What is On-Demand Warehousing?

Allison Champion
5 min read
June 20, 2018
Modified: April 14, 2024

Updated April 14, 2024

On-demand warehousing, as provided by Flowspace, is an online marketplace that allows customers to access shared warehousing, fulfillment, and logistics services on a pay-per-use basis. By matching owners of excess warehouse space with users (generally e-commerce companies, retailers, or shippers), Flowspace boosts the utilization of its warehouse partners’ facilities while allowing end-users flexibility in an industry where demand can be uncertain, and budgets are constrained.

Let’s say you run a small e-commerce company that sells widgets. You launched a Kickstarter a year ago that did so well that you built a website to continue selling your product. Over the past year, you’ve seen incredible growth. Until now, you’ve been able to produce your product in your garage using manual techniques, and then package the goods right there on the assembly line before taking batches of outbound orders to a carrier for shipment to customers.

Today, you finally have enough orders that you are working with a manufacturer to produce your product at scale. You’ve ramped up your marketing efforts to help drive business, and are excited to start selling higher volumes. You’re receiving the first wave of inventory from your manufacturer at the end of this month, only two questions: where are you going to put it all? Are you going to need to need a distribution center to help you with product fulfillment?

Storing Inventory Options

  1. You can choose to work with a 3PL, or third-party logistics provider. The lead time to work with a 3PL can be weeks or even months. A 3PL will want to know exactly how much space you will need, and exactly when your products will be moving out again. If you intend to be there for a longer period, they will want demand-projections and predictions on how much inventory you will be storing in six months, nine months, or one year. These questions can be hard to answer. And if your need is immediate, or short term, it often doesn’t make sense for a third-party logistics provider to work with you at all. Short term engagements are not as lucrative for 3PLs who often require 1 year minimum commitments.
  2. An alternative is to use a third party fulfillment company. Amazon FBA or “Fulfilled By Amazon” is the dominant player in this niche. This option is available on a more immediate basis, and for a less well-defined requirement, but it can be a high-cost solution. And many retailers are hesitant about handing over their critical supply chain to what is often their number one competitor in Amazon.
  3. A third option would be to lease or purchase your own warehouse and build out in-house distribution capabilities. While this path boasts an attractive layer of control and autonomy, it will involve a high, up front start-up cost and likely result in a new fixed-cost line item (either rent or building maintenance) on the company’s income statement. This is to make no mention of variable costs such as labor from the warehousing jobs, warehouse equipment, and packaging supplies. This option also limits the retailer or seller to just one location, which can limit shipping speed and cost optimization.
  4. The fourth, and possibly most feasible, option is using on-demand warehouse services from Flowspace. Apart from being the only cost-effective option for immediate needs, and the only variable-cost long-term option, on-demand warehousing enjoys several more advantages against traditional warehousing solutions.

Benefits of On-Demand Warehousing

On-demand warehousing is revolutionizing the way businesses approach inventory management and fulfillment. This flexible warehousing solution offers a variety of benefits, from reducing fixed costs to enhancing customer satisfaction. Let’s dive into the advantages that on-demand warehousing brings to the table.

Faster Shipping and Fulfillment

With on-demand warehousing, businesses can position their inventory closer to customers, drastically cutting down shipping times and improving order fulfillment rates. This logistics strategy ensures that warehouse space is utilized efficiently, meeting customer demand swiftly and effectively.

Reduced Fixed Operating Costs

Traditional warehousing often involves long-term leases and fixed costs that can burden business owners. On-demand warehousing, by contrast, allows for the use of warehouse space on a flexible basis, significantly reducing the need for long-term commitment and fixed overheads. This model supports better cash flow management and cost savings.

Supply Chain Resilience

The flexibility of on-demand warehousing enhances supply chain resilience, allowing businesses to adapt quickly to market changes and demand fluctuations. Whether it’s scaling operations up during peak season or addressing inventory overflow, on-demand solutions provide the agility businesses need to stay competitive.

Access to Expertise

Partnering with on-demand warehouse providers gives businesses access to a wealth of logistics and supply chain management expertise. This can be particularly beneficial for retailers and ecommerce fulfillment, where optimizing logistics and distribution is key to success.

Scalability and Flexibility

On-demand warehousing offers unparalleled scalability and flexibility, enabling businesses to adjust their storage needs and logistics operations with ease. This model supports a range of sales channels and allows for rapid expansion or contraction based on real-time demand.

Integrated Technology and Visibility

On-demand warehousing solutions often come equipped with advanced technology platforms that offer real-time visibility into inventory levels, warehouse operations, and order fulfillment processes. Real-time inventory visibility is crucial for managing inventory efficiently and ensuring seamless logistics operations.

Resource Optimization

Utilizing on-demand warehousing allows businesses to optimize their resources by leveraging temporary warehouse space only when needed. This approach helps avoid underutilization of space and resources, ensuring that every square foot of warehouse storage is used effectively.

Improved Service Levels and Fulfillment Rates

Businesses that adopt on-demand warehousing can expect to see improved service levels and higher fulfillment rates. By leveraging flexible warehousing and expert logistics services, companies can meet customer expectations consistently, enhancing overall satisfaction.

Market Expansion Support

Expanding into new markets is made easier with on-demand warehousing. Without the need for a long-term lease or significant upfront investment in warehouse operations, businesses can test new markets with minimal risk, adapting their supply chain to serve global logistics needs.

Enhanced Customer Satisfaction

Ultimately, the agility, efficiency, and cost-effectiveness of on-demand warehousing translate into enhanced customer satisfaction. By ensuring products are delivered quickly, reliably, and without the need for extensive inventory storage, businesses can exceed customer expectations and build lasting loyalty.

Revolutionizing the Supply Chain Process

To start, on-demand warehousing does not have minimum volume requirements, and yet by aggregating volume from multiple customers, Flowspace can negotiate volume discounts with its partners and pass on these advantages to its end-users. No minimums and competitive pricing yields the ability to economically store goods in multiple geographies so that retailers can service stores more efficiently and e-commerce players can reduce shipping times and costs.

Finally, by eliminating fixed costs, the on-demand warehouse model reduces the risk of expanding a supply chain network. The last thing a scaling retailer or e-commerce company needs is the added stress of a rent payment or minimum payment requirement to a 3PL or a distribution center. We started Flowspace to enable companies of all sizes to start optimizing their supply chain today, without dependency on competitors or taking on the added risk of a long-term commitment to a lease or 3PL.

Flowspace has hundreds of warehouses around the country who can handle your inventory. Let us handle warehousing and logistics with on-demand warehousing and inventory management software, so you can worry about your business. Save time and money with Flowspace today!

Written By:

flowspace author Allison Champion

Allison Champion

Allison Champion leads marketing communication at Flowspace, where she works to develop content that addresses the unique challenges facing modern brands in omnichannel eCommerce. She has more than a decade of experience in content development and marketing.

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