Tackling e-commerce logistics and outsourced warehousing

Last-mile logistics park owner and operator Inospace has launched a  facility to help mid-sized and small e-commerce companies with their fulfilment, warehousing, and distribution needs.

Inospace, founded by the writer in 2017, has grown its property portfolio to R3bn. The company's 52 sites house over 1 500 clients who distribute goods directly to consumers and other businesses.

The company's first fulfilment and outsourced warehousing facility in Paarden Eiland, Cape Town, will be followed by a second site in Midrand, Johannesburg early next year.  

Launching a specialised warehousing and distribution offering supports the concept of property providers offering value-added services to their tenants. For Inospace, the company believes that it should create a frictionless end-to-end logistics environment that supports emerging and fast-growing businesses.

The commercial real estate industry is undergoing massive structural change through a concept known as space-as-a-service. Space-as-a-service (SPaaS) is a paradigm shift in how the commercial real estate industry has provided products and services to tenants and has changed the role of commercial landlords from rent collectors to service providers. The business model is based on the view that traditional landlordism is being disrupted and real estate requires customer-centric solutions and value-adding services.

In South Africa, the beleaguered office sector is increasingly growing a range of services to attract tenants to their spaces. Inospace is one of the only non-office property owners to introduce the space-as-a-service model to the growing industrial and logistic sector.

Prologis, the world's largest logistics real estate company, with a market value of over R2Trillon, has grown its Essentials space-as-a-service platform into a multi-billion Rand income generator. Founded in 1983, Prologis owns over 4,703 buildings in 19 countries across the Americas, Europe and Asia. The company provides warehouse real estate solutions and services to over 5,000 tenants, including Amazon, BMW, FedEx, Pepsico, UPS, and Walmart.

Prologis developed its Essentials platform by offering "warehouse-as-a-service" to global businesses. They have created an integrated solution by helping small and medium-sized businesses to move in, set up or solve a problem in a warehouse.

Following the precedent set by the global warehouse leader, Inospace launched the Inocircle platform in 2022. Inospace not only  grew its physical last-mile logistics real estate platform over the last two years, but through Inocircle, it focused on solving tangible pain points for smaller business owners, allowing them to streamline their logistics operations

The team behind Inospace Services, the company's management arm, travelled to the USA to learn from the world's leading logistics companies about which service tenants most require.

E-commerce companies, which have driven the industrial and logistics sector, often face fluctuating inventory sizes and seasonal demand challenges. An all-in-one logistics and outsourced warehousing solution allows these companies to adapt and scale their operations based on ever-changing supply.

When an e-commerce business receives, stores and sends goods to customers, it can either rent a fixed warehouse space and provide its picking, packing and shipping services or outsource this to a third-party logistics (3-PL) provider.

Many small and growing businesses resort to using empty garages, their homes, and rental storage spaces. These spaces serve as functional warehouse spaces if inventory can be delivered, picked up and stored safely and efficiently.

When this space becomes inefficient or impractical, smaller e-commerce businesses find renting their own warehouse the most cost-efficient option. But as their company grows or stock levels rapidly fluctuate, they require scalable space and outsourced staff to assist with order fulfilment. For most smaller e-commerce businesses, a fully outsourced 3PL option is unaffordable.

Several global real estate providers are now offering a hybrid warehouse service that can go the extra mile by providing fixed spaces with outsourced warehousing and fulfilment under one roof. This space-as-a-service offering is where the highest demand is, and companies such as Atlanta-based Saltbox are rapidly sprouting up nationwide.

Inospace's first "fulfilment warehouse" was launched this month, and existing e-commerce clients are already using it to handle their stock.

Our logistics fulfilment service assists tenants in managing product orders as directed by their customers. For example, suppose a customer (be it an end-consumer or a retail outlet) requests 100 units of our tenant's product. In that case, they can transmit the order details online to our technology platform for order fulfilment. Once we receive the information, our staff will pick, pack, and arrange delivery of their order. Most critically, the platform automatically selects the lowest pre-negotiated courier prices and terms based on our tenant's requirements.

We may cannibalise some of our own lettable space as clients realise they can reduce their traditional rented warehouse space in favour of outsourced warehousing, but we are tapping into a much-needed boost to assist growing e-commerce businesses in South Africa. Smaller businesses can level the playing field and compete more effectively with larger companies. That is the ultimate space-as-a-service model that will continue to take the real estate world by storm.