Traditional fulfillment methods are facing a new challenge: on-demand warehousing.
If you want to know even more about mastering warehousing fulfillment and winning customers for life, read our full guide here.
On-demand warehousing and logistics is growing 20% year-over-year because it makes shipping faster, supply chains more resilient, and fulfillment more consistent. But some people still haven’t adopted this way of handling their logistics.
That’s why we’re covering everything you need about on-demand warehousing. Learn how to free up working capital and grow your business with an on-demand warehousing partner.
What Is On-Demand Warehousing?
On-demand warehousing is a fulfillment model based on partnerships between warehouses looking for new inbounding merchants and an on-demand warehousing provider with a roster of merchants in need of affordable warehouse space and premium SLAs.
On-demand warehousing services negotiate with multiple warehouses on behalf of their merchants to build a nationwide fulfillment network to reduce shipping costs and streamline fulfillment so merchants of all sizes can reach customers within 1 to 2 days and create efficiencies in their fulfillment process.
The result for merchants is a customized solution based on their business objectives and inventory requirements so they can compete and scale at an enterprise level. Ahead, we’ll examine the top 10 business outcomes merchants can expect when they abandon legacy fulfillment models for a flexible and scalable solution.
How Does On-Demand Warehousing Work?
On-demand warehousing solutions are managed by a neutral third party, often referred to as a 4PL (fourth-party logistics). The 4PL builds a roster of small- to mid-sized merchants and aggregates their shipping volume. This lends greater negotiating power to merchants who normally would not have the average daily volume (ADV) to negotiate space and labor at top-tier warehouses or 3PLs.
A recent merchant survey revealed that many fast-growing businesses see on-demand warehousing as an effective way to scale up their fulfillment operations without taking on additional assets and gain access to better supply chain technology and storage rates they could not access on their own.
In fact, nearly three-quarters of merchants believe that warehousing models like on-demand warehousing are the future of fulfillment. That’s because they affect more than just the warehousing stage of the logistics process. After inbounding, the warehousing experts handle the physical inventory management and fulfillment execution, making everything until shipping a breeze.
On-Demand Warehousing: A Real-World Solution
LS2 Helmets needed a new fulfillment solution to meet their customers’ changing delivery expectations. As they weighed their options, they determined that an in-house solution would require too much overhead, traditional 3PLs were too expensive and inflexible, and negotiating lower freight costs on their own was unfeasible. After extensive research, they discovered on-demand warehousing.
10 Ways On-Demand Warehousing Will Benefit Your Business
On-demand warehousing can make your logistics more cost-effective, flexible, and timely. Here are all the different ways to do that through shared warehouse space.
1. Faster Shipping
In a recent survey, 37% of consumers expected 1–2 day delivery, and 29% expected same-day delivery.
According to McKinsey, shared, multi-client warehousing enables merchants to have a broader footprint with their inventory — stocking multiple warehouses across the country to get closer to their end customers and lower time in transit (TNT) on final mile deliveries. Often, SMBs are prohibited from distributing their inventory due to higher inventory carry costs. With shared warehouse space, they have a smaller footprint within each warehouse and lower associated costs.
When children’s toy and furniture provider ECR4Kids began selling direct-to-consumer on the Amazon marketplace, they found that their in-house fulfillment model was unable to meet 1- to 2-day shipping expectations. They soon discovered that by outsourcing fulfillment to on-demand warehousing they had a nationwide network of full-service warehouses, allowing them to offer 1- to 2-day delivery to 97% of their eCommerce customers.
2. Supply Chain Resilience
Aside from large-scale market disruptions, many vendors experience seasonal demand that requires a flexible fulfillment solution. On-demand warehousing allows merchants to pay only for the space they need when needed, so they’re not paying exorbitant fees in the off-season that can eat into their overall profitability. By scaling resources to match demand, seasonal merchants can double down on sales and marketing efforts during their busiest seasons without fear of their overhead being too high when demand slows down.
Fitness recovery drink, O2, accomplished a pivot with on-demand warehousing through Ware2Go. When their retail sales channel shut down, they found a new customer base through their eCommerce storefront.
This required their fulfillment process to shift from largely LTL retail shipments to small parcel D2C shipments practically overnight. Because their on-demand warehousing partner was equipped to handle multiple transit modes, they made the transition smoothly and grew their overall sales by fivefold.
3. Better Fulfillment Rates & SLAs
Negotiating affordable rates with traditional 3PLs can often be difficult without meeting a certain ADV (Average Daily Volume). Even if your business can afford storage fees at one of these 3PLs, lower-volume merchants might be a lower priority to maintain acceptable on-time fulfillment and delivery rates.
However, by aggregating the inventory of multiple merchants, on-demand warehousing providers can negotiate rates and SLAs typically reserved only for high-volume sellers. For instance, Ware2Go guarantees all of its merchants 99% on-time fulfillment and delivery, including same-day fulfillment for orders received before the daily cut-off time. For a detailed rate quote for your business, reach out to one of our fulfillment experts.
4. A Team of Supply Chain Experts Working with You
Building a 2-day fulfillment network is complicated and requires in-depth analysis of sales cycles, shipping data, and storage requirements. A qualified on-demand warehousing partner will become an extension of your team — not only guiding you through an initial network setup but regularly combing through data to understand patterns in your sales cycles and suggest new efficiencies in your end-to-end supply chain.
