Learn the Benefits of Shared Warehousing

As the logistics and supply chain industries continue adjust strategies to meet the demands of today’s economic environment, businesses of all sizes are finding creative ways to beat financial hurdles and competitive stagnation to forge ahead and scale.

One of the most prevalent challenges most businesses face as they grow is finding an optimal warehousing solution that meets their needs without eroding profits. As the economy struggles to steady, finding affordable real-estate, while inflation remains high, has become quite the conundrum in today’s market. But the challenge doesn’t end there. The shift in consumer demand has caused fulfilment to explode across retail, food & beverage, CPG, and e-commerce supply chains. And with that, higher expectations for faster and more convenient service and delivery options.

A growing trend providing tremendous value to mitigate these challenges is shared warehousing, also known as multi-client warehousing.  In this article, we’ll explore what is shared warehousing, the difference between shared and dedicated warehouses, and the pros and cons to help guide you to a solution that fits the needs you may be looking for.

What is Shared Warehousing?

Shared warehousing is a third-party (3PL) warehouse solution designed where multiple businesses share a common warehouse space to store their inventory and manage their fulfilment and logistics needs. It’s a collaborative setup that includes shared rent, utilities, services, machinery, warehouse management and automation technology, labor, and more.

What makes the operational dynamics of a shared warehouse space so attractive to businesses?

1. Space allocation – Businesses have the flexibility to choose the space they desire based on their inventory needs. This allows for more efficiency in their space utilization. Space not being used means excess dollars going down the drain, instead of towards profits. If more space is needed, for example, during seasonal times, the shared warehousing option allows for that accommodation. You can scale up or down when needed. Essentially, you pay for only the space being used. This can be a significant cost-savings measure, especially for newly established businesses looking to conserve spend.
2. Cost – The ability to share operating and overhead costs is a huge benefit of the shared warehouse space.  All expenses for utilities, rent, labor, technology, and security are shared and come packed in one monthly fee.
3. Shared amenities – Another attractive benefit are the shared amenities. If you’re a small business handling all of the overhead and operating costs on your own, there probably isn’t much left for amenities. However, with a shared warehouse space these come bundled with the monthly fee. Some of these amenities include:
   1. Advanced warehouse automation
   2. Warehouse management software (WMS)
   3. On-premises security measures
   4. Loading docks
   5. Conference rooms
   6. Office spaces, that includes furniture and equipment
4. Collaborative environment – Not to be overlooked or understated, this is a unique opportunity that a shared warehousing environment provides. The ability to sync and explore synergies within the day-to-day warehouse operations can be an invaluable benefit. The opportunity to collaborate and network with potentially more experienced merchants on logistics and supply chain best practices is a powerful amenity that can reap rewards for years to come.

There are cases where shared warehouses aren’t for every business. These include:

1. Supply chain operations may not be customizable.  Shared warehousing uses a plug and play system, with a standardized process that accommodates the need for high efficiency to meet set production goals.
2. Multi-client warehouse shortage - As e-commerce continues to take the retail industry by storm, this has caused an influx of challenges within the warehousing sector, as it pertains to finding adequate space.  Between the growth of e-commerce and large companies nudging out smaller companies for a spot, shared warehouse space seems to have become a hot commodity.
3. Shared warehouses will have limited control over the overall warehousing environment; and the fundamental day-to-day decisions will be made by the collective clients occupying the space.

Shared vs. Dedicated Warehousing

An important distinction when considering shared warehousing vs dedicated warehousing is the use case. A dedicated warehouse is more suited for an established business, that has a keen understanding of their logistics needs, their order fulfilment, and inventory volumes are consistent.  These types of businesses are looking for a more comprehensive inventory model to scale, with greater overhead and customizable solutions. 

The shared warehouse solution is a setup more suited for the smaller business, that may or may not be newly established within the marketplace, but has fluctuations in inventory volumes, can’t handle a lot of upfront costs, and require a more flexible and cost-effective logistics solution for fulfilment and inventory management needs.

