More space, fewer problems
We live in an era in which the digital world is so rooted in the physical world that when we mention certain concepts, we must clarify which world we are referring to. For example, if we talk about extra storage space, many of us will automatically think of digital cloud storage services, such as that offered by Dropbox Inc (NASDAQ: DBX) or Snowflake Inc (NYSE: SNOW). We may also think of companies like Seagate Technology PLC (NASDAQ: STX), a leading manufacturer of hard drives for both home computers and large servers. But the truth is that sometimes phrases have a more literal meaning, and when we say “extra storage space,” we may also be talking about large warehouses that can be rented to house a variety of physical objects.
The trend of renting warehouse space or storage started a few years ago for private use. Sometimes, people run out of room in their homes or decide to move to a smaller place, and in order not to get rid of their belongings, they rent a small warehouse where they deposit furniture and other objects that no longer fit in their homes. This methodology was baptized “Self Storage” and spread mainly from the United States to the rest of the world. In the United States, one of the main companies providing this service is Extra Space Storage Inc (NYSE: EXR), which has more than 2,000 warehouses distributed in 41 states and is also gradually betting on sustainability by migrating to the use of solar energy in its facilities.
But little by little, this trend has reached the industrial level, and today there are many companies that decide to outsource the storage of their products, and in this way, they obtain numerous advantages. First of all, they save money on the acquisition and subsequent refurbishment of buildings to transform them into warehouses. On the other hand, they do not have to hire additional personnel since the company providing the storage service is in charge of covering the needs that may arise, such as cleaning, air conditioning, security and, in some cases, 24-hour service. Another very important point is the possibility of monitoring the spaces remotely. Digital camera systems such as those from Cisco Systems Inc (NASDAQ: CSCO) and Logitech International SA (NASDAQ: LOGI) make it possible to visualize the status of objects and their entry and exit at all times. Another advantage offered by some storages is the flexible warehouse plan, which allows payment month by month according to the space used, which is convenient for both the service provider and the customer.
Another increasingly common use of large warehouses is the creation of distribution centers. Marketplace industry giants such as MercadoLibre Inc (NASDAQ: MELI), Amazon Inc (NASDAQ: AMZN) and Alibaba Group Holdings Ltd (NYSE: BABA) offer their major retailers to store their products in large distribution centers. In this way, sellers gain great advantages, such as being able to completely disengage from product logistics when making a sale and take advantage of all the technological advances of these facilities. The distribution centers of these companies are equipped with automated processes, robots and planned architectural designs. Using 3D simulations performed with software from companies such as Autodesk Inc (NASDAQ: ADSK) and Dassault Systemes SA (BATS EU: DSY), the arrangement of packages in the storage racks is optimized. Thanks to this, an average retailer can benefit from the technology of large companies and ensure, for example, that its packages reach their destination in record time.
The methodology is not only here to stay but to evolve in gigantic leaps. In the United States, demand is greater than supply, and it is increasingly difficult to find available warehouses in strategic locations. In the real estate sector, buying a property to be rented as a warehouse is considered a safe bet; in fact, it is one of the sectors that grew the fastest during the isolation due to Covid 19, as it benefited from the boom of online sales platforms, which caused small and medium-sized companies to need to store stock of their products but did not have enough physical space. Thanks to the implementation of services of this nature, smaller companies can increase their level of competitiveness in the market, as they benefit from technological and logistical advances without investing large amounts of capital.
Once again, an idea that, in principle, seems very simple becomes complex to the point of solving a major problem for small and medium-sized companies. Outsourcing services such as logistics gives companies extra time, capital and energy to focus on development issues, such as expanding and strengthening sales channels and reinforcing product stock without the limitation of physical space. Technology applied in the right way always levels up and pushes the smallest companies towards competitiveness.