Seven Critical Steps To Planning A Warehouse Or Distribution Center

Seven Critical Steps To Planning A Warehouse Or Distribution Center

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Theres no room for mistakes in todays economyand that includes building or re-engineering distribution centers.
Because these facilities are critical components of the supply chain, they require a detailed planning process to ensure they meet return on investment expectations.
More than ever, the measure twice, cut once rule applies, since having to tack on additional capital outlays five, six, seven years down the road is costly. The projection of inventory and how it is to be stored and moved are the driving factors, as a 20% deviation on a 200,000 square foot storage area can result in a 40,000 square foot shortfall or surplus.
In the final design phase, picking and storage will rule the day; yet they have opposing agendas. Large storage areas increase travel distances and reduce the picking efficiency. On the other hand, the ideal picking operation requires relatively small amounts of product stored in dedicated locations, relatively close to one another, which works counter to a facilitys storage efficiency.
When considering the design and layout of a new distribution center, its important to first consider which of the four scenarios most closely resembles your operation:
Low Activity / Low Storage Requirements. This combination represents the simple, smaller warehouse operation. Rarely are automation or sophisticated storage and picking mediums or devices required or justified. In most instances, floor storage, stacked pallets, simple pallet racks and/or conventional shelving are utilized within the facility, along with manual handling.
Low Activity / High Storage Requirements. This combination typically calls for high bay, multi-level, high-density storage, and a random location strategy. Picking can be manual or semi-manual.
High Activity / Low Storage Requirements. This combination generally suggests a very condensed forward picking area supported by simple overstock storage. The high pick activity level often justifies automating the picking system and the use of automated handling.
High Activity / High Storage Requirements. This combination is characteristic of a typical distribution center. The high pick activity and high storage requirements often justify the use of exceedingly automated picking systems, heavily automated handling and sortation systems and high-density storage.
Once the storage and picking scenario is clear, taking into account economic forecasts (consumer spending habits down in todays stagnant economy could change over the next few years, and inventory requirements with it), the planning process is now off and running.
Keeping in mind that a distribution center may be a companys largest capital investment, as well as the final stop before the product reaches the customer or doesnt, its imperative the planning is done perfectly the first time. To accomplish this objective, here are seven critical steps to follow when planning a warehouse or distribution center.
1. Define goals and objectives. These should be closely aligned with the overall strategy for the new facility. They can be defined as minimizing warehousing costs, maximizing picking productivity, or simply providing the best customer service. They can also be defined more specifically, such as maximizing cube utilization, providing maximum flexibility in the final layout to accommodate future expansion or changes in business, or maximizing efficiency and productivity with a minimal amount of resources.
2. Document the process. Review the existing or proposed methodology and process, and conduct personal interviews with the staff dedicated to all major functional areas within the process. Recent changes in the economy may have caused some downsizing and movement of personnel to work areas they may not be totally familiar with, so be sure to interview enough people familiar with each functional area. As a rule, if those interviewed cant identify areas of opportunity for improvement in their department or area, you should look to interview more from that department or functional area.
3. Collect information and data. Collect any and all information specific to the new facility. Since it is best to work from inside the facility out when considering new construction, dont let any building constraints restrict design. When considering existing space for the new facility, make sure the information includes accurate drawings showing column sizes and locations, dock and personnel doors and locations, ceiling height restrictions, and ceiling girder/joist construction. It is also important to collect all relevant product information pertaining to the number of stock keeping units (SKUs) to be stored and picked within the facility, along with their dimensional measurements, order history, and velocity data.
4. Analysis. Once information about the building and the inventory has been collected, a thorough analysis should be performed with respect to the goals and objectives defined for the project. The analysis should determine if these goals and objectives can be attained. If they cannot be met, then management should determine an alternate plan of action. Should the goals and objectives be modified? Should substantial changes be made to the building design? The analysis should answer the following questions:
How well does the product flow into, within, and out of the facility?
Do the pick modules hold sufficient inventory to avoid excessive replenishment requirements?
Is the storage system and area large enough to accommodate the inventory?
What type of conveying and sortation equipment will be used?
What are the staffing requirements?
Does the operating budget include staffing, maintenance, utilities and the cost of the information system?
How well will the facility adapt to a change in operating requirements?
How effectively will the warehouse management system work with the automated material handling system?
If the analysis determines the goals and objectives can be met, the detailed solution and project plan can then be developed.
5. Create a detailed project plan. This plan should identify all the steps required to create the warehouse or distribution center layout, including the overall goals and objectives, and the results of the information and data analysis used in developing the plan. The project plan should contain the major tasks to be undertaken, the resources needed to achieve each task, and how much time should be allotted to accomplish the tasks successfully. In addition to these responsibilities when creating the project plan, there are a multitude of design concepts to consider in order to best meet your companys needs. Some of the most effective and widely used include: cross-docking, forward pick areas, slotting, task interleaving, and creative use of your cube.
