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Warehouse management has become an integral business component to scale up businesses and ensuring customer satisfaction through state-of-the-art supply chain management and efficient inventorization. Warehouses ensure seamless and efficient product delivery framework, mapping logistics to a streamlined process ecosystem, spreading wings far and wide to satisfy customer requests from far flung regions. The big question then is: should entrepreneurs buy or lease warehouses? Seemingly a simple choice to make, but there are a variety of factors which go into making the decision. With the emergence of a massive real estate market, competitive pricing models, warehouse decentralization has become indispensable for companies, especially those in e-commerce logistics, to ensure enhanced customer experience and loyalty.
According to CBRE, leasing of warehouses spaces has grown by a massive 31% Y-o-Y to 13 million square feet across 8 Indian cities in the first half of 2019 alone, with a total investment of more than USD 200 million. This points towards the potential growth prospects of a planned leasing model and its benefits to economize business cash-flow and optimize risks.
Leasing costs is spread out over the time period of lease, rather than a lump sum amount. The businesses have a lot of flexible options to choose from, depending upon the business size, location, and those which are proximate to important infrastructural facilities for easier movement of goods. This also entails minimal/no repair and maintenance costs to be incurred by the lessee, and consequently minimal overhead expenditure. Since cost is often a critical deciding factor in sourcing assets, adopting the leasing route is often a profitable investment, especially with the wide-ranging business needs.
Let us look at some of the benefits your business value accrues as a result of leasing assets:
1. Leasing is generally less expensive than buying, if arranged in a cohesive, efficient and future-oriented arrangement. Lease agreements must be reviewed with respect to major parameters like logistical services, financial impact, customer satisfaction and flexible options to up-scale business.
2. Lesser liabilities and overheads – Instead of focusing on providing exquisite customer service through an efficient supply chain management and timely delivery of services, owning assets poses additional liabilities arising out of repair and damages, re-selling assets and their valuation. With a dynamic market, technology and equipment needs have rapidly evolved, and it makes less financial sense to buy these assets than leasing them. Businesses would be better off in investing more capital on enhancing product value and service efficiency.
3. Leverage complementary business aspects - Your business should be known for the value it provides to customers, and resource allocation should be accordingly mapped to those needs. Leasing is an effective way to build networks and relationships, by gaining access to a plethora of business opportunities with other clients.
4. Leasing is the best option to consider when your potential for future expansion is high, avail tax benefits arising out of leasing and invest more time in nurturing innovation rather than getting tangled in managing owned assets.
An integrated, flexible, dynamic business outlook requires businesses adopt leasing, rather than buying as their preferred mode of sourcing assets, and implement their business prospects in an efficient and economic manner without unnecessary overheads.
After co-working and co-living, the next big thing in the world of shared spaces is co-warehousing- collaborative workplaces for businesses with physical products and art entrepreneurs. With e-commerce witnessing unprecedented boom across the globe, many small businesses are facing logistics issues especially last-mile delivery which carries an in-proportionate cost. Having a conventional warehousing space in India means long, multi-year contracts, hiring operation staff, acquisition of expensive machinery, its maintenance, and not to mention the monthly utility bills. Thus, warehousing marketplace is experiencing a trend towards collaborative economies and greater flexibility, where different businesses can seamlessly receive, store and ship merchandise from a shared warehouse without the harshness of costly rents, maintenance or long term commitments. Such spaces also give businesses ability to customize a storage plan that matches very specific needs, regardless of company size. Other advantages of such shared warehousing marketplaces are: 1. Leveraging of equipment: Besides divvying up many direct and indirect costs like security and utility bills, co-warehousing also saves you from purchasing expensive equipments like forklifts, pallet-jacks, industrial grade racks etc, opening up the market to smaller players and start-ups. 2. Scalability: Co-warehousing lets users to adapt quickly to variable demand,allowing for an incremental rollout, which presents less risk than housing a considerably larger amount of product if the launch is less successful than desired. 3. Flexible labour: Co-warehousing brings with it the flexibility of cross-trained associates who have access to state-of-the-art warehouse and management systems and can handle a multitude of situations based on customer needs. While industrial spaces developers in India have already started building large logistics park where multiple companies with warehousing and inventory management needs can operate under one roof, some global firms are taking the idea a notch higher, trying different permutations and combination within collaborative spaces. One such combination bringing together co-working and co-warehousing. These community centres of innovation will have places to work and hold meetings, similar to what more traditional co-working spaces offer. But there will also be places for small entrepreneurs and artists to store their goods and creations, hire shared logistics services and heavy lifters as needed, all on site. For artists, there will even be gallery space to host exhibition, and event space for all to use.
