The Wall Street Journal’s recent analysis of retailers’ logistical challenges highlights the appeal and success of alternative solutions to traditional warehousing in retail and beyond.
Driven by problems of scale, pricing, and flexibility, these new solutions help shippers reach key markets, meet holiday demand, and ultimately gain a competitive advantage.
New approaches to warehousing and distribution are causing a market shift: we’ve now seen some of the biggest brands in the nation utilize these strategies when the stakes are highest. These solutions are here to stay, raising the supply chain bar for shippers of all sizes.
We’ve rounded up the key insights from the article below.
1. Consumer expectations and high volume are straining traditional warehousing models
- Because of high consumer expectations (largely driven by Amazon), shippers and retailers increasingly seek distribution centers and warehouses nearer to population centers.
- Demand for these warehouses, driven by the explosion of e-commerce sales, has increased prices and decreased vacant storage space. The industrial availability rate for warehouses fell to its lowest rate since 2000 in the third quarter of 2018.
- High prices make shippers’ lives difficult, but a lack of flexibility is also an obstacle. Retailers know that demand can shift quickly, so they don’t want to tie themselves to long-term commitments with warehouses in limited locations. Companies need to ship and store in numerous markets, but they can’t afford long-term contracts that may limit future growth.
- All of these factors are stressors on traditional warehousing models. Companies need more space than ever, but they aren’t comfortable with the inflexibility of long-term contracts or inflated price points.
2. New and innovative approaches to distribution are rising to the challenge
- Alternative warehousing solutions offer flexible, scalable storage space without long-term contracts. In short, they exist to ease the pressures of traditional distribution.
- The category of public warehousing isn’t new: these spaces have existed for many years to provide flexible storage space. However, this type of storage has traditionally been difficult to leverage. Today, through reach, visibility, and reliability, new distribution strategies offer storage space in ways that make public warehousing not just usable, but an incredible solution.
- Nationwide reach is a crucial part of these new approaches. Alternative distribution solutions connect vast numbers of warehouses, allowing companies to access storage space near any major population center through one point of contact.
- Visibility is also vital. The software that these new approaches often offer allows shippers to view their inventory more easily.
- Scalability is a huge component of alternative strategies. Traditional warehousing solutions don’t offer the same potential for steady growth and expansion, benefits that new distribution solutions are built to provide.
- Finally, the industry is growing. The market for public warehousing and storage is projected to hit $28.7 billion by 2023.
3. Major brands are adopting alternative distribution solutions, even when the stakes are highest
- Driven by the strains on traditional warehousing, Walmart, Ace Hardware, and KFC have all turned to new storage and distribution strategies.
- These brands adopted alternative warehousing solutions in high-stakes situations. Whether to meet holiday demand or solve pressing problems with current providers, these new strategies demonstrated success, even in high-stakes situations.
- New approaches aren’t just for one market segment or group, though. Alternative warehouse strategies help enterprises, but also small and midsize businesses. These solutions power distribution and facilitate meeting long-term goals, including matching high expectations set by Amazon.
The biggest brands, including Walmart (#1 on Fortune 500’s Global 500 list in 2018), are adopting new approaches to distribution. Their decisions showcase the strains on traditional warehousing.
Through scalability, flexibility, and nationwide reach, new approaches to distribution are making their mark on the industry.
An example: networked distribution
STORD’s 2-year relationship with one client demonstrates the value of networked warehousing as a new and innovative distribution solution.
A solar-panel supplier needed a partner that could help them reach several U.S. markets and provide a clear view of inventory across facilities. Dissatisfied with its current provider (including concerns with quality), this supplier chose STORD’s networked distribution solution.
STORD’s nationwide network of warehouse and transportation partners helped them expand their warehouse footprint and store product near numerous U.S. markets. The partnership with STORD also gave this shipper one partner to provide logistics support and simplify day-to-day operations, as well as inventory visibility across facilities.
Through its partnership with STORD, the shipper was able to steadily scale distribution and improve efficiency. With expansion to multiple additional markets planned in 2019, this relationship will continue to deliver a competitive advantage going forward.