Partnership allows Salvation Army to lease underutilized ARC warehouses

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Collaboration with startup creates new revenue source for West’s Adult Rehabilitation Centers.

By Vivian Lopez – 

The Salvation Army Western Territory partnered with Warehouse Exchange—an online warehouse space leasing platform—earlier this year to lease out underused space at its Adult Rehabilitation Center (ARC) warehouses. The partnership creates a new revenue stream for the ARC to fund its programming.

“We had multiple warehouses with quite a bit of not properly utilized space. And we thought, ‘If we can convert that space from dead space to income-producing space…it would be a great opportunity,” said Major Henry Graciani, ARC Commander. “This is an efficient way to maximize space and, for our purposes, convert it to cash for our mission.” 

Warehouse Exchange understands the Army’s goal.

“Together we are generating real dollars from otherwise unused space, which goes directly to fund The Salvation Army’s mission of saving lives,” said Jonathan Rosenthal, Warehouse Exchange co-founder and executive chairman.

The partnership resulted from a connection made by Territorial Advisory Board Member Rick Osgood.

He met Rosenthal through a mutual friend. After hearing about Rosenthal’s background in warehouse logistics, Osgood—who serves as chair of the ARC’s Retail Task Force—told him about The Salvation Army’s logistical challenges at the ARC warehouses.

“It turned into a longer conversation of how he might be able to help us,” Osgood said. “He was starting a new company called Warehouse Exchange that could not only help us take advantage of unused space we had in our warehouses, but also help us potentially get better organized and become better operators of those warehouses.”

From there, the partnership took root. The Salvation Army selects warehouses and notifies Warehouse Exchange of the amount of space available. The company then advertises the warehouse spaces for lease on its platform; space is rented in sections based on what each tenant needs. Warehouse Exchange installs fencing for every tenant’s space—each with loading access and a lock for their area.

“We thought it was perfect for us because in many cases our warehouses may be full of stuff, but they might not be full of stuff in the right way,” Osgood said. “Having a partner who is at the cutting edge of logistics and warehouse utilization will definitely help us out and make us better at what we’re doing in the warehouses.” 

Warehouse Exchange CEO Grant Langston is excited about the potential.

“Together, we’re really inventing a new industry,” he said. “This idea that there’s on-demand warehousing, it just doesn’t exist out there.”

The program launched at a Salvation Army warehouse in Riverside, California, and has now expanded to ARC warehouses in Portland, Oregon, and Tucson, Arizona. Warehouse Exchange is in the process of securing tenants for both locations.

“It’s passive income. We do nothing,” Graciani said. “They come in, they set up the fencing, and the vendor comes in and uses that space that we’re not using anyways and we get a check every month. As they make money, The Salvation Army makes money. It’s a win-win.”

There are plans for possible expansion at Salvation Army warehouses in Southern California if the COVID-19 thrift store donations slow and space is found at those locations. The goal is for warehouse leasing to become a territory-wide endeavor implemented at all ARC and other warehouses in the West. 

“We’re going to be adding spaces as we go,” said David Bentley, Property Secretary for the Western Territory. 

The partnership also fills a need for small business owners in need of smaller warehouse spaces for shorter periods of time.

“Typically when you’re a merchant and you’re going out to get warehouse space, warehouse operators are looking for multiple-year contracts and big commitments of money,” Osgood said.  “Warehouse Exchange is basically operating a needs-based matching service for people who have excess warehouse space and those who want very flexible warehouse space.”

“Warehouse Exchange is saying, ‘Look, let’s help small businesses. They don’t need maybe 100,000 square feet; they need 5,000 and maybe they only need it for three to four months,’” Bentley added. “They’ve created this platform for small businesses to lease smaller spaces for shorter amounts of time.”

Additionally, Bentley said he looks forward to the opportunities the program could bring for The Salvation Army.

 “I always think it’s great when we can find people outside the organization that we can connect with because many doors can open up through these relationships,” he said.

And it’s already started. Because of Warehouse Exchange’s ties to the University of Southern California’s (USC) Supply Chain Management Masters Program, graduate students are currently conducting a case study of the Western Territory’s warehouse operations at no cost to The Salvation Army. The idea for the study stemmed from the huge volume of COVID-19 donations and the resulting backlog of thrift store inventory. 

“We said to Dave and leadership, ‘What if Warehouse Exchange got together with USC and did a study…of the ways your warehouses bring in inventory, how they process it, how they sort it, how they put some in the store, and how they discard it. What if we did a study and proposed some ways to improve the process?’” Langston said.

That’s exactly what the case study consists of. USC students and the Warehouse Exchange team will address their findings with industry experts. When the study concludes, Warehouse Exchange will make a formal presentation to territorial leadership with recommendations of ways the warehouses can function more effectively.

“This partnership will provide a learning opportunity for the ARCs,” Graciani said. “We’ll learn instead of doing things this way, perhaps there’s another methodology we can learn from Warehouse Exchange on how to streamline our operations to get product in and out in a much more efficient manner with minimal touches. Because every time you touch an item, that adds an expense to it.”

Graciani believes that the partnership with Warehouse Exchange is more important now than ever before, as the coronavirus pandemic continues affecting communities across the U.S. 

“Right now, during these challenging times, we want to generate as much income as possible to provide services to our communities. COVID-19 is driving a lot of people to despair,” Graciani said. “I’m excited about the opportunities of a new stream of income to better support our men and women in recovery.” 

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