Collaborative warehousing: driving market share in an evolving economy

In the 100 years post the industrial revolution, business experienced an era of slow, incremental change. In recent years, however, the so-called fourth industrial revolution has brought about exponential disruption to every area of industry, thanks to rapid digitisation and pervasive technological advancement. One area hugely impacted by the digital economy is consumer buying behaviour, which has a direct knock-on as to how supply chains react in order to satisfy ever-evolving demand patterns.

On-demand shopping, personalisation and instant gratification are intrinsic to the millennial consumer, and these trends, together with the never-ending increase in e-commerce, require a fundamental shift in warehousing models. Order management, inventory levels, picking processes and warehouse layouts have had to adapt to smaller, more frequent shipments enabled via technology-driven systems.

According to Ian Milln, Executive Supply Chain Management Supply Chain Management at Barloworld Logistics, while such consumer behaviour requires smarter warehousing to fulfil demand, ongoing economic pressure has created buyers who are not only seeking service excellence, but who are equally cost-conscious. These seemingly diametric demands create a conundrum for the modern warehouse manager, in that the delicate balance between service and cost is more critical than ever before.

"Consumerism is omnipresent. Consumers have the choice of when, where and how to shop, at any time of the day or night," says Milln. "This frictionless, easy buying process has not only shifted shoppers from the brick-and-mortar retail environment to the online world, but has directly impacted the distribution and warehousing models that support the retail value chain."

Solutions such as single parcel home delivery, click-and-collect, parcels-on-the-go and same-day delivery options have driven models whereby some organisations opt for smaller regional distribution centres near demand centres of gravity. While such solutions increase the speed to market, the downside of such proximity to market is that multiple facilities can increase the unit cost of SKUs if not managed correctly.

"A viable solution to cost containment within decentralised distribution models is, among others, vertical or horizontal industry collaboration in terms of shared warehousing," argues Milln. "Despite the fact that traditional opinion dictates that shared warehousing erodes competitive advantage, the positives of such a solution far outweigh the negative."

Shared space provides rapid, flexible access to an increased geographic footprint, spatial options to meet fluctuating demand, shared access to leading-edge technology, and perhaps most obviously, cost management through the sharing of overheads and operational costs associated with facilities.

Barloworld Logistics believes that, rather than a grudge cost within a supply chain, but as an essential strategic driver of growth, a warehouse should not only enable consumer satisfaction, but drive reach, demand fulfilment and overall smart supply chain solutions. As organisations face ever-evolving demand, economic pressure and technological disruption, collaborative solutions that allow for maximised access to premium solutions at relatively low cost may be just what is needed to stay competitive and gain access to markets previously beyond reach.