Definition Flexible Warehousing and
Solution Comparison [Guide Part I]

A short guide including a definition of flexible warehousing and comparison to the traditional Status Quo.

Publication Date: 29th April 2020, Reading Time: 6 mins.

In the past years, we’ve seen more modern technologies and concepts being adopted in the logistics spheres (finally!). Flexible warehousing is one of them, and clearly we’re a big fan of it. Here’s the overview of what you need to know about flexible warehousing.

Flexible warehousing

Definition: What’s flexible warehousing?

Simply put: flexible warehousing is the model of making use of the warehouse facilities of a 3PL (third party logistics) provider at flexible terms for all distribution logistics activities. Whether you are a multi-national, mid-sized or a startup organization – flexible warehousing can help you unlock new business opportunities and excel your growth and profits by optimising your supply chain and distribution logistics.

Depending on how you want to sell your products (e.g. via eCommerce), where you want to sell (target markets), or to whom (B2B or D2C) – at the end of the day, you need to store, fulfill and deliver your products. Now, flexible warehousing enables dynamic processes of handling all forward logistics (product storage, pick & pack of stock-keeping-units) and reverse logistics (returned orders and restocks of returns) needs. With flexible warehousing, businesses can scale operations in a fully demand-oriented way, and most importantly, get easy access to professional 3PLs that fit their order fulfillment needs.

To give you a better understanding, here’s an example of flexible warehousing: Instead of using one centralized distribution centre or warehouse, in a flexible warehousing scenario, multiple decentralized fufillment hubs are used. This enables businesses to shorten last mile deliveries, and hence increase product delivery speed. But simply making use of multiple warehouses and storage locations brings also operational challenges with it. For example, keeping data transparency for stock movements, or communicating orders and fulfillment status between commerce systems (online shops, ERP-Systems) and warehouse management systems. Hence, flexible warehousing does not only come with making use of multiple storage locations at flexible terms, it also includes the use of the right technology to master these operational challenges. But we’ll come later to this point in detail and provide you a more detailed understanding of flexible warehousing.

Why is it time for flexible warehousing?

The way consumers and businesses shop and purchase products is rapidly changing. However, the supporting structures to store, fulfill and deliver your eCommerce, B2B and Retail customer orders have been slow at catching up. For simplicity reasons, we call these structures traditional warehousing. Traditional warehousing and supply chains that were built during times before the big eCommerce era, were designed to deliver products to domestic Retail store shelves according to predictable purchasing plans – and not how we need it today: to your customers’ doorsteps across borders within a few days or even hours.

With the emergence of eCommerce, omnichannel Retail and disruptors such as Amazon setting new delivery standards, the traditional way of distributing products became outdated, rigid and inefficient. In fact, according to a recent study by PA consulting, less than 10% of organizations have an advanced vision of a smart supply chain, despite significant customer experience and cost savings potential. Thus, flexible and accessible solutions to manage supply chain operations in a smart way must evolve. As customer behaviours are rapidly changing, logistics cannot stay stagnant. The opposite, we believe that logistics, fulfillment and warehousing processes should enable commerce businesses, not stop them.

Our Logistics-as-a-Service platform is based on the concept of flexible warehousing. With flexible warehousing, we provide independent retailers, commerce businesses and brands of any size with the unique opportunity to contract and expand their warehousing networks as needed and without large scale investments or complex IT integrations.

Operations across the warehouse network are connected to a proprietary cloud technology enabling full visibility of and intelligence on all storage, inventory and fulfillment processes for forward logistics (restocking, orders, pick & pack) and reverse logistics (returns).

Ultimately, flexible warehousing makes it possible to deliver on all the different ways customers do their shopping today and in the future, be it online, cross-border, via retail stores, pop-up shops, or any other method yet to arise.

What do we mean
by the Status Quo of traditional solutions?

For everyone who is not an expert in logistics or wants to understand the differences between flexible and traditional warehousing better, let’s examine first the traditional options that retailers, commerce businesses and brands used to employ for storing, pick & pack processes and shipping of their customer orders.

