The new big thing: A look at massive distribution centers

Indeed, Adkins says, the risk of natural disaster is a concern for Zappos.com, “because if there were ever some sort of catastrophic event like a tornado, we'd be knocked out all at once.”

“Right now, what I'm struggling with is at what point economically do I have to split, just from a risk mitigation and business continuity standpoint?” Adkins says.

Adkins is hoping that Zappos will grow beyond this building, “and we'll need to build another facility anyway. Whether I put it a mile away or across the street, I'm splitting my risk, but I can still realize efficiencies.”

But Adkins also says most of the risks a company faces when operating a single, large DC can be mitigated.

For example, severe snow storms typically don't last very long — “you know they're going to plow the roads, so it's only a service disruption of about six hours,” he says.

And if there's a major power outage, Zappos can get a flyway gas turbine generator on the site in less than four hours, Adkins says. “Even fire doesn't really concern me that much, because it's not highly flammable material to begin with, plus we have really good suppression.”

Another risk: That mega DC you build today could be difficult to sell tomorrow, in the event you no longer need it.

“Years ago, Sears Roebuck built a 4-million-sq.-ft. mail order plant on the west side of Columbus, OH, and it's a real white elephant,” Ackerman says. The hulking, two-level structure was custom-built, which is part of the reason it is still on the market today.

“It was a single-purpose building — Sears doesn't want it anymore and, apparently, nobody else does either,” Ackerman says. “I'm sure when they built the thing, they figured they'd be in it for 50 years, and they didn't expect the downturn that they took.”

Ackerman believes going the mega-DC route “is a matter of balancing insurance risk, resale risk and operational effectiveness.”

“I'm willing to sacrifice operational effectiveness, to a degree, in order to cut the risk of fire loss, or the risk that I have to unload this building someday,” he says.

Ackerman states that anyone who builds a mega distribution center should remember that few buildings spend their whole useful life with the same owner. “And if you build a white elephant, you're going to take a real beating,” he adds.