On-demand warehousing will become ‘the coworking for logistics’

On-demand warehousing, the logistics equivalent of office coworking, is anticipated to accelerate in prevalence over the next five years, according to more than six out of 10 respondents to Aberdeen Standard Life’s wide-ranging survey on the state of the European logistics market.

According to the survey, conducted by Transport Intelligence, 62.3% of respondents said they anticipate that operators will increasingly turn to on-demand warehousing to better balance the peaks and troughs of demand, driven by fluctuations in consumer-driven e-commerce.

For growing online retailers, the expansion of fulfilment capacity to accommodate demand is a precarious balance: too little limits potential which could backfire on consumer-facing brands if orders are unfulfilled but too much could be profit erosive. Intrinsically, large-scale expansion is expensive which tends to push operators towards the conservative end of the spectrum.

Aberdeen Standard Investments’ research team, led by Lars Flaoyen, writes:

“Warehousing is rarely operated at full capacity. Not only is the under-utilised space not visible to other customers but, in any case, there is no traditional method of making it accessible. The modern supply chain is designed to be agile and flexible, dealing effectively with risks such as falling/increasing demand, trade wars and natural disasters.”

Stowga is an an example of how the market may support on-demand warehousing. It is an online business-to-business digital marketplace that allows warehouses with spare capacity to be matched with businesses looking for short-term storage. Stowga, backed by propetch investors including CBRE, is a kind of Airbnb for on-demand warehousing, with more than 4,000 warehouses in 10 countries listed on its platform. The platform is an example of how technology can simplify through bringing together counterparties to transact directly.

Shared warehouse agreements provide companies with an opportunity to reduce their logistics costs by as much as 12 to 15%, according to the World Economic Forum.

Aberdeen Standard Investments’ research team, led by Lars Flaoyen, writes:

“Much of the cost saving will come from rental and property cost reduction, further reinforcing the importance of investing in well-located units close to end-consumers.  For landlords, the implications are interesting. Tenants offering some space as flexible warehousing might ensure more stable cash flows through quieter times while allowing them to charge a premium for spare capacity at the busiest times.  However, the more efficient use of space could ultimately reduce the overall need for redundant or under-utilised floor space and this could result in the sector becoming modestly less supply constrained.”

james.wallace@realassetmedia.com