The need to manage seasonality is a given for the majority of retailers – from Easter to Christmas, Black Friday to summer sales, effective management of trading peaks is key to success. But in an increasingly volatile business environment, with events from Brexit to global political uncertainty affecting retail operations, future proofing any business has become a significant challenge. As Charlie Pool, CEO, Stowga explains, rethinking seasonal planning by embracing warehousing on demand can not only cut costs but also deliver essential contingency planning for retail businesses.
Contingency Planning
If business leaders ever needed a reminder, Brexit has undoubtedly reinforced the need for contingency within every operation. From the immediate impact of a devalued pound to the longer term – and as yet unclear – the impact of new trading agreements, the vote to leave Europe has had a profound effect on many UK retail businesses. Of course, Brexit is far from the only event that requires strong contingency planning if companies are to achieve any degree of future proofing. Supplier failure, the impact of weather on the supply chain, or political instability in countries of product manufacture can have a drastic impact on a company’s ability to get goods into the country.
So how can a business future proof against such unexpected events? One of the key areas to address is long-term fixed costs. Just consider warehouse space as a prime example. That it can take as long as a year to locate and negotiate the lease for a new warehouse should raise concerns for any business looking to be more agile; however, the biggest risk is associated with the traditional contract length, which can be up to 15 years.
How many of the warehouse leases signed even five years ago would be considered good business today? From warehouse space that is under-utilised and incurring unnecessary cost to retailers struggling to expand due to the constraints of existing space, such long-term commitments increasingly represent business risk.
Responsive and Agile
In a volatile trading environment, contingency needs to be built into every part of the business – and that means finding a more flexible, more responsive approach to warehousing. One option is to embrace warehousing as a service to manage the peaks and troughs in demand. This innovative new service matches a retailer’s warehouse needs to available spare space. From size to location and duration, the entire process is totally flexible – a retailer can commit to as little as one month and payment is on demand, on a ‘pay as you go’ basis, enabling the business to scale up and down the amount of space as required.
And it is this pay as you go, on-demand model that offers unprecedented contingency options for retailers – not only to future-proof the business against the new challenges such as Brexit but to better manage seasonality. Rather than investing in long-term warehouse contracts to cover the maximum, peak season demand – a policy that results in unused space for much of the year – a retailer can buy the space to support standard demand and use warehousing as a service to cover peaks.
Allocating just 25% of stock to an on-demand model can transform costs as well as providing much needed business agility and contingency. Plus, with the ability to scale up and down the warehouse commitment on demand, a retailer is perfectly placed to respond to the unexpected. For example, if new border controls and import procedures add unacceptable delays post-Brexit, it will become essential to opt for bigger shipments and, as a result, add warehouse space if a retailer is still to fulfil customer expectation. With warehousing on demand, scaling up to respond to such changes will be straightforward.
Future proofing any business is a challenge – but it is those companies that embrace flexibility and on-demand services that scale up and down in line with real business activity that will be best placed to survive in a volatile and uncertain marketplace.