Traditional warehousing solutions:

  1. You can build a real estate facility that you own, equip, and operate
  2. You can lease a real estate facility that you equip and operate
  3. You can lease space and services from a 3PL (Third-party logistics provider) based on long-term contracts and complex IT integrations

Your warehousing needs are unique to your business and some combination of the above options may work for you, however, there also are some major drawbacks:

Expensive: Traditional solutions require significant upfront capital investments and costly project setup fees

Slow: Changes to your owned network won’t be implemented very quickly and leasing space from traditional 3PLs is associated with long sourcing and implementation times

Limited: With traditional 3PLs, your company’s growth is highly dependent on and limited by their network locations and capabilities

Comparison: How is flexible warehousing different?

Flexible warehousing provides you with a distribution network as dynamic as your business. It allows you to scale the size, locations and capabilities of your warehousing and fulfillment network and adjust for the varying and sometimes unpredictable demand over time.

everstox partners with leading warehousing providers across Europe who have integrating their warehouse management systems (WMS) into our Logistics-as-a-Service platform solution. Our tech platform also adds a smart layer of data and analytics – so the solution doesn’t only give you access to all these warehouses, but provides you with unique visibility, control and smart logistics tools.

Flexible warehousing enables you to test out new strategies and take into consideration increasing customer expectations. Employing flexible warehousing let’s you use a logistics infrastructure that is built around your business, and not the other way around. Since logistics costs are calculated on a variable cost model, the usual traditional fixed pricing models, long-term contracts or high premium short-term contracts are eliminated.

But let’s directly compare how traditional warehousing differs from flexible warehousing.

Comparison: Traditional vs Flexible Warehousing

Warehousing and Operational Technology

Traditional WarehousingFlexible Warehousing
System & Technology Landscape:Fragmented and diverse legacy warehouse management systems (WMS) across 3PLsUnified technology across the network agnostic to multiple 3PL systems
IT Integration to Order Management Systems:Complex IT integrations to WMSEasy to use pre-integrations
Data Exchange for Orders, Stock and Ops:Manual processing of scattered data to achieve operational transparencyAutomated data exchange with real-time dashboard
and analytics

Onboarding Speed

Traditional WarehousingFlexible Warehousing
3PL Selection Process:Time and effort to source, compare and qualify 3PLs Selection from pre-qualified providers within days
Operational Onboarding:Months-long manual implementation and operational iteration to achieve best practiceStandardized onboarding to get started in days and weeks
Starting with a new 3PL:Process repetition when expanding markets or providersEasy warehouse addition thanks to unified technology and terms

Contract and Pricing Terms

Traditional WarehousingFlexible Warehousing
Contracts:Page long contracts with long-term durationsFlexible pay-as-you-go model
Monthly Service Bills:Fixed packages, pay also for unused space and services as sunk costOnly pay for space and services used
Pricing Term Structure:Varying terms from provider to providerUnified term structure across providers

Market Expansion

Traditional WarehousingFlexible Warehousing
Scalability:Growth limited by locations and capabilities of 3PLsExpansive network covers every size and market
Omnichannel Fulfillment:Lack of expertise in supporting new channelsBroad capabilities incl. storage, Retail and eCommerce
Offering the Best for YOUR Business Case:Biased advice of 3PLs governed by own capabilitiesAccess to an independent expert team

Now that you know that flexible warehousing substantially differs from traditional solutions, you should also learn how it solves some of the biggest logistics challenges retailers, eCommerce and B2B enterprises face.

Learn more about the practical capabilities of flexible warehousing in the second part of our ‘Guide on: Flexible Warehousing’. We can also directly help you out if you’re looking for tailored B2B, Retail and / or eCommerce fulfillment services.

Author

Distribution Logistics Insights | Maximilian Nenning | everstox

Max and the marketing team at everstox take care of researching, evaluating and writing all logistics insights that we gather from our day-to-day operations. If you have any questions on our thought-led articles, guide’s or any other blog-related topic, feel free to get in touch with our team.

Maximilian Nenning

Head of Marketing

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