Warehousing is the keystone of any e-commerce business. It plays a vital role in the success of any business. Reliable and responsive warehousing can ensure timely order fulfillment and enhance customer satisfaction. There are various types of warehouses, such as public warehouses, private warehouses, and many more. Nowadays, shared warehouse or multi client warehousing options are increasingly popular.
In the next five years, retail, third-party logistics, and e-commerce will create 80% of the demand for Grade A warehouses. The total space needed is likely to reach 410 million square feet. Around 70% of this demand comes from cities like Delhi-NCR, Mumbai, Bengaluru, Chennai, and Pune.
Here, multiple business owners share a common warehouse space to store their goods and products. This approach is helpful for small and medium businesses as the owner does not have to spend massive capital on building infrastructure, managing staff, or buying heavy equipment to move products inside the warehouse. Shared warehousing helps businesses save money and utilize the warehouse space according to the product demand in the market.
What Is Shared Warehousing?
Owning or leasing a warehouse involves enormous capital investment, which may not be possible for SMB owners. Shared warehouse is a great alternative for them. Here, multiple businesses share warehouse storage space, labor, and resources.
Companies can rent only the space and logistics services they require for storing goods and products. It is a cost-effective option and particularly beneficial for businesses with fluctuating inventory demands in the market. Shared warehousing is not a new concept. It has evolved over a decade. One of the most crucial reasons for the increase in demand for shared warehousing is the rise of online shoppers.
As online shopping increases, e-commerce business owners find managing and storing their inventory challenging. Storing in a big warehouse can lead to high warehousing costs. It even requires long-term contracts, which are unsuitable for every business owner.
Shared warehousing is a great option to fulfill customer demands immediately without investing much money. They are equipped with advanced technology, ensuring efficient order fulfillment.
Shared Warehousing Vs. Dedicated Warehousing
1. Definition
A single business exclusively uses dedicated warehousing, which uses warehouse logistics space, resources, and services to fulfill its demands.
It allows a company to design the warehouse layout and optimize the storage according to its requirements. However, shared warehousing is used by more than one business. The warehouse space and resources are shared among various companies.
2. Cost
Dedicated warehousing involves high costs. The business has to bear the cost of leasing the warehousing facilities and maintaining staff and infrastructure.
It is suitable for large businesses with high-volume products. However, shared warehousing is a cost-effective option. The Company needs to bear the cost only for the space and resources utilized inside the warehouse. It is suitable for small and medium enterprises.
3. Flexibility
There is limited flexibility in a dedicated warehouse. It means that when the business expands in the future, it may not have space to accommodate its products. However, shared warehouses provide flexibility in scaling operations based on business needs.
4. Contract
A long-term contract is required to store products in the dedicated warehouse. But you don’t need such a long-term contract in the shared warehouse space.
Benefits Of Shared Warehousing For Indian Businesses
1. Cost Efficient
Sharing warehouses can reduce business logistics costs. It eliminates the need to build infrastructure for product storage. Shared warehousing divides cost expenditures, age, maintenance and labor, and costs among business clients.
2. Scalability
Shared warehousing can accommodate a business’s products when there are seasonal demands or when the Company expands in the future.
3. Collaboration
Shared warehousing brings together businesses in various industries under one roof. So, there is a networking or collaboration opportunity in the shared warehouse.
Challenges Of Shared Warehousing
Warehouse sharing has certain advantages and specific challenges, as listed below.
1. Limited Customization
Shared warehouse is designed to meet the needs of various businesses. So, a business has to compromise on the workflow, storage conditions, and layout. This can be an issue for a company with particular warehousing operations needs. For example, a pharmacy company can have problems storing the products in shared warehousing.
2. Inventory Management Complexity
Managing inventories for various businesses can increase the complexity of tracking or handling. There can be mistakes of misplacing items if robust processes are not utilized in the shared storage facility.
3. Data Security Risks
Sensitive information like inventory levels and product strategies are at high risk of exposure in shared warehouses.
How Does Shared Warehousing Improve Supply Chain Efficiency?
1. Access To Advance Technology
Shared warehousing is usually accessed through advanced technology, such as warehouse and inventory management systems, real-time tracking, and many more. These systems increase visibility and accuracy and help business owners make correct decisions.
2. Located Closer To Transportations Hubs Or Target Markets
Shared warehousing is closer to the target markets or transportation hubs, reducing transit times and enabling fast ecommerce fulfillment.
3. Focus On Core Activities
Managing logistics operations solely is quite difficult. It can involve mistakes or decreased customer satisfaction if warehouse fulfillment is done at a different time. Shared warehousing takes responsibility for the Company’s supply chain operations.
Most shared warehousing uses advanced technologies, and, as a result, there is a lower chance of errors. This enables a business to focus on core activities like product development or exploring new market strategies.
Who Should Consider Shared Warehousing?
- Small and medium-scale enterprises have limited budgets. They can’t build infrastructure for storing products or make long-term contracts with a contract warehouse. They should store their products in shared warehouses. They can share a shared warehouse’s rent and other resources with other businesses.
- E-commerce businesses usually face unpredictable order volume. For example, a fashion business requires more space to store apparel during peak seasons like Diwali. In such a case, shared warehousing can provide scalability without incurring more money.
- Startups and new businesses need more capital for storing products in dedicated warehouses. It can first store its products in shared warehousing and grow the business.
How To Choose The Right Shared Warehouse For Your Business?
1. Location
The shared warehouse should be closer to your target markets or well connected to rail, road, and air. This will lessen B2B transportation costs and enable fast delivery to customers.
2. Transparent Pricing Model
Some shared warehouses include hidden fees for packaging or providing extra space. You must ask the shared warehouse partner about the detailed cost, including storage, value-added services, etc.
3. Size And Scalability
Your business’s products can fluctuate based on the season or specific festivals. The shared warehouse should accommodate the products at that time. To access the size and scalability of a shared warehouse and ensure that it should hold your business products at present and in the future.
4. Technology And Services Offered
Ensure that the sharing warehouse should provide value-added services like packaging and labeling. It should also be leveraged with advanced technology like inventory management systems.
5. Flexibility In Contracts
Long-term contracts can become a burden for small businesses. It would be best to choose a shared warehouse provider that offers contract logistics flexibility.
Conclusion
The demand for warehousing services is continuously evolving in India. India’s logistics industry was valued at around $200 billion in 2020 and is predicted to reach $380 billion by 2025. The Indian warehousing market is expected to reach $34.5 billion by 2027. Shared warehousing is a cost-effective logistic option for small and medium enterprises, startups, and e-commerce businesses. However, consider a few factors, such as the services offered, contract flexibility, and location, before forming a partnership with a shared warehouse solution provider.
AAJ Supply Chain Management
