Replacements, Ltd. Expanding to Mega DC

Seeking to consolidate its warehouse operations into one centralized facility, Replacements, Ltd., which sells replacement pieces for china, crystal, silver, contemporary and collectible tabletop sets, is adding 500,000 sq. ft. to its main distribution center in Greensboro, NC.

The project, which will cost around $15 million, will bring the DC’s total size to about 750,000 sq. ft.

Company president Scott Fleming says the expansion will enable Replacements Ltd. -- which has been seeing rapid growth -- to close three other satellite warehouses located within a mile of the main DC and put all of its operations, including its approximately 550 employees, under one roof.

“It was never our intent to operate multiple facilities,” Fleming says. “We got into this situation because we’ve accumulated inventory at a much more rapid pace than we ever could have imagined.”

Fleming says in recent years Replacements, Ltd. has had some incredible merchandise buying opportunities from manufacturers and individuals. This is due in part to the shortened lifecycle of today’s contemporary and casual styles, but also because economic conditions have forced a lot of manufacturers out of business.

As a result, the company has accumulated a vast amount of inventory, more than 13 million pieces, which is a good thing since it relies on having an expansive inventory in order to stay in business.

The only problem, though, is that the product has to be stored -- sometimes for quite a while. That’s why, when the company outgrew its main, 250,000-sq. ft. facility a few years back, it had to start leasing additional space in the same neighborhood.

Replacements, Ltd. started by leasing a 75,000 sq. ft. facility just up the street from the main warehouse, which it later bought. “But we continued to need space,” Fleming says, “so we were able to get two more leases -- an additional 75,000 sq. ft. of space under a sublease, and another 40,000 sq. ft. of space under a primary lease.”

But having 440,000 sq. ft. spread across four different locations, he says, has been an operational nightmare. Not only does the company have to deal with maintaining all those facilities – including covering the utility costs and in some cases rent – there’s the challenge of trucking product back and forth for inventory and distribution purposes.

“It is inherently inefficient,” Fleming says. “So we are delighted to have the opportunity to have all of our operations consolidated.”

Fleming says once construction is completed (it’s slated to begin in early spring), the company will hire a consultant to help design the new warehouse and distribution center, which will be built “from the ground up.” He says by consolidating all labor and warehouse systems under one roof, he expects to