Has cloud computing turned industrial real estate into a liquid asset?

Though recent comments from Prologis CEO Hamid Moghadam point to a gradual stabilisation of the industrial property market, small businesses face many problems in securing adequate warehousing, and this lack of flexibility has appeared as an opportunity to an enterprising few

Several companies have emerged offering to provide warehousing-on-demand, by leveraging cloud computing to provide quick and flexible service solutions. Specifically marketed towards fast growing businesses and SMEs with dynamic requirements, these companies leverage empty space in existing warehouses and combine it with integrations to popular order management and inventory management tools as a bundle.

The role-model for these operations is Amazon, which has gained thousands of customers through its Fulfilment by Amazon (FBA) programme. The company has exploited its position as the dominant e-commerce sales channel to attract SME’s looking to outsource their warehousing and fulfilment operations. By combining its physical assets with well-versed integrations to leading inventory and order management platforms, the company has been able to take on a significant amount of business, and is now expanding further into logistics operations.

In addition to Amazon, companies such as Shipwire (owned by Ingram Micro), the UK start-up Stowga and even FedEx have jumped on the bandwagon. The great enabler for such solutions is Software as a Service (SaaS), a variant of cloud computing which enables companies to access software remotely through an internet connection rather than by locally installing the relevant systems.

This also means that it is much easier to connect distinct software functions together; for instance, to connect a cloud-based warehouse management system (WMS) to a cloud-based transportation management system (TMS), the integration only needs to be achieved once, and can be done remotely. Doing so with locally installed software requires the manual integration of operations throughout a company’s entire network, which is expensive and time-consuming.

Many of these companies utilise their own warehousing space, and are in some ways therefore no different from conventional 3PLs. Others, however, such as Anchanto and Flexe, primarily pitch their services as technology platforms, relying on partners or third parties to provide the actual warehousing space.

The flexibility provided by software means that companies now have the option to fulfil orders from a single ‘virtual warehouse’, whilst their physical inventory is spread out over several facilities. Operations like this, once impossible, will proliferate, and the implications for industrial warehousing are a world in which space is used far more efficiently.

If this article has been of interest, you might also like to download Ti’s report Global Warehousing & Logistics Networks 2016. This report examines the shifting landscape of supply chain real estate and the changing patterns of distribution on a global basis.

Source: Transport Intelligence, February 14th, 2017

Author: Alex le Roy