From retailers to manufacturers, enterprises that handle large amounts of product and raw materials have always needed places to put it. As a result, the vast majority of industrial real estate is devoted to warehousing, with 11.1 billion of the 14.8 billion square feet of industrial real estate in the US classified as warehouse space.
Warehouse square footage is essential, not only to logistics, but to the procurement department. You can’t buy things if there’s nowhere to put them. Procurement teams working to support the needs of the business as a whole are therefore bound by the limitations of the physical space the business maintains for storage.
Changing demands
A procurement function’s ability to respond to changing demands—either from within the company or when performing direct procurement in anticipation of demand from without—is limited by the physical warehousing space maintained by the enterprise. However, more space isn’t always the solution, as real estate is costly to buy, develop, maintain, secure, and so on. Small and even medium sized enterprises may not have the capital or resources to maintain their own warehouse space, and—in an era of e-commerce-first business models—may have more distributed business models than can be supported if warehousing space is internally owned.
The answer to giving procurement teams the flexibility they need to store, move, and acquire necessary stock for the business could lie in On-Demand Warehousing.
On-demand warehousing
The model “allows eCommerce businesses to access warehousing solutions as and when needed, without making a long-term commitment, through a pay-as-you-go system,” write Dr Banu Ekren, Dr Ismail Abushaikha and Dr Hendrik Reefke in a recent report. By using a platform to purchase space within a larger warehouse on a short term basis, businesses gain the flexibility to grow (or shrink) their procurement of inventory in line with the demands of their business, without the need for long-term rental agreements or costly real estate purchases that the business “might” grow into down the line.
On-Demand Warehousing platforms can also reduce environmental impact by consolidating inventory from multiple buildings into singular facilities—reducing the need for heat, electricity, etc.
By Harry Menear