Additional considerations to keep in mind for both, shared and dedicated warehousing options:

• Contractual agreements for both are significantly different. For dedicated warehousing spaces, contracts require a longer commitment, ranging between three to seven years. This agreement usually includes specific termination stipulations that can have additional cost impacts. For shared spaces, terms are much shorter ranging between one and three years and will also have conditions around cancellations. So, we recommend reading the fine print.
• Pricing is vastly different between these two options. The dedicated warehousing tenant will be singularly responsible for all the fixed costs associated with running the space, no matter how much of that space is being used. The overall costs are bit higher, as a larger facility requires more oversite to maintain, and more labor and utility usage expenditures. The shared warehousing option is the most cost-effective option of the two, as these costs are more transactional in nature, and are primarily based on the amount of space being used. The fees associated with running a shared facility are spread out amongst multiple clients, making the cost more affordable.

Shared Warehousing Supply Chain Benefits

The key benefits of a shared warehousing space for a small business are the shared operational expenses, which can be daunting and discouraging when faced alone. Having the labor that you need and access to advance technology to drive efficiencies for your operation can make all the difference, in staying competitive within the marketplace. Here are some additional benefits of a shared warehousing solution that helps streamline operations:

• Streamlined distribution – A streamlined distribution method can help reduce transportation costs. This method aims to strategically positioning locations in key markets, keeping you closer to the customer for faster delivery every time.
• Enhanced Inventory Management – Most shared warehousing facilities offer state-of-the-art technology.  These advanced technology solutions, like automation and warehouse robots, keep small businesses in the game to compete with other big box retailers.  They provide real-time inventory tracking, which enables more precision demand forecasting for greater efficiency. 
• Collaborative Environment - In a multi-client facility, businesses can pool resources together when handling materials and machinery to streamline operations. Additionally, having other players around within the same industry, to bounce ideas with, not only helps build stronger relationships, but will foster a collaborative environment that can only enhance operations as the business scales.

How to Choose the Right Shared Warehouse Space?

Choosing the right shared warehouse space can be an intimidating task. We’ve listed a few key components to look for when conducting your search:

1. Location – is a crucial component when deciding on a shared warehouse space. The impact of picking a space that can help you be as nimble as possible, and as centrally located as possible to your target consumer is paramount. You want to ensure that you can deliver goods not only on time, but possibly even faster than your competition.
2. Accessibility – What makes certain fulfilment warehouses stand out from the rest is their convenience factor. With consumer expectations being at an all-time high, and the market being so saturated with competition, it’s important to find a third-party logistics third-party logistics (3PL) provider that isn’t bound to standard working hours. A facility that is flexible with their hours of operations so that you can have access to your goods whenever they’re needed is a great feature to have for a thriving and growing business.
3. Security – Is a critical aspect when looking for shared warehousing. A quality 3PL will have existing security measures in place to not only protect their assets, but more importantly the safety of their tenants and staff.  It’s important to choose a space that proves to be accountable and compliant in the latest building codes and safety regulations set by the city.
4. Amenities – Another great benefit of a shared warehouse space is the amenities that it comes with. The ability to share state-of-the-art equipment, automation, management systems, industrial racking, conference rooms, kitchens, and reliable hi-speed WIFI that’s secure, will makes your operations more efficient, functional and comfortable to work in for employees and partners alike. These extra features are typically built into the total monthly fee and make the shared warehousing space a compelling option.

How can a 3PL help with Shared Warehouse Space?

3PLs like Ryder are experts in shared warehouse operations, so you don’t have to be. They already have the real-estate and space available. They also specialize in facilitating the needs of businesses of all sizes who are looking for fulfilment solutions, inventory management, technology integrations to help streamline operations, and scale.  Partnering with a 3PL takes the guess work out of a very complex supply chain operation.

If you’re looking to expand your operations or try a more streamlined solution for your warehousing needs that won’t break the bank, consider a shared warehouse space.  This option could be a game changer for your inventory management needs, and in enhancing your supply chain efficiency.