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31 May 2018 3 min read

The Rise of Flexible Warehousing: Part III

John Calder

John Calder
Partner, expert in supply chain transformation

Matthew Denny

Matthew Denny
Senior Consultant | Supply chain and procurement | London

Flexible warehousing is disrupting the last remaining fixed cost in the supply chain by connecting warehousing with spare capacity to those looking to rent space on-demand. In the final blog in our series, we look at how the flexible warehousing market might evolve and the response of those likely to be most disrupted.

As with any disruptive digital business it is difficult to predict how exactly flexible warehousing might evolve.
How it does will be determined by which of the different provider approaches we described in our previous blog scales most successfully. This will likely be driven by which providers successfully scale quickly with large blue chips; balancing this with a strong service proposition and of course good marketing and PR.
UK-based flexible warehousing provider Stowga stole a march on this front, with a major publicity campaign after stepping in to support KFC ’s recent well-documented supply chain challenges. Off the back of this and with peak Q4 planning underway, they’re seeing a surge in interest amongst the blue chips in the UK.
Key to the evolution of flexible warehousing will also be the response of the disrupted.
Some are likely to embrace flexible warehousing and pivot their own business models to take advantage. Others will resist in an effort to preserve their existing position.
The disrupted can be separated into three categories; incumbent third party logistics providers (3PLs), real estate companies and Amazon.
The 3PLs
Even without flexible warehousing, the 3PLs face challenges to their mainstay business as struggling retailers grapple with the growth of ecommerce abandon expensive 3PL contracts.
Progressive 3PLs, including DHL, are already trading their own space through flexible warehousing platforms, the more progressive still, such as France’s FM Logistics and the UK’s Wincanton, are exploring flexible warehousing platforms of their own.
If flexible warehousing grows significantly it is inevitable that the larger 3PLs will make a concerted entry, possibly through acquisition of one of the early entrants.
The Real Estate sector
Here flexible warehousing presents an opportunity and a threat, particularly those with sizeable industrial and commercial portfolios such as JLL and Cushman & Wakefield.
CBRE have gone as far as investing in and agreeing a strategic partnership with Stowga.  In the US, Segro a major investor holds a stake in Flexe, the US market leader.
For online aggregators with established online platforms, such as Costar and IS24, there exists an easy route into flexible warehousing. Their existing stock of retail footprints and office space could be repurposed to offer additional flexibility in the final mile.
It appears inevitable that this group will have a role to play in the development of the market.
Amazon singlehandedly have the ability to shape the flexible warehousing market, as well as disrupt the wider 3PL sector given early moves to offer shipping services to third parties using Amazon’s marketplace.
Should flexible warehousing scale significantly, and with Amazon themselves a major real estate player in their own right, there is little to stop them entering and dominating the market, using their established online platform and market presence to offer platforms to buy and sell warehousing space. 
Given the challenges flexible warehousing can solve, the simplicity and speed at which it is deployed and the comparatively low risk to adoption, we anticipate major growth in the flexible warehousing sector in the next 12-18 months.
If and when it does, the future of warehousing and the wider supply chain will become significantly more flexible.

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