Come Together: Logistics and the Sharing Economy
Logistics embraces the sharing economy with supply chain collaborations, industry crossovers, and unexpected partnerships, bringing fulfillment and transportation efficiencies.
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The sharing economy just keeps growing, with options to borrow everything from someone's car to their cabbages. The prevalence of this sharing model was instrumental in getting Coterie Baby's baby products business off the ground. Coterie spent more than two years creating its high-quality, sustainable diaper products, and expected to launch a new line of baby wipes before the end of 2019.
But two significant challenges remained: finding a way to manage fulfillment and a place to store its products. The traditional warehouse management process of investing in a dedicated space, signing long-term leases, or working with third-party logistics (3PL) partners who may shy away from onboarding companies with lower startup volumes made the job even tougher.
Instead, the New York City company took the on-demand route. On a recommendation from executives at mattress startup Casper Sleep, Coterie teamed up with Seattle-based Flexe, an on-demand warehousing provider.
This decision feeds into an evolving trend recently grounded in the hospitality, ride-sharing, and entertainment industries with companies such as AirBnb and Lyft. The availability of on-demand flexibility and access, along with other strategies, is creating new versions of supply chain collaboration to increase efficiencies, reduce costs, and capitalize on under-used assets.
"The on-demand warehousing model immediately sounded like a great option for what we needed," says Mark O'Toole, Coterie's vice president of product and operations. "It offered access to an enterprise-grade fulfillment network without having to commit to a long-term lease or massive investments to acquire our own distribution centers.
"Through Flexe, we get both the technology platform we need to manage operations and access to some of the world's largest and most sophisticated 3PLs," he adds.
With Flexe's help, "We were able to set up our entire fulfillment network in less than two months, and start offering a two-day delivery promise right out of the gate without ever signing a lease," says O'Toole.
In the shipping world, omni-channel sales and fulfillment business models running at Amazon-induced hyper-fast delivery speeds are intersecting with the sharing economy's commoditization and monetization of physical assets—and making these assets available whenever people want or need them at more affordable prices. You want a movie, a room, or a car, here you have it. You need a warehouse, a truck, and a fulfillment management solution, here you have that, too.
"In the post-mobile app world of real-time communication, same-day delivery, and always-on consumption, people living especially in cities have come to expect instant gratification from e-commerce platforms, social media, and on-demand services," according to the 2017 DHL Customer Solutions and Innovation report, "Sharing Economy Logistics" by Ben Gesing, project manager at DHL Trend Research.
"The sharing economy has proved highly disruptive to several industries that are asset-heavy in nature, such as mobility and hospitality," the report notes. "But the technologies and business models enabling the sharing economy can be applied to any industry. Logistics, with all its heavy assets and infrastructure, is no exception."
Warehousing On Demand
Companies like Flexe have already seen the truth in that.
The on-demand warehousing company uses its technology platform to connect a network of more than 1,000 warehouses with a team of logistics experts, retailers, and brands to resolve warehouse capacity constraints and provide dynamic e-commerce fulfillment. Flexe's dominance in this young, but growing, segment has secured it $64 million in funding since it was founded in 2013.
"Because customer needs are constantly evolving, shippers can't sit back and be excited about what they just did," says Megan Evert, Flexe's senior vice president of operations. "They have to keep looking for innovative ways to fulfill demand."
Flexe works with a range of shippers, from small businesses in startup mode who want to test their product at a pop-up shop for a few weeks all the way up to top-tier names such as Walmart and Ace Hardware who need additional flexibility and space for promotional, seasonal, or excess inventory.
Bringing In 3PL Partners
Evert is less surprised by the shippers who come to Flexe for innovative solutions than by the collaborative relationship it is building with 3PLs, who in some contexts may see Flexe as a competitor.
"It has been interesting to see the way 3PLs engage with us," Evert notes. "Sometimes, we bring them a piece of business that they may not have gotten themselves, and we can help 3PLs, especially regional providers, fit into a brand's national warehouse and logistics strategy."
That was the case for ITS Logistics of Reno, Nevada.
When Walmart ran a two-week promotion for televisions in fall 2018, it turned to Flexe to supplement its warehousing and logistics needs. Flexe then reached out to ITS for help in positioning product on the West Coast.
"Everyone thinks that Walmart has all the space in the world, but they are still building out the e-commerce side of the business," says Ryan Martin, president of distribution services at ITS Logistics. "Flexe asked if we had a decent-size warehousing option they could use for the promotion.
"It was extremely successful, and turned out to be a nice shot in the arm for our revenue," Martin adds. Additionally, since Flexe uses a simpler web-based platform than ITS uses in-house, it was easy and efficient to move Walmart's products in and out of the warehouse.
Co-working to Co-warehousing
On-demand warehousing is not the only place ripe for new opportunities and collaboration. The extension of co-working into co-warehousing opens many more options for people to share supply chain ideas and build off best practices.
