouses looking to extend their offerings in 2022 and beyond.
Stowga’s Warehousing as a Service Network is a new way to approach warehousing, opening the door to a model of on-demand logistics adding new levels of agility into your supply chain, which can cost you around 0.5-1% of retail sales when not following best practices. With warehouse space making up the single largest expense for most 3PLs, adding space you don’t use can take a toll on the bottom line—especially as rent has gone up, but not having enough can mean lost business.
An agile supply chain is the only way to effectively manage risk.