Why Micro-warehousing is the Natural Evolution of Logistics

delivery man wearing a face mask and riding a bicycle

Do you remember life before the Internet? When parcels in the mail were a rarity sent by family members for Christmas and birthdays? As a kid, growing up in northern England in the late ’90s, I remember going into the town center on a Saturday with my Mum to buy new shoes, clothes, CDs and video cassettes, from brightly lit, exciting stores. The internet existed but not in a way that really mattered. Connecting to an old modem and watching pages load line-by-line wasn’t the best online experience.

When I was at university in the late 2000s, the use of the internet was prevalent, but I was still largely shopping in stores. When I did shop online, it was mostly through Amazon, who introduced 2-Day Prime shipping in 2005. For most other retailers, I was still having to wait up to a week for my items to arrive. Due to this inconvenience, I preferred to head to the store to get the item that day.

But today, I barely step into a physical store. Instead, I buy everything from weekly groceries to the latest sneakers on my phone with just a few clicks. I’ve become increasingly impatient — wait 5 days for an order to arrive? Forget it. Close window. See if Amazon has it available to be delivered the next (or same) day.

As my personal shopping habits have changed, I have started to wonder what must have changed behind the scenes to make this possible — how has the logistics infrastructure changed in that time, and what will it look like in the future?

An industry ripe for change

Strangely a lot of the logistics infrastructure hasn’t changed that much in the last 20 years. Warehouses, planes, and trucks are still the backbone of e-commerce holding things together behind the glamour of brands. Back when I was a kid, shopping in physical stores, the inventory was being held in large warehouses, built a long way outside of cities, due to their cost and size. Stores could request weekly or monthly deliveries to replenish stock by truck, so there wasn’t a need to move goods quickly. Lowering the cost of storage, not the speed of delivery, was the priority for these early warehouses. So long as inventory was held on low-cost land, in a place that was convenient, that was good enough.

Come the mid-to-late 2000’s, supply chains had to adapt to the growth of e-commerce, and of 2-day delivery. But the way they did so was to increase the number of trucks driving across the country. They added more capacity to truck routes, increased truck utilization and used air freight if the customer wanted something in two days.

Supply chains were still focused on optimizing shipping around the existing warehouse networks. Warehouses were still in Louisville, KY or Memphis, TN, close to the population centers of the US, but not really close to the people buying. It was a stretch, but two-day shipping was still possible from these locations, albeit it at much higher costs (both financially and environmentally).

Younger generations are the catalysts

Today though, millennials and Gen Zs have come of age in a world where everything is digital and instant. Instant gratification is the new norm. With the click of a button, we’ve been able to send messages to friends around the world, order food, taxis, even dog walkers near-instantly thanks to the wonders of e-commerce and social media. Two-day delivery (the realistic limit of the existing fulfillment networks) is no longer fast enough.

Larger retailers have already started to adapt to this change. Amazon, Walmart, and Target are moving to next day delivery. In the near future, they’ll move to same-day delivery.

This type of fast shipping is great for consumers who tend to shop at one of these three websites. But, what about those who want to order organic makeup from their favorite online store?

Or, what about those who prefer to buy their clothes from an online brand that only uses the finest, sustainably sourced wool?

We’ve stretched the existing infrastructure network as far as it can go — and other direct-to-consumer (D2C) companies don’t have the resources of Amazon to build their own infrastructure to meet that shift in expectations.

What does that infrastructure need to look like to democratize same-day delivery for all brands? My belief is the existing warehousing infrastructure is no longer just stretched; it’s broken. Brands need something different to meet the ever-changing expectations of consumers. For this reason, I founded Ohi to build the next evolution of the logistics network.

The Ohi solution

For over 60 years, the physical infrastructure supporting our shopping habits hasn’t changed, but as the leading micro-warehousing platform in the United States, we’re changing what it means to be a warehouse.

By repurposing unused space within cities, our platform enables brands to position inventory really close to their customers, enabling same-day and next-day delivery for a lower cost than 2-day delivery from existing warehouses.

Today’s millennials and Gen-Zs are not just driven by instant gratification, they’re also increasingly environmentally conscious. This summer, people showed that they are willing to fight for change by staging global protests and demanding that politicians take action on climate change.

Often, instant gratification and environmental consciousness seem to be in conflict with one another. The faster you need to move consumer goods, the more likely you’ll need to do so via plane, which is much worse for the environment.

The more online shopping is broken down into single orders, the more packaging is used to move the goods across the country. I’m sure you’ve received more than one package to fulfill one order from Amazon, right?

Sadly, the faster the delivery gets, the more damaging to the environment it typically is. We’ve therefore put sustainability at the heart of our new platform, aiming to build something that isn’t just serving the needs of consumers today but will serve consumers sustainably for the next 60 years.

As I look back to how my shopping habits have changed, I realize the infrastructure enabling that change has reached a breaking point. Existing warehouses, trucks, and planes cannot be used in a same-day and next-day world. Instead, we should put them back to what they were designed to do, restocking “stores” (or micro-warehouses) on a semi-regular basis, and building a new infrastructure layer that reduces the environmental and economic cost of same-day and next-day delivery.

Want to talk to us about it? We’d love to hear from you at info@ohi.com