Saltbox, an Atlanta-based startup, picks up where co-working leaves off. It offers a diverse group of business owners, importers and exporters, distributors, manufacturers, and e-commerce operators a place to be both office mates and warehousing colleagues. Its goal is to make it easier for people who need a warehouse to run their businesses, while creating a collaborative environment to cross-pollinate business models, supply chain practices, and logistics and warehousing management strategies.
"We want to create not only functional, physical spaces where people can form a community, but also remove the friction that exists for the 'Concrete Class' entrepreneur," explains Tyler Scriven, Saltbox's co-founder and CEO.
Many entrepreneurs and small business owners are caught in a tough spot today, he adds. They need a place to grow their companies and a network of support. But they don't want or need expensive, multi-year leases for thousands of feet of warehouse space in old buildings without modern conveniences and far from city centers.
Unlike technology and services employees and entrepreneurs who can find what they need in the growing number of co-working spaces in most cities, those who need more than a desk and an internet connection have trouble finding similar spaces.
Aeugenie Mack looked forward to the day she could move natural hair products in and out of her own warehouse space. She outgrew her capacity of accepting and storing boxes in her garage, and hoped for a shipping dock to receive goods from distributors and route outbound packages to consumers.
But a long-term rental of a large amount of warehouse space, with all the implied insurance costs and potential liabilities, was still out of reach for her one-year-old startup.
"It's difficult to have an inventory management system in place when your garage is your warehouse," says Mack, who draws on her previous experience in IT, law, and manufacturing to run her e-business. "We see our business growing, but we couldn't take out a five- or 10-year lease for warehousing space.
"We began to think about how we could minimize overhead, share the responsibility of having warehouse space, increase our revenue, and collaborate with others," she adds.
Mack's company, Manetain Beauty, an Atlanta-based, online, direct-to-consumer business, found a solution with Saltbox.
"We take a human-centric approach to solving an industrial space problem," Scriven says. "We look at the needs of the humans who are trying to run their businesses and build a hyper-functional space to support the entrepreneurial community.
"Traditionally, warehouses are masculine environments—they're cold, dirty, in distant locations, and maybe even unsafe. With Saltbox, we wanted to create a fresh, bright place where everyone feels welcome," adds Scriven, noting that half of Saltbox's founding members are women entrepreneurs.
So who's on board with Saltbox's co-warehousing idea? Founding members include a popular physician/author who wants to consolidate several warehouse spaces storing his books; a Caribbean food product importer; a dressmaker; several remote workers from a company doing $6 billion in revenue; and Aeugenie Mack's Manetain Beauty.
For Mack, the Saltbox model makes sense for where her company is today.
"Finding a way to share warehousing and maybe shipping services will have a big impact on our margin," Mack says. "It's also exciting to have a community where we can inspire each other and incorporate ideas that can benefit us all."
Ordering It Fresh
Transportation and delivery innovations have also created interesting supply chain pairings.
Food marketplace FreshSpoke, as an example, makes it easier for wholesale food buyers at restaurants and supermarkets to source directly from local food producers. The Barrie, Ontario-based company, which incorporates many sharing economy elements, uses a logistics platform to connect buyers and sellers to simplify order, payment, and delivery.
But what really makes it work is FreshSpoke's ability to tap into existing excess transportation capacity in the commercial delivery sectors. The company works with drivers, fleet operators, and food suppliers who make other deliveries during a regular shift and want to supplement their revenue by filling their empty trucks with food goods.
"We never intended to get into the logistics business when we started in 2014," says Marcia Woods, FreshSpoke's co-founder and CEO. "We wanted to support the local food chain, but ended up trying to solve the distribution challenge of getting fresh local products into the wholesale food market.
"We got feedback from the buyers and sellers that there was already enough awareness about food sustainability, food literacy, and connecting the local food chain," she adds. "What everyone asked is, 'How are we going to get our food from here to there?'
"We knew it would be environmentally irresponsible to put more trucks on the road," Woods says. "But we knew that while many trucks move full in one direction, between 40% and 60% return empty. We thought it would be a good idea to tap into that excess capacity."
What also helped FreshSpoke was timing. When the company took its proof of concept to market in 2016, the sharing economy models of Airbnb, Uber, and others had already disrupted the world and gained traction. That top-of-mind attention on how other industries were gaining efficiencies with these emerging business practices earned FreshSpoke buy-in from the community it targeted.
The company is now teamed up with 306 local food suppliers and 650 buyers in Ontario, Canada. FreshSpoke is expanding into Ohio, and Woods hopes to scale the model to other regions.
In the end, regardless of where inspiration comes from or which supply chain practices are borrowed from other sectors, the fundamentals will remain fundamentals.
"Businesses are always changing, but the thinking still revolves around how to best use space, how to keep smaller amounts of inventory closer to customers, and how to satisfy customers through every node in the network," says Richard McDuffie, chief operating officer at Kane Is Able, a 3PL based in Scranton, Pennsylvania. "Everyone is looking at how to build a better mousetrap. In some areas, collaboration will help achieve that."