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Thanks to the current global environment, the already rapidly expanding world of e-commerce has exploded as customers and businesses focus on ways to meet the needs of their clientele safely and efficiently. In this blog post, we'll explore what on-demand warehousing is, the different types available, and how this flexible solution can benefit your business.
As businesses and companies alike reflect on how to stay competitive, they are often seeking solutions that will allow them more flexibility while simultaneously cutting costs. The costs associated with leasing a warehouse, for example, can be astronomical. For many, the availability of warehouse properties and their associated costs can be so prohibitive that they block potential business owners from attempting to follow through on their visions of a successful ecommerce business. At worst, they drive current business owners into desperate measures to maintain their inventory storage spaces.
What is on-demand warehousing?
An available solution to the problem of prohibitive warehousing costs is on-demand warehousing. Essentially, on-demand warehousing is a logistics strategy that matches businesses with a need for short-term or temporary warehouse space with warehouses that have excess capacity.
Thanks in large part to eCommerce giant Amazon, consumers have developed an expectation that products ordered will arrive in a very short window of time, leaving businesses that are unable to offer 1-2 day shipping at a distinct disadvantage. Utilizing logistics strategies like on-demand warehousing can help small to medium-sized businesses circumvent this issue by adding additional warehouse space and order fulfillment in strategic locations across the country, thus shortening shipping times.
There are many types of on-demand warehouses
The above is only one example of how on-demand warehousing provides a variety of advantages, chief among them being flexibility. There are a variety of models, but the most common is where the warehouse owner acts as a fulfillment company, handling:
- Warehouse storage
- Inventory management
- Picking
- Packing
- Shipping
- And more
This kind of flexibility allows business owners to elect to opt-in to complete fulfillment services and is more akin to a 3PL service.
Alternatively, they can decide how much they wish to take on themselves and work with the warehouse company or fulfillment partner to delegate aspects of their supply chain. This model can be especially beneficial for small business owners, who may need less inventory space. Having access to a suite of value-added warehousing services beyond just product storage is a significant advantage.
Flexible warehousing
On-demand warehousing is also scalable, which is an important aspect for businesses that experience seasonal shifts in volume or are attempting to grow or expand.
On-demand warehousing grows with the needs of the businesses it serves and allows companies to make decisions such as adding new products to their lineup without fear of space availability constraints. It also allows business owners and start-ups to work within shorter timeframes, having no need to commit to longer leases typically associated with warehouse spaces that are not shared. On-demand warehousing often has inventory storage options for as little as six months to a year.
In addition to the flexibility, scalability, and short term lengths available, on-demand warehousing assures that the warehouse space being used already meets security and climate control needs. When leasing your own warehouse space, the additional costs associated with assuring that the building is secure, whether that be in making adjustments to the structure or hiring security professionals to keep an eye on your product, means costs continue to add up. This applies as well to climate control concerns.
However, when engaging with an on-demand warehousing solution, these concerns are covered by the warehouse owner and are usually built into the competitive pricing for space. The best warehousing providers use the latest available technologies to protect their partners' inventory from theft and vandalism, weather concerns, and other potential damage costs.
Understanding all the factors of on-demand warehousing
Finally, on-demand warehousing includes systems like micro-warehousing or micro-fulfillment centers. With last-mile delivery being a huge focus for goods that need to be close to urban centers, are branded to a specific region, or are only relevant in specific areas with specific weather conditions, utilizing local warehouse space makes the most sense.
There is a broad range of factors driving the expansion and growth of on-demand warehousing centers, including:
- Warehouse consolidation
- Small business expansion and cost-cutting
- The rise of eCommerce
The growth of this industry and availability of options works to the benefit of companies seeking to:
- Expand their reach
- Scale their inventory storage options
- Partner with a 3PL or warehouse and distribution provider
- Shorten their shipping times
- Save on real estate purchasing or leasing costs
Final Thoughts
No matter which reason, on-demand warehousing can be a huge ROI for many companies. Contact Redwood today to find out how our Modern 4PL approach can help you get started with an on-demand warehousing solution.
FAQs
What is on-demand warehousing?
On-demand warehousing is a logistics strategy that matches businesses needing short-term or temporary warehouse space with facilities that have excess capacity. It gives companies flexible storage without committing to a long warehouse lease. In many cases, it can also support fulfillment, inventory management, picking, packing, and shipping through a warehouse or fulfillment partner.
How does on-demand warehousing help reduce costs?
On-demand warehousing helps reduce costs by avoiding the high fixed expense of leasing or buying dedicated warehouse space. Instead of paying for unused capacity, businesses use storage only when they need it, which can free up cash for operations and growth. Security and climate control are often included in the provider’s pricing, which can also limit extra facility costs.
Why is on-demand warehousing useful for eCommerce businesses?
On-demand warehousing is useful for eCommerce businesses because it adds flexible storage and fulfillment capacity in strategic locations, which can shorten shipping times. That matters when customers expect fast delivery, often within one to two days. For small and mid-sized businesses, it can also make it easier to compete without taking on a large permanent warehouse commitment.
What services can an on-demand warehouse handle besides storage?
An on-demand warehouse can handle much more than storage. Common services include inventory management, picking, packing, shipping, and other fulfillment tasks. Some providers operate more like a 3PL, while others let businesses choose which parts of the supply chain to keep in-house and which to delegate to the warehouse partner.
Is on-demand warehousing scalable for seasonal or fast-growing businesses?
Yes, on-demand warehousing is built for scalability. Businesses can add space when volume increases and scale back when demand slows, which makes it useful for seasonal swings, product launches, or expansion. It also avoids the long lease commitments tied to traditional warehouse space, with some storage options available for as little as six months to a year.
What is micro-warehousing in on-demand warehousing?
Micro-warehousing is a smaller-scale on-demand warehousing model that places inventory closer to end customers, especially in urban markets or regions with specific demand patterns. It supports last-mile delivery by reducing the distance products need to travel. That makes it a practical option for brands focused on regional service, speed, or localized product availability.
What types of businesses benefit most from on-demand warehousing?
Small and medium-sized businesses, eCommerce brands, and companies with seasonal or expanding inventory needs tend to benefit most from on-demand warehousing. It is also a strong fit for businesses that want to shorten shipping times, expand into new markets, or avoid the cost and complexity of purchasing or leasing dedicated warehouse space.
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