Today's innovations from startups could be the source of transformation that shapes the future of logistics. Recent technological innovations have allowed startups to disrupt mature industries in a matter of a few years. Take Uber for example, a car service start up founded in 2009. As of July 2016, there have been more than 2 billion trips on Uber that have bypassed the taxi industry. Are there any start-ups out there that could have this type of impact in Logistics? This is the first in a series of posts on start-ups in the Logistics industry and we’ll start with a “shared economy” player, Flexe, a marketplace for excess warehousing space.
Funding: $20.8 million
What is it?
FLEXE is a cloud-based peer-to-peer marketplace for sharing excess warehouse capacity; the airbnb for warehouses. FLEXE connects partial or temporary warehouse space with companies that need short term storage and provides order fulfillment services. As an on-demand provider, FLEXE does not require customers to make any capital, implementation, or technology investments, or sign long-term leases. FLEXE’s platform includes more than 400 warehouses in North America.
What are some Use Cases?
Distributors of Highly Seasonal Products: The seasonality of products like Halloween costumes, Christmas decorations, camping equipment or back-to-school-supplies leads to vastly underutilized warehousing space during the slow season. Previously, it was very difficult for companies with excess capacity to find companies that required warehouse space largely due to the duration of the slow season and complication with sub-leasing. The FLEXE platform changes the dynamics by allowing warehouses to market their excess capacity
Returns: Increasingly retailers are adopting more liberal returns policies and it is estimated that more than 30% of products ordered online are returned. FLEXE enables a compelling use case by allowing retailers to set up short term seasonal return centers in various parts of the country to manage spikes in the volume of returns after the holidays or sales promotions. Previously they would have either needed the capacity in their own warehouses or signed inflexible longer term contracts with third party logistics providers.
eCommerce and Pop-up Fulfillment: eCommerce likely provides the most interesting and lucrative use case for FLEXE. Thanks to Amazon, consumers now expect rapid order fulfillment for a low cost. Fast and cheap shipping has put customer convenience at the top of Amazon's priorities and at a minimum, I would expect next day delivery to become the new normal over time, just as free shipping became the new normal in 2005. FLEXE’s extensive network of warehouses enables retailers and small and mid-size eCommerce players to not only locate inventory close to their demand without making upfront investments, but also enables cost effective same-day and next-day shipping at a low cost.
3D Printing and Spare Parts: As 3D printing evolves and the price of the printers come down, why not throw 3D printing as a service into the mix? Customers could upload blueprints of their spare parts and the local warehouses could print locally close to the demand.
What could go right?
In other words, what are some of the conditions that might enable FLEXE to become a game-changer in logistics? While providing a simple process for offering excess capacity to companies that require capacity may be a nice little business, the true value lies in how the platform fits into 1. the evolution of eCommerce 2. and if companies can change their mindset as to how they view inventory and warehouses.
FLEXE’s model is somewhat analogous to Amazon Web Services (AWS). AWS enabled companies of all sizes from a single developer to large multinational organizations to access enterprise-level computing resources with zero up-front capital investments. This allowed companies to think differently about computing and shift from an asset-based fixed cost model to a variable service cost model that could be scaled up or scaled down with minimal friction. In the 1990’s and 2000’s most large companies IT department's were making massive upfront investments and long term commitments to software and hardware vendors. The rise of AWS enabled companies to think differently and avoid making these massive upfront investments and long term commitments. This has been particularly beneficial to startups who have not had to focus resources on buying and building their own server infrastructure to bring their products to market.
Could we see a similar change in mindset as to how companies view inventory and warehousing? Will retailers, startups, and smaller eCommerce companies be able to compete and grow their businesses quicker due to FLEXE's platform? Will new business models be created as a result of a warehouse sharing platform? Can the FLEXE platform be as friction-less to engage with as AWS? These are the multi-billion dollar questions
The societal shift from owning assets to a sharing economy has been one of the more recent ground-breaking innovations. How this plays out in warehousing is unknown at the moment, just as the value proposition of AWS was an unknown in it’s infancy, but by being a first mover in creating a warehouse marketplace, FLEXE is positioning themselves nicely to benefit from the sharing economy trend.