Your startup/SME can turn the tide against surging storage costs and transform challenges into opportunities with cutting-edge logistics and warehousing strategies.
In the current economic climate, small enterprises in the UK face the challenge of adapting to rising storage for rent costs, which are expected to increase by 5% in 2023-2024, according to a report by commercial real estate firm Colliers. Despite a notable decrease in the uptake of logistics properties, the first half of the year has already seen storage for rent costs go up by 3.7%, influenced by a 1.8% rise in the second quarter alone.
The report emphasises that while the market has slowed due to economic uncertainties, such as continuous interest rate hikes, the industrial sector's robust fundamentals are causing rent for storage facilities to persistently climb. Many analysts expect this trend to continue, despite a slowdown from the intense demand seen during the pandemic.
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In this volatile and speculative development are a mix of factors affecting the demand-supply balance. From the high construction costs, uncertain exit yields, and elevated borrowing costs that are making developers cautious, to the reduced inventory levels and turnovers in real terms that are making manufacturers/merchants cautious as well. On balance, we expect that this will lead to a further increase in space availability in the coming months, followed by a constriction in 2025, driving storage for rent costs back up.
In light of the volatile storage for rent costs and evolving market needs, it's crucial for startup/SMEs to look beyond traditional business storage solutions. The integration of advanced technologies, like AI, into storage management offers an innovative way for startup/SMEs to navigate these challenges. The Logistics Tech enabled solutions provide the agility and efficiency necessary for scaling, from enhancing picking and packing processes to optimising inventory control. With the e-commerce boom reshaping warehousing demands, adopting flexible, tech-driven storage services becomes imperative for startup/SMEs aiming to boost operational efficiency and customer satisfaction.
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Rapidly evolving Logistics Tech landscape offers startup/SMEs a suite of operational storage benefits, from enhancing efficiency and scalability to improving sustainability. By leveraging innovations such as automation, AI, and data analytics, young businesses can navigate storage challenges effectively, ensuring cost savings and improved customer service:
Startups or young and fast growing businesses must strategically plan and seek cost-effective storage solutions, considering options like shared or on-demand warehousing, inventory management optimisation, or relocating to areas with lower rent costs. Staying adaptable is key to overcoming challenges to logistics operations.
When reviewing and comparing different storage solutions, it's crucial to consider the following emerging warehousing trends:
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Companies are increasingly facing the challenge of adapting to fluctuating storage rent costs. This volatility can significantly impact operational budgets and overall profitability, particularly for startups and SMEs that may not have the financial resilience of larger corporations. To navigate these challenges, a shift towards more efficient and agile storage solutions has become essential. Leveraging technology integration, such as the ones enabled by advanced algorithms and AI, can significantly reduce the need for extensive physical space by optimising inventory management and streamlining storage operations. This not only cuts down on the warehousing requirements but also enhances operational visibility and efficiency.
Collaborative space sharing or on-demand warehousing solutions present a viable solution for operational risks and costs mitigation, allowing companies to benefit from a share of a large and less expensive warehouse space. Exploring alternative locations for warehousing can also yield more affordable options without compromising on logistical efficiency. If longer term arrangements are required, negotiating flexible lease terms can provide companies with the adaptability they need to respond to market fluctuations and customer demands promptly.
By embracing these strategies, startup/SMEs can develop a more resilient and flexible approach to storage and warehousing, enabling them to adjust more effectively to the dynamic market conditions and customer expectations.
References: Warehouse rents predicted to rise by 5% in 2023-2024 | Logistics Manager
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Calculating the storage space you need involves careful planning to ensure that you rent an appropriate size unit for your business operations.
Inventory Assessment:
Categorise Your Items:
Calculate Dimensions:
Calculate Total Volume:
Consider Space Efficiency:
Account for Additional Space:
Choose the Right Unit Size:
Consider Accessibility and Features:
The costs associated with warehouse services typically include:
Storage Fees: Charged based on the amount of space occupied in the warehouse, often calculated per cubic foot or pallet. These fees can vary depending on the warehouse provider and may be influenced by factors such as the season or the length of time items are stored.
Order Fulfilment Fees: These fees are incurred for the picking, packing, and shipping of orders. The cost can vary based on the complexity of the order and the type or size of the items being fulfilled.
Shipping Costs: Additional costs could also include charges for transporting products from the warehouse to the customer. This can include costs for various methods of shipping products and may vary depending on the destination and shipping speed.
Return Handling Fees: Costs associated with processing returns, which can include restocking items, inspecting returned goods, and managing the logistics of returns.
Set-up Fees: Some warehouse providers may charge an initial setup fee to establish services, which can cover onboarding and system integration.
Long-term Storage Fees: Additional charges may apply for items that are stored for extended periods beyond a certain threshold, incentivizing sellers to move their inventory more quickly.
Value-added Services Costs: Fees for extra services such as contract packing, shrink wrapping, rebranding, or gift packing, which can enhance the presentation of products.
Insurance Fees: Optional insurance costs to protect inventory stored in the warehouse against loss or damage.
These costs may vary significantly depending on the warehouse provider's pricing structure, the geographic location, and the specific services selected by the business.
Yes, warehouses can handle returns. Some of the steps involve:
Return Processing: Warehouses can streamline the return process by quickly checking in returned items, inspecting them for damage, and determining their resaleability. This helps in efficiently integrating returned products back into inventory.
Inventory Management: With advanced inventory management systems, warehouses can update stock levels in real-time, ensuring that returned items or excess inventory is accounted for and available for resale or redistribution.
Refurbishing and Restocking: Warehouses can also handle the refurbishing of returned goods, preparing them for resale if they are still in good condition. This can include re-packaging or minor repairs.
Data Analysis: By tracking return reasons and patterns, warehouses can provide valuable data back to the business, helping them identify issues with products or customer expectations. This information can be crucial for improving product quality and customer satisfaction.
Customer Communication: A well-managed returns process can enhance customer experience. Warehouses can facilitate prompt communication regarding the status of returns, refunds, or exchanges, ensuring customers stay informed.
Efficient Logistics: Integrating return handling with existing logistics operations allows for efficient transportation and processing of returned items, reducing costs and improving overall supply chain efficiency.
A warehouse and a fulfilment centre serve different purposes within the logistics and supply chain management landscape. A warehouse primarily functions as a storage facility where goods are kept for an extended period. Its main role is to store inventory, manage stock levels, and ensure that products are readily available for distribution when needed.
Warehouses typically focus on bulk storage, inventory control, and sometimes the consolidation of goods for transportation. They may not be involved in the processes of order picking, packing, or shipping directly to consumers, as their operations are geared more towards long-term storage rather than immediate order fulfilment.
In contrast, a fulfilment centre is a specialised type of warehouse designed specifically to handle the complete order fulfilment process efficiently. Business fulfilment services not only store products but also manage inventory, pick and pack orders, and ship products to customers. These facilities are equipped with logistics technology and systems that enable seamless integration with eCommerce platforms, allowing businesses to process orders quickly, ensuring timely delivery and enhanced customer loyalty and satisfaction.
The dynamic nature of fulfilment centres allows them to support eCommerce businesses and online retailers by providing a range of value-added services, such as real-time inventory tracking, order management, and even returns processing. This makes fulfilment centres essential for startup companies looking to streamline their operations and compete effectively in a fast-paced market.