With warehouse vacancy rates in much of the U.S. below 5 percent, finding space is challenging. Finding someone willing to share, on the other hand, is becoming easier with every passing day. In one example of a broader phenomenon known as “collaborative logistics,” enterprising third parties are helping unrelated warehouse users partner up. These pioneers of what have been termed “Airbnb for warehouses” are thriving in what would otherwise be a tough, crowded market.
In Southern California, for example, where CBRE industrial research head David Egan says “there’s almost nothing available,” companies like FLEXE Inc. are helping those needing warehouse space connect with others who have some to spare. With more than 80 warehouses spread across 20 major American markets in its system, FLEXE makes it simple to line up a spot, even presenting users with an online interface that resembles that of famed peer-to-peer housing matchmaker Airbnb.
On top of helping companies squeeze more usage out of overflowing warehouse markets, this brand of collaborative logistics cuts costs. Companies needing quick warehouse space have long taken advantage of the offerings of third-party specialists and real estate brokers eager to hustle up short-term leasing opportunities. Whereas those options typically implied a premium compared to the norm, though, FLEXE makes a point of the affordability of the space it lists. FLEXE’s warehouse sub-letters, of course, enjoy an improved bottom line thanks to the rent they take in.
The Spirit of Sharing On the Open Roads
If the shared warehousing arrangements being lined up by companies like FLEXE are fairly straightforward, collaborating on the shipping side of the logistics space can be quite a bit more challenging. It has been done successfully for years, as with a longstanding partnership between FMCG companies Henkel, Colgate, and Glaxo Smith Kline. That arrangement, though, involves the kinds of long-term commitments that inherently detract from the true potential of collaborative logistics.
With 20 percent of all American trucking traffic running the roads empty of cargo, it is clear that a lot could be done in terms of squeezing out greater efficiencies. Experience has already proven, though, that designing agreements that distribute costs, benefits, and deliveries in ways such that all partners remain satisfied will take some heavy lifting.
In fact, that very challenge is now an area of great interest to academic researchers. In an extended presentation on collaborative logistics, large-scale-network design specialist Özlem Ergun of the Georgia Institute of Technology pointed out how many of the most important issues can be analyzed in game-theoretic terms. Although a successful collaborative shipping arrangement between three competing companies would have the outward appearance of harmony, that look would belie the fact that each has real incentives to constantly seek concessions from the others.
Furthermore, with endemic issues like asset repositioning creating “hidden cost[s] that everybody pays for, but no one controls individually,” Ergun notes, partners in collaborative shipping arrangements do not even necessarily default to a clear picture of the real benefits they receive. Her work and that of a growing cohort of other academics focuses on creating systematic new ways, both theoretical and technological, to design collaborative shipping networks that will properly align incentives while promoting transparency and efficiency, making them a clear win for all involved.
Collaboration: The Competitive Advantage of the Near Future
If there are still challenges to be overcome, there are so many clear benefits on the horizon that it seems inevitable that collaborative arrangements will feature prominently in the logistics world of the near future. FLEXE and others are making that point in concrete ways in the relatively straightforward sphere of warehousing. Researchers studying network design in the context of real-world shipping needs are even now laying down the foundations of the digital platforms that will enable flexible, collaborative shipping as an everyday matter in the future.
Just in Time Management Group partner Paul Van den Brande figures that strong collaborative logistics solutions will double the savings typically realized from outsourcing to third parties, while also delivering a “5-10 percent improvement in service levels to the retailer.” With continuously shrinking margins in so many American industries marching in lockstep with demands for increasingly capable service, it may just be those who learn most quickly to collaborate who out-compete their rivals.