We love this tweet:
It was posted by Sabine Mueller, CEO for DHL Consulting - i.e. someone you ought to take seriously if you are reading this.
The image is interesting because it’s DHL’s view of the future. Why do they think this?
The answer is simple: it’s what their customers are demanding.
Not long ago next day delivery was a marvel. Now many of us just expect it. Same day delivery is becoming a thing. It’s not going to be long before we expect that too. We are a ‘want it now’ society and as almost every innovation in history has taught us, once we have something it quickly becomes indispensable and it’s very hard to go back.
Back to warehouses - the customers aren’t going to change, the geography isn’t going to change, the traffic isn’t likely to get better even with autonomous vehicles. So if delivery times are going to be reduced there’s only one way this can go - smaller, more distributed warehouses.
Distributed Warehousing
If you need a warehouse but don’t have a pot of money available to invest in real estate you are going to have to rent.
Unless you are a logistics company and managing warehouse space is your thing, that is going to be a pain in the arse. You really don’t want the hassle. It’s hard to find a place, negotiate a rate, and transact. Once you’ve done that it is a long term commitment, a financial liability not to mention hard work for low margins. Better to concentrate on what you’re good at.
Location, location, location.
If you get a warehouse it’s all about location. The prime location for maximum geographical reach is obviously in the centre of a defined area. In the UK that means the midlands, hence why warehouses are clustered in the golden triangle between the M1, M40 and M6. But even there if the customer demands next day delivery then you are going to need another warehouse.
This is where the headache is. More warehouses means more cost and more hassle.
What if there was a way to have the distribution without the hassle?
If you are going to compete with the likes of Amazon localised fulfilment is mission critical. The only way to do this is by joining forces and reducing the cost through scaled efficiencies. What that requires is a network of warehouses distributed all over the country/world that are available for providing pay-as-you-go services. If that existed, you’d not only be able to replicate what Amazon does, you’d be able to better it by having even larger scale, with more localised fulfilment, and without the burden of owning and managing the warehouses.
Omni Party Logistics
We are working with several high-profile, forward thinking companies to redesign their entire warehousing strategies to the distributed model.
A great example is a global FMCG player who are shifting from 3 central distribution centres to 25 smaller regional sites, all run through Stowga. The reason this company did not do this before was that no single logistics partner could provide them with all the services they required in all the locations they required. The local fulfilment market is highly fragmented so they will have to use multiple third parties. That means multiple companies, with multiple reporting systems and multiple invoices. The administrative overhead simply isn’t worth it.
On top of this, as the number of partners providing warehousing services increases so too does the number of carriers for the dispatch. More complexity, more admin…
With Stowga all that is taken away. Stowga manages all those relationships, our client faces just one partner; they get one simple dashboard with one bill.
Distances to customers are dramatically reduced, so driver times and costs are down, fuel costs are down and fuel emissions are down - a better customer experience for reduced costs.
This is the future for any retailer looking to compete with Amazon, and it’s not as difficult as they might think!
Originally published at medium.com on May 3, 2017.