Cross-docking is the practice of unloading product from an inbound trailer or rail car and then loading this product directly into outbound trailers or rail cars, with little to no storage or warehousing in between. This methodology is typically employed to minimize or decrease inventory storage requirements, reduce transportation costs and increase customer service through speed to market. This type of operation often requires large inbound staging areas where inbound product is sorted, consolidated and stored until the outbound shipment is complete and ready for shipping. Oftentimes automated handling and sortation equipment is used to move, sort and consolidate the product through the facility.
The forward pick or fast-pick area of a warehouse or distribution center is the most important piece of real estate as it is the most convenient and efficient area to pick from. It is an area created to support the picking of the fasting moving products within the facility, with replenishment coming from bulk, overflow or reserve storage elsewhere in the facility. This concept is typically employed to increase picking efficiency and productivity, by minimizing travel time and maximizing picking time. Oftentimes considerable capital is invested in the area on specialized equipment. Some examples would include pallet flow, carton flow rack, pick to light (PTL), pick to voice (PTV), carousels and A-frames. To gain maximum benefit and returns from a forward pick area, it is critical that the area be stocked with the right SKUs and slotted properly. Most warehouses or distribution centers store product in the forward pick or fast-pick areas according to one of two philosophies: 1) provide each SKU with the same amount of space, or 2) provide each SKU with enough space for the same time supply of storage (2 days supply, 1 week supply, etc.).
Slotting, as relates to the logistics industry, is defined as the intelligent placement of product in a warehouse or distribution center for the purpose of optimizing material handling efficiency. Some of the high level benefits associated with properly slotting a warehouse are time savings (optimal storage media selection, optimal pick/replenishment locations and sequences result in reduction in picking time), value added to the process (better safety and ergonomics, increase picking rates and accuracy) and return on investment (reduction in labor costs as travel distances reduced during picking, possibly defer capital expansion by getting more out of what you have). Too often, warehouses do not recognize the value of a properly slotted warehouse or what the direct impact of such can be on the facilitys bottom line. Paying pickers/operators to travel about the warehouse is a fact of life. When considering, though, in a typical warehouse, travel about the warehouse can be 50-60% of an operators total working time and functionality. Slotting the warehouse based on velocity and travel distance alone can reduce your labor costs by 5-10%. If you further consider access and handling issues like pallet stability, grouping of product families and associated products, you can achieve another 3-5% savings. Finally, if you consider increased storage density, which corresponds to a decrease in space requirement, or opportunity to do something else with the free space created, you can gain as much as 5-10% of your overall floor space back for new opportunities.
Task interleaving is the term used to refer to a warehouse management system mixing tasks to reduce travel time. An example of this would be sending a lift truck operator to put a pallet away from the dock area into a storage position on his way to the next picking location. In most warehouses or distribution centers, up to 60% of workers time is spent traveling while performing no true value add or bottom line function. The concept of task interleaving can reduce this non-productive time by 10-20%. This can result in reduced labor costs as fewer people will be required to perform the work in the warehouse since the waste involving the needless, non-productive travel was eliminated.
Often times, companies consider searching for new space or an expansion of their existing space when it really isnt necessary. A lot of times the space they need is right above their eyes. Utilization of the cubic space located above the operation often is overlooked when a company is looking at growth plans. Simple installation of a free-standing mezzanine or conversion of a floor level picking operation to a multi-level pick module often offers the opportunity for a company to increase the size of their operation under the same roof and significantly increase their picking capacity. It also offers the opportunity for considerable cost savings versus brick and mortar construction expansion can be anywhere in the range of 70-85% less than conventional construction depending on the cost of new construction.
In order to maximize your investment in a warehouse or distribution center, all possible avenues should be explored. In composing the project plan, a detailed timeline must be constructed. The project plan should include start and end dates for all tasks, as well as availability of resources. Once the plan has been developed, it should be reviewed and checked to be sure the timeline is realistic and attainable, as the available occupancy date of a new facility will dictate equipment delivery and installation.
6. Implementation. The implementation phase of the project is when the rubber meets the road. This is when most companies find out whether their project plan is on the money or not. Its with the implementation phase that the layout is transformed from concept to reality.
All resources within the new facility need to work together to ensure the project plans goals are met. But few plans are perfect, and oftentimes during implementation, obstacles are encountered and the plan needs to be adjusted or changed. This can be due to any number of reasons, such as an oversight during the drawing approval review process, or changes in the building construction from what was originally planned. Most obstacles can be overcome. Its important to remember that all changes or deviations from the original plan must be well documented.
7. Post project review. Once the project has been completed and inventory is moving smoothly in and out of the facility, a closeout meeting should be scheduled. This session will include a discussion with the implementation team as to whether the final layout was implemented as originally designed and approved, and to confirm that any changes were appropriately documented. This step is critical for future project planning.
A well-designed and well-planned warehouse or distribution center offers multiple advantages in the fight to remain competitive and successful. By taking the necessary steps to see the project through from start to finish, the result will be a facility that operates efficiently, uses space effectively, maintains cost control, and in the end achieves its ultimate goal of meeting expectations.

About the Author:
Craig Bertorello is Vice President of Operations at TriFactor, a material handling systems integrator based in Lakeland, FL. He can be contacted at 904-493-2171 or cbertorello@trifactor.com. For more information, log on to www.trifactor.com

This white paper and other material handling white papers can be found at the TriFactor Learning Center.



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