Warehouse News

CBRE report makes the case for not overlooking on-demand warehousing

Online sales create instant short-term demand for warehouse and distribution center space, a potential headache for retailers.

At this time of year, holiday shopping takes precedence with many consumers making trips to local shopping malls and retailer big box stores, as well as making myriad online purchases, too. This happens every year, without exception, to be sure.

And with holiday sales commonly viewed as make or break time for retailers, coming with that are different ways for them to brace for the rush. That is a major theme of research recently issued by Chicago-based industrial real estate firm CBRE in its 2017 U.S. Holiday Trends Guide.

This wide-ranging report takes deep dives into various holiday season trends focused on the intersection between online and in-store shopping, including: short-term retail leases during the holiday season, which the report calls “pop-up mania”; increased online sales activity through mobile commerce; and heavy retailer discount activity.

But the most applicable trend on the supply chain and logistics side cited in the report centers around what CBRE called “Warehouse Space, On Demand.”

CBRE explained that this trend is being paced by online sales essentially creating instant, short-term demand for warehouse and distribution center space, something it also labeled as a potential headache for retailers that want to ensure prompt customer delivery.

The way the pop-up warehouse model works, according to CBRE, is with short-term industrial space being matched with suppliers, which has resulted in higher efficiency and lower costs.

In the report, CBRE said makes it clear that as the demand for goods grows or shrinks, so does the demand for warehouse space, which makes projecting warehouse demand manageable on a broad scale, given that reliable macroeconomic projections are available.

But it countered that at the user level within a year or sales season, being able to accurately forecast warehouse demand becomes difficult, with users leasing space sufficient for an average inventory count. And it added that over the course of a year or sales season, inventory amounts in that space can see significant fluctuation, which becomes an issue during the holiday season run-up, due to inventory levels being high, coupled with a “massive strain on warehouse capacity” not to mention increasing e-commerce activity higher inventory levels, with a focus on a higher level of service have set the stage for a challenging environment.

This is where warehousing on-demand, or the pop-up warehouse, comes into play, said CBRE.

By matching owners of excess warehouse space with users, or retail shippers, that need it temporarily, it provides a way for both parties to “easily match both sides of the transaction…with greater transparency and fewer transaction costs to the process.”

David Egan, CBRE head of industrial and logistics research in the Americas, likened the pop-up warehouse to the natural cousin of the gig economy and its better-known players such as Uber and Airbnb in terms of how they also match demand to capacity.

“In the warehouse space, there will always be this excess capacity where people, or users, will have more space than they may actually need,” he said. “There is very rarely plentiful inventory in warehouses. There are things like seasonal issues that impact every single thing running through a warehouse [to varying degrees]. The traditional model says that you lease the space you need for your max capacity, which can lead to a lot of excess capacity over the course of the year as you are not always going to match your maximum inventory levels and it is also expensive.”

While sub-leasing may be an option to take advantage of empty space, he said those leases come with longer terms. This can be problematic because when that sub-leased space is needed back, it can be tougher to do so, and it can also impact long-term needs, too.

The concept of matching up users with excess capacity makes on-demand warehousing a natural fit, much in the way that Uber and other companies work, said Egan.

“In warehousing, there is a persistent problem of users having more space than they need,” said Egan. “We know there are seasonal situations, where users need short-term space, this leads to a situation to match two sides up [for a leasing transaction].”

Durations for short-term warehouse leases can range from two weeks to two months or longer.

Egan explained that retailers are paying for the convenience of having the space for a short period of time at a premium, as it is only for a limited time so they can lease it when it is needed.

But costs can vary, too, depending on how long a lease is, as well as its conditions, CBRE data showed. Citing data from Flexe ‘s (an on-demand warehouse provider) Warehouse Capacity and Trends, 2017, it found that users utilizing on-demand flexible warehouse space to augment a single-peak seasonal inventory surge are able to improve warehouse utilization by nearly 100% and reduce over all seasonal warehouse and inventory costs in half, while in a multi-peak setting, where inventory surges more than once per year, warehouse utilization sees a bump up to 40%, with costs cut 20%-30%.

No matter how one views it, on-demand warehousing figures to loom large in retail shippers’ holiday supply chain planning and strategy going forward.


Article Topics
CBRE   Distribution Center   Economy   Logistics   Retail   Storage   Supply Chain   Warehouses   All topics


Comments
You must be logged in to post a comment. Login.

About the Author
Jeff Berman, Group News Editor
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman
 
Latest Warehouse News
Five Keys to “Click and Collect” Order Fulfillment
To meet consumer demand for more convenient delivery options, many retailers have adopted the buy online and pick-up-in-store (BOPIS, or "click-and-collect") order fulfillment model.

5 Ways to Assess Your Warehouse Technology Needs
When looking to leverage new technology, each warehouse must assess their business and determine the solutions that offer not only best practices that are tried and true for today’s customers, but also…

Material Handling Tips For Maximizing Warehouse Space
Warehouse storage space is expensive, so it makes sense to make the most of your warehouse storage capacity in order to reduce carrying costs and increase material handling efficiency.

Swisslog Optimizes Efficiency at the North Pole
Swisslog automation and software is making Santa's job easy...


 

24|7 Pro Team

The 24|7 Team is your direct pipeline to solutions for your business challenges. It's your opportunity to have supply chain and logistics experts look at your specific challenges and needs, and give you free, no-obligation advice, solutions, and information.

The 24|7 Team will simplify the task of creating a database of likely partners, building your knowledge base, and preparing your Request for Proposal list.

