Material benefits: how the subscription economy can resolve growing e-commerce pressures

In 2015, year-on-year warehouse truck orders increased by 14.1%, according to the latest Forklift Truck Market Outlook for 2016, due to the shift to online purchasing.

Although this is great news for the industry, the pressures have increased in kind.

Indeed,where e-commerce brings big profits, it also brings big logistical challenges. The need to expand fleets has become a matter of urgency, but fleet costs are rising, fuel prices are erratic, and financial control has become an issue in more ways than one: you can buy a new van, but you may not be able to upgrade your forklift trucks if you do. Schedules are also getting tighter: the expectation of next day delivery is slowly being supplanted by same-day delivery or even within the hour, and with road traffic increasing year-on-year, it’s becoming harder to satisfy these highly time-sensitive requirements.

If you can’t expand your fleet, upgrade your equipment, or get the most out of your teams, you will find yourselves at a disadvantage.

Of course, the upfront cost of buying all the equipment you need for a business can be intimidating and off-putting, but the rise of the ‘subscription economy’ presents an alternative for businesses looking to invest in the e-commerce revolution.

The premise is simple: whatever you need, for as long as you need it, at a reasonable price point. Here’s how it’s being fulfilled:

Regular upgrades

Subscription models allow you to use the best possible equipment whenever it becomes available. Instead of making a commitment to a fleet of rapidly degrading forklift trucks, you’ll have the opportunity to upgrade to the latest model at the end of your contract – and these upgrades will typically be available on comparable terms. Sourcing machinery in this fashion allows you to keep costs under control and make significant gains to overall efficiency.

Bespoke service

No two logistics companies will have precisely the same requirements. Some will need repair service; some will handle that in-house. Some require a number of forklift and pallet trucks; others rely heavily on ASRS systems.

The appeal of the subscription model is that it allows you to select whatever combination of services you require a la carte. Providers approach your business relationship in a less transactional, more need-based fashion: if you require routine maintenance, they’ll try to accommodate it; if you want multiple products on an ongoing basis, monthly payments may be discounted. They’re in it for the long-haul, and they’ll do everything they can to make sure your company is as well.

Scalability

E-commerce has also introduced the peaks and troughs of seasonal store sales to the modern warehouse.

In busy shopping periods, you may find yourself without the vehicles and equipment you need to move all your stock to its intended destination. You’re left with a choice: buy more HGVs or forklifts outright – on the assumption that you’ll sell enough goods to justify the expense, and that you’ll find a use for them in quieter periods – or overexert what you already have, risking breakdown and slowing down the delivery process.

A lease provides an alternative: if you lease all the assets you need for three years, you can arrange to pay more during busy periods, and pay less in the off-peak – allowing you to organise your payment schedule around your financial requirements.

In this sense, the model offers greater financial flexibility, and in most senses, it offers superior freedom and control. When you can access the tools you need on a subscription basis, you can improve efficiency, control cash flow, and equip your logistics company for the short and long term.