News

The shared economy model used by the likes of AirBnB or Ola/ Uber has brought significant changes to their respective industries by integrating a once fragmented market and creating greater value for its customers. India’s logistic market with its $160 billion market size is also absorbing this model and its benefits through Shared transportation and warehousing space services.

In shared warehousing, a company shares its operation business with other companies under a single distribution center.  This allows the company to have better control over cost per unit and mitigate the risk of having a large fixed cost base & high overheads by sharing space, people, technologies, resources and equipment for warehouses and freight-transporting vehicles. Shared warehouse space also allows companies to carry out order and distribution consolidation in several locations, rather than just one, providing a better cost-to-serve ratio and reducing road miles due to improved drop densities.

Shared transportation capability through either splitting vehicle capacity simultaneously (for instance, by ride-sharing) or over time (for example, by truck-sharing) is also beneficial to the company. It allows companies to improve last-mile delivery services by reducing the waiting time to fill up the vehicles for shipments.  Further, it allows firms to reduce overall operating expenses, by reducing transport costs per kilogram and cutting maintenance and personnel costs, as fewer assets are needed.

The decision to choose shared warehousing space over dedicated space should be based on the following parameters:

1. Operational Scope – A company which has just started or has limited operations can benefit from the shared warehouse space while a company with complex and big operations should prefer dedicated space.
2. Customization –  Shared warehouse space provides limited customization facility so a company that has a complex operations activity should prefer Dedicated warehousing
3.  Economical – Dedicated warehouses are a costly affair because of huge fixed costs and overheads while in shared warehouses, burden is divided among multiple businesses operating out of the warehouse.
4. Tenure –  Shared warehouses spaces usually have shorter contractual tenure and more flexibility with lock ins as service providers usually find replacements but a dedicated warehouse will have higher contractual tenure and lock ins as the overhead costs are higher.

Nonetheless, as the companies will move from the traditional model of bulk movement (supporting the wholesalers) to single-unit delivery to different parts of the country, the importance of shared spaces would increase in the Indian logistics market.

Chowgule Brothers Private Limited is a leading 3PL service provider and offers shared space warehousing services.  Equipped with immense industry knowledge and modern technology, it offers innovative supply chain solutions for greater visibility, cost savings through shared services and consequently better inventory integrity. For more information kindly contact us.