This warehousing solution for overflow inventory (and more) helps you avoid paying for space you don’t need.
The issue of inventory fluctuations stems from more than seasonality. Forecasts gone wrong, supply chain disruptions, and the shift from bulk warehousing to single-line orders all make warehouse space management more challenging than ever before. Many of our clients come to us precisely because they have realized the need to adopt a new warehousing solution for their overflow inventory.
In an environment where the unexpected is to be expected, it pays to be able to find warehouse space on short notice.
A quick example: A large, international tire manufacturer used to pay penalties and drayage near port before its distribution centers were ready for the goods. Traditional warehousing solutions for overflow inventory hardly made sense. The company’s need was short term and immediate, and not conducive to drawn-out contract negotiations or long-term leases. The solution? Warehowz and our cloud-based on-demand warehousing platform. Our platform allowed the company to tap into a pool of available warehouses and find just the right amount of space — for the right amount of time.
Matching capacity with inventory levels
Inventory fluctuations are, of course, a fact of doing business for retailers and ecommerce companies. Some spikes and dips in demand remain largely the same. Others come as a surprise. Promotions and product launches tend to fall into the former category, while buying discounts, sudden recalls, a wave of returns, and disappointing seasonal sales are harder to predict. Regardless of the reasons, you have to accommodate more inventory than your regular base capacity.
And — for the sake of your organization’s bottom line — the key is to match capacity with actual inventory levels throughout the year.
Let’s look at the two scenarios:
1. The expected scenario
A seasonal retailer knows the year will bring typically one or two big runs on products. The question is which mix of warehousing solutions makes the most financial sense? Some of you may add enough capacity to your baseline to cover the peaks and accept the fact most will sit empty as the cost of doing business. Or, you may sign short-term subleases to temporarily increase space, even if those leases may extend longer than needed.
Another way: On-demand warehousing lets you tailor your warehouse capacity in accordance with demand.
And here’s a bonus: If you also own and operate the same warehouse, you can take advantage of the same model to lease space on-demand and drive up your utilization rates.
2. The unexpected scenario
Let’s say you are faced with large volumes of returns after the holidays. Inbound shipments bring their own set of challenges, including the need for as much as 20% more space, according to CBRE. So, how do you plan for the unexpected and add a warehousing solution for overflow inventory that can be employed as needs arise? Discounting prices to draw down inventory can hit first-quarter earnings, and so can paying for more warehouse space than you need.
The answer: On-demand warehousing lets you limit inventory costs by allowing you to only pay for warehouse space and services when you need them.
Want to learn more? The Warehowz team of seasoned industry professionals are here to help. Contact us today and find out whether adding on-demand warehousing makes sense for your business.