5. Bandwidth to Focus on Business Drivers
Most SMBs find that their core competencies lie in product development, sales, and marketing. Siphoning valuable internal resources to supply chain and fulfillment can burden business operations, but outsourcing fulfillment to a shared warehouse space frees up those resources to focus on your areas of expertise.
If your organization already has a high-level supply chain strategy, having an on-demand warehousing partner enables your team to become even more strategic by offering automated reporting that presents your team with real, actionable insights that drive profitability.
6. Integrated Technology
On-demand warehousing is anchored by cutting-edge technology like FulfillmentVu, which automates traditionally manual processes. New fulfillment technology fully integrates your sales channels with your supply chain and gives you full visibility into your inventory levels at all warehouse locations and sales channels.
It also allows the flexibility to migrate inventory to feed more profitable or higher-volume sales channels. Additional visibility into fulfillment and delivery statuses ensures that service levels are maintained and that customers can be regularly updated on their order status.
7. Top-Line Revenue Growth
Survey data shows that 65% of merchants saw increased cart conversion rates of up to 25% when 2-day shipping was offered at checkout. With integrations like Google’s Free & Fast shipping annotations, on-demand warehousing providers enable merchants to advertise their fast shipping promises earlier on in the buyer journey.
8. Lower Fixed Operating Costs
The flexible nature of shared warehouse space agreements enables your business to convert more fixed costs to variable costs, minimizing your risk exposure. This freedom allows you to invest in the areas of your business that will drive the most profit — inventory, marketing spending, or strategic hires. Reducing fixed costs also lowers the risk of testing new products and sales channels, allowing you to reverse course should a new venture prove unprofitable quickly.
9. Simplified Supply Chain Management
Streamlining multichannel fulfillment through a single fulfillment provider allows you to monitor and manage all sales channels through a single platform. It also creates a seamless and consistent brand experience regardless of the channel customers are purchasing through.
10. Scalability & Market Flexibility
Partnering with an on-demand warehousing provider will drive top-line revenue growth, more satisfied customers, and opportunities to expand into new markets and geographies. This growth will be supported by a fully scalable fulfillment solution that can support any transit mode, order mix, or level of demand.
To learn more about Ware2Go’s on-demand warehousing network, which can help you grow your business, check out our solutions.
Risks of On-Demand Warehousing
While the advantages of on-demand warehousing are numerous, it’s important to consider potential risks. Here’s what you should weigh against those benefits:
1. Customer Support Issues
One common concern with on-demand warehousing is the customer support quality provided by 3PL providers. Some merchants worry that outsourcing their warehousing could lead to inconsistent or unresponsive customer service, potentially damaging their business relationships.
That’s why paying attention to reviews that mention customer support is important. For example, this one says, “The level of care and customer service is incredible.” But that won’t be the case for every 3PL provider, so remember to do your research.
Ware2Go earns reviews like that one through our OPEX (Operational Excellence) team, which is dedicated to ensuring customer satisfaction. The team focuses on continuous improvement and proactively supports merchants, ensuring their needs are met promptly and effectively. Additionally, we emphasize the importance of warehouse visits to maintain high service standards and address any issues on-site.
Plus, the benefits of on-demand warehousing, such as faster shipping times, often lead to higher customer satisfaction. With 2-day shipping capabilities, merchants can meet or exceed customer expectations, leading to repeat business and positive reviews. This fast delivery time is a significant advantage that helps offset potential customer support issues, ensuring a positive overall experience for the end consumer.
2. Long-Term Storage Options
Another concern is whether merchants can rely on using the same warehouse consistently for long-term storage. The fear is that a lack of stability could disrupt operations and lead to inefficiencies.
However, Ware2Go mitigates this risk by setting stringent requirements for our warehousing partners. These facilities must pass an extensive vetting and testing process, including a 100+ point inspection to be added to our network. This rigorous process ensures that you only use high-quality, reliable warehouses, providing consistent service levels.
That way, you also benefit from the flexibility of the shared warehouse space. It lets you scale your storage needs up or down based on demand without being tied to a single facility. This adaptability ensures that merchants have access to the storage space they need, regardless of seasonal fluctuations or market changes. Sustainable partnerships with multiple warehouses mean you are not dependent on one location, reducing the risk of service interruptions and maintaining continuity.
3. Quality Concerns
Merchants might also worry about potential quality issues with on-demand warehousing, fearing that warehouses’ variability might lead to inconsistencies in order fulfillment and delivery accuracy. These concerns are understandable, given the importance of maintaining high service standards to ensure customer satisfaction.
However, Ware2Go addresses these quality concerns by guaranteeing a 99% on-time fulfillment and delivery SLA (Service Level Agreement) as well as a 48-hour dock-to-stock time and 99.9% inventory cycle count accuracy. This high level of service assurance ensures that orders are fulfilled accurately and delivered on time, maintaining the quality of service that merchants expect.
Additionally, our robust warehouse network and advanced technology enable easy integrations and fast onboarding, as demonstrated by our ability to support YBell’s rapid launch without compromising on service quality. That’s the kind of service that has customers saying things like, “I love that I’m not stressed about orders shipping out on time or mis-picks or lost inventory.”
Learn the Details of On-Demand Warehousing
On-demand warehousing is a great way to improve your fulfillment rates, shipping speeds, and supply chain resilience at an affordable price.
However, there’s only so much we can cover in this article. There are even more benefits and details to explore about on-demand warehousing. Interested in learning if on-demand warehousing could be right for you?
