Looking to meet the needs of ecommerce shippers facing a shortage of warehouse space – as well as those who need excess capacity at specific times but aren’t interested in fixed asset investments – Flexe has been building out its network of partner-based fulfillment locations.
Founded in 2013, Flexe operates on a marketplace model, providing shippers access to more than 550 distribution facilities in the U.S. and Canada operated by about 200 partners. The company says there are locations in every major market, as well as in many secondary and tertiary ones. About 60% of them are operated by third-party logistics (3PL) firms, while the rest are brands or retailers with excess capacity.
“These are companies with their own facilities who do a great job managing their own goods, but in order to drive better economics and provide a more continuous workflow for labor, they provide similar services to other businesses,” said Karl Siebrecht, co-founder and CEO of Flexe. “We bring the software to manage the operations end to end and the customer gets a unified experience, all the inventory tracking and management and branding of the service through to billing, even from different locations and different operators.”
Siebrecht said the “blinding insight” that led him and his partners to launch the firm was the changing dynamic of ecommerce fulfillment. In addition to its network of fulfillment locations, Flexe’s software manages storage and fulfillment services across multiple nodes and providers, using algorithms to make the decisioning faster, more intelligent and more efficient.
“Fundamentally a warehouse is a fixed, static asset, bought and sold via long-term leases,” Siebrecht said. “That worked well 10 or 20 years ago when mall-based and big-box retail formats were relatively mature and stable. But in the increasingly dynamic world of product lifecycles, a five- to seven-year lease term didn’t make sense for an ecommerce company that can’t imagine how big it’s going to be in five years, never mind seasonal dynamics.”
While Amazon did in fact create a massive fixed-asset distribution network that was purpose-built for ecommerce, it has a large head start and it’s not something that can be replicated. At the same time Amazon has “trained all consumers to expect fast and close to free shipping,” Siebrecht said, creating a need for services like his.
Flexe started out with a focus on bulk inventory of larger companies with hundreds or thousands of pallets of product due to seasonality or pre-ordering goods at a lower price, that didn’t have the capacity in their existing network.
“The software was created to manage inbound and outbound bulk inventory, and getting those orders right is very complicated,” Siebrecht said. “We make sure the (storage and fulfillment services) are efficient and high quality for some Fortune 100 clients. As we evolved the platform over the last 18 months we’ve launched our ecommerce fulfillment capability. We’ve had very significant adoption. Tom’s Shoes for one has been a super happy client for quite a while, using many scenarios to manage the growth of their business domestically.”
Siebrecht said Flexe doesn’t necessarily have to replace a company’s own network infrastructure or fulfillment services. Instead he said it acts more in a complimentary fashion, handling excess capacity as companies scale up and down across seasons and product launches.
“On the fulfillment side, the evolution is about getting goods to consumers even faster and at a lower cost per order,” he said. “Fundamentally what drives that is having more nodes so the final leg is as short as possible. If you have one DC in California and an order comes in from Florida, you either put it on a plane, which is expensive, or on a truck taking six to eight days. Adding a second east coast DC helps, but even with three nodes there are still a bunch of orders that take three to four days. That’s one dimension to grow along, but how many nodes can I have?”