While automation and robotics are disrupting the traditional warehouse and threaten to upend the historic notion of a warehouse altogether, a Seattle-based startup called Flexe is fundamentally altering the approach businesses can take for their distribution needs. Flexe offers on-demand warehousing through an AirBnB-like network.
“There is capacity available when you need it and where you need it,” explained Flexe co-founder and CEO Karl Siebrecht in an interview.
Through its software, Flexe links those who need space to a network of warehouse providers, which now number more than 900 throughout the US. The customers pay for only the space and handling they need and can use one or several different facilities. The warehouses provide the labor for handling as well as the facilities. There are no leases whatsoever.
Both warehouse operators and clients use the same Flexe-provided software, which takes care of inventory control and order management for clients and warehouse management system for operators.
“All warehouses use the same platform and any given client can work with any one of the operators across the 930 odd nodes,” Siebrecht said. “They have the same experience, have a singular view of their inventory, centralized control of all their orders, shipping inbound and outbound, to and from the warehouse.”
“Customers buy services,” Siebrecht continued. “They may say, ‘hey, I need to manage 10,000 pallets of product inventory, this many inbounds per week, this many outbound per week.’ That will take 20,000 square feet of space or 200,000 square feet.”
When Flexe started in 2013, founders expected clientele would be small companies needing minimal space who couldn’t afford to lease their own warehouse. Instead, Siebrecht said, Flexe customers now include Fortune 1000 companies as well as high-growth etailers.
The key is excess warehouse capacity, which in the US at any time ranges between 20% and 30% of total space, according to Flexe estimates. That translates into millions of underutilized square feet.
That excess, Siebrecht said, is largely the result of the long-term lease, a hallmark of warehouse real estate. When companies plan their own warehouse needs, they must build into capacity the five or seven years of growth from the lease’s beginning to its end. Or, they must factor in peak demand. Both mean the warehouse will sit in part empty for at least some of the time.
On the other hand, a business may need more space at any given time than its own warehouse provides. This could be the function of seasonality, exceeding forecasts, or supply chain disruption. Siebrecht offered the example of Ace Hardware, a Flexe client:
Ace Hardware already has a network of warehouses it either owns or leases. Say, however, the hardware chain gets a shipload of lawnmowers, but still has snow blowers in stock. Or say an early snowstorm disrupts delivery from its own warehouses to its stores, clogging up distribution. In both of these examples, Ace Hardware can locate warehouse capacity wherever it wants for as long as it wants.
Siebrecht believes his company demonstrates the evolution of what he called a “hybrid model” in warehousing. A huge grocery chain, like a Kroger or an Ocado, can afford to construct the most efficient warehouse imaginable, which means the heavy use of automation and robots, no matter what the cost. But even those players need to put their products close to where their customers and where they can be reached with speed and ease.
That requires what he termed “satellite nodes.” These, he said, “may be somewhat less efficient than the highly automated ones, but they don’t cost you $100 million to put up, in fact they cost you nothing because they’re on demand. You just pay for capacity as you go along.”