1
  Choose a topic for your RFP

Transportation RFP/RFI

The Transportation RFP is your direct pipeline to solutions for your transportation challenges. It's your opportunity to have logistics experts look at your specific transportation challenges and needs, and give you free, no-obligation advice, solutions, and information specific to your request.

Choosing the perfect software or system can be an indomitable challenge. Using this transportation/TMS RFP will simplify the task of creating a database of likely partners, building your knowledge base, and preparing your Request for Proposal list.

Warehouse/DC Management RFP/RFI

The Warehouse Management Systems (WMS) RFP is your direct pipeline to solutions for your WMS challenges. It's your opportunity to have logistics experts look at your specific WMS challenges and needs, and give you free, no-obligation advice, solutions, and information specific to your request.

Choosing the perfect WMS solution can be an indomitable challenge. Using this WMS RFP will simplify the task of creating a database of likely partners, building your knowledge base, and preparing your WMS Request for Proposal list.

Supply Chain RFP/RFI

The Supply Chain RFP is your opportunity to have logistics experts look at your specific challenges and needs, and receive free, no-obligation advice, solutions, and information. It simplifies finding a pool of likely partners, building your knowledge base, and preparing your Request for Proposal list. The companies in the Logistics Planner have agreed to respond to your request for in-depth information and follow-up, and your request is totally confidential.

Software/Technology RFP/RFI

The Software/Technology is your direct pipeline to solutions for your logistics information technology challenges. It's your opportunity to have logistics experts look at your specific technology challenges and needs, and give you free, no-obligation advice, solutions, and information specific to your request. Whether it's WMS, TMS, Mobile or Cloud, our pros can help.

The companies listed below have agreed to respond to your request for in-depth information and follow-up. Your request is totally confidential.

Executive Education RFI

The Logistics and Supply Chain Education RFI can help you identify the schools, coursework, continuing education, distance learning and certification opportunities available from leading logistics educational institutions.

Upgrade and improve your logistics and supply chain skillsets. Whatever route you choose—advanced degree, executive education, certification or distance learning—the time and money you invest in your education today can pay off in continued career success tomorrow. Contact leading universities and professional institutions for the information you need to prepare for the future.

Third Party Logistics RFP/RFI

This 3PL Request for Proposal (RFP)/Request for Information (RFI) can help you find the 3PL and 4PL providers that can meet your specific 3PL service challenges and needs. The 3PL companies below will provide free, no-obligation third-party logistics advice, solutions, and information.

Ask your 3PL questions, you'll get answers. Simply complete the information, and detail your 3PL challenges. Then, check off the third-party logistics companies that you want to review your request.

1. Choose an RFI topic.
2. Enter your contact information and challenge.
3. Select companies and optional categories.
4. Submit.


2

Your Information



Your Challenge, Problem or Request *

3

Select Transportation Companies

  • Select All

  • 3Gtms
  • BluJay Solutions
  • CSX Trans. Intermodal
  • Kuebix
  • Landstar
  • Legacy Supply Chain Svs.
  • One Network
  • Pitt Ohio
  • Purolator
  • Quintiq
  • SEKO Logistics
  • SMC3


Select Relevent Categories

  • Air Freight
  • Intermodal
  • Motor Freight
  • Ocean Freight
  • Rail Freight
  • TMS

Select Warehouse/DC Management Companies

  • Select All

  • 3PL Central
  • Apex Supply Chain Tech.
  • Honeywell Intelligrated
  • Kuebix
  • Legacy Supply Chain Svs.
  • Swisslog
  • Westfalia Technologies
  • Zebra Technologies


Select Relevent Categories

  • Auto ID & Data Capture
  • Automation
  • Conveyors & Sortation
  • Lift Trucks
  • Packaging & Labeling
  • Pallets & Containers
  • Shelving & Racking
  • WMS

Select Supply Chain Companies

  • Select All

  • 3Gtms
  • 3PL Central
  • Amber Road
  • Apex Supply Chain Tech.
  • APICS
  • BluJay Solutions
  • CSX Trans. Intermodal
  • Frontier Business
  • Kuebix
  • Legacy Supply Chain Svs.
  • Logility
  • One Network
  • Purolator
  • Quintiq
  • SMC3
  • Synchrono
  • TAKE Supply Chain
  • Westfalia Technologies
  • Zebra Technologies


Select Relevent Categories

  • Global Trade
  • Inventory Management
  • Risk Management
  • Sustainability

Select Software/Technology Companies

  • Select All

  • 3GTMS
  • 3PL Central
  • Apex Supply Chain Tech.
  • BluJay Solutions
  • Honeywell Intelligrated
  • Frontier Business
  • Kuebix
  • Logility
  • One Network
  • Quintiq
  • SMC3
  • Swisslog Logistics
  • Synchrono
  • TAKE Supply Chain
  • Zebra Technologies


Select Relevent Categories

  • ERP
  • Sales & Operations
  • Sourcing/Procurement
  • Optimization
  • Transportation Mgmt
  • Warehouse Mgmt

Select Executive Education Choices

  • Select All

  • Graduate Courses
  • Online/Distance
  • Executive Education
  • Certifications
  • Undergraduate
  • Seminars
  • Associations
  • Conferences
  • Tradeshows


Select Third Party Logistics Companies

  • Select All

  • 3PL Central
  • Landstar
  • Legacy Supply Chain Svs.
  • Purolator
  • SEKO Logistics
  • Westfalia Technologies


4
 

24|7 Company Profiles