You don’t need to be a corporate giant to save big on supply chain’s storage location costs. This article tries to open eyes regarding significant savings opportunities for companies of all sizes and across all industries. The biggest saving opportunity? Optimize your stock locations & supply chain network. I will tell you why and how.

Storage and distribution is potentially complex and expensive, not only because the size and value of the order can be quite low (and thus the cost of distribution as a percentage of sales is high), but also, in case of e-commerce fulfilment and direct to consumer (DTC), because the customer is often not at home. This leads to redelivery and even more costs in your supply chain.

In general, a reduction in the number of square meters and the number of warehouses leads to a reduction in total costs. Though in specific cases, increasing the number of warehouses can save costs.

Mapping out your supply chain network design and optimize

The design and management of a company (or corporate) manufacturing system plus coherent distribution system is one of the biggest challenges in logistics and (facility) management. Companies want to design, try and evaluate different configurations for their logistic networks and strive to find the smartest and most intelligent way. But, that is usually not easy. This therefore requires efficient and effective mapping of the entire supply chain.

Normally, companies minimize costs by optimizing their production and distribution locations. Important elements here are: the allocation of customer demand to production and/or distribution centers, the inbound and outbound transport activities, the product flows between manufacturing and/or storage facilities, the reverse logistics activities, etc.

Full optimization of the supply chain is achieved through the integration of strategic, tactical, and operational decision-making. Frameworks need to be created in the field of design, management and in the control of activities. The management must make the following decisions: the number of facilities (e.g. warehousing systems, distribution centers), the choice of their locations and the allocation of customer demand to these locations. Also incorporate tactical decisions related to inventory control, production rates, and service-level determination in any environment in the decision-making process. 

Define the optimal storage location

Nowadays, warehouses are increasingly an active part of a chain and contribute to efficiently designed logistic flows. The choice of the location of a warehouse therefore has a direct influence on the degree of efficiency. Organizations are aware of this, resulting in a reversal in the market with the come-back of a warehouse design, transformed into one or more warehouse locations close to the customer(s). In conclusion: decentralized locations, centrally controlled.

The optimal location is determined by the most favorable interaction of the relevant parameters. In order to achieve an optimal solution, the mathematical process of non-linear programming (NLP) can be used besides ‘flair’. Parameters that are distinguished: customer need parameter, personnel parameter, logistical parameter, housing parameter and invested power parameter. (Out of scope in this blog).

Today there are a lot of (AI/ ML based) tools, helping defining the best supply chain network including stock locations and the different stock levels. For example look at Aera Technology (HQ in USA), Kinaxis (HQ in USA) or bluecrux (HQ in Europe/ Belgium). By using this tools you are able to create the digital twin of your physical supply chain. You can play with parameters, what-if- and alternative scenarios. The technology enables a cognitive operating system which connects you to your business and orchestrates your operations, autonomously.

“A solution for the rapid accommodation of your stock requirements and locations.”

Year to date, it is desirable and possible to make a warehouse design more flexible, since the international rise of ‘Airbnb concepts’ for warehousing.

Think about hiring a flexible warehouse layer

Once you have ‘a tactical or strategic idea’ of what the optimal warehouse locations should be within your supply chain network, an ‘On-Demand Warehousing Platform’ can surely help and provide a solution for the rapid accommodation of your stock requirements and locations. Instead of investing in our own warehouses, nowadays it is a good alternative to hire external warehouses. For example Flexe (HQ in USA) and Stockspots (HQ in Europe/ The Netherlands). Both companies are a marketplace that connects shippers (owners of goods) with warehouse companies that temporarily have unused storage space and logistic services at their disposal. 

“Three segments have emerged in this market. (1) inventory overflow, (2) e-commerce fulfilment and (3) direct delivery to consumers.”

Stockspots for example, uses a smart webportal in the Cloud with whom they create a new and sustainable European warehouse network. Stockspots is therefore ‘a matchmaker’ in the supply and demand of (temporary) warehouse space and uses online, real-time insights to provide the best matches.

(1) Inventory overflow

The warehouse capacity you need is hard to predict. External factors like seasonal patterns, weather conditions, commodity trading, currency fluctuations or changes within world politics, increase pressure on the supply chain. They influence the capacity needs of your organisation and you have limited control over them. Quite frustrating. But, what if you could continuously adapt the change in capacity needs within your company? Flexible, on-demand warehousing is the solution. 

(2) E-commerce fulfilment – multi brand

Starting out selling into Europe asks for a future forecasted warehouse strategy. Usually, when foreign suppliers start delivery overseas, they will only ship per order directly to the consumer. This results in the waste of a lot of time and money. But, what if you were always able to scale your warehousing and fulfillment up and down? 

Join the network of European warehouse providers and easily (re)stock your goods at the best spots near your foreign customers as you sell them. Stockspots guarantees you the flexibility and speed you wish to have while developing your new market. Same or Next Day deliveries at low or no shipping costs included.

(3) Direct delivery to consumers – single brand

As online retail has grown, companies have started leveraging their logistics and transportation resources to provide direct-to-consumer delivery (or DTC) for their clients. In recent years, for example the consumer packaged goods (CPG) industry has struggled to sustain growth amid flat sales. The reasons are many: the strengthening of powerful retailers, the growth of e-commerce channels, and the change in consumers’ needs and priorities.

In response, manufacturers have focused on cost-cutting and trimming brands while seeking new avenues for growth. One avenue that holds promise for some manufacturers is direct-to-consumer (DTC) strategies in which the manufacturers sell their products directly to consumers using e-commerce, without going through intermediaries like wholesalers, retailers or physical.

Why has this warehouse shell became so popular?

On the one hand, the supply chain is becoming more volatile. On the other hand, shippers often conclude long-term warehouse contracts, which means that there is little flexibility to scale up or down the use of storage.

“There is little flexibility to scale up or down, or there is a loss of turnover because there is no stock capacity available at the right time and/or location.”

The result is unnecessary costs for warehouse space and services that are only used at peak times of the year. Or there is, for example in case of a new client, a loss of turnover because there is no capacity available at the right time and/or location. Stockspots provides an user-friendly marketplace that can make the right match between supply and demand throughout Europe, any time. With initiatives like Stockspots it isn’t hard to save big on the supply chain’s storage location costs. Easily optimize your stock locations and supply chain network.

Other advantages:

• User friendly application;
• Quotations are made online;
• It is a pay-per-use system;
• Maximum scalability according to the warehouse needs;
• Promotes sustainability: save idle warehouse space and new built DC’s;
• The smart IT solution has a control tower and dashboard to keep a close eye on the activities and non-conformities;
• This means that a user always has insights into their stock and continuously control over its warehouse activities. 

Stockspots is flexible, scalable and sustainable

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Harry Luijk | Chief Commercial Officer at Stockspots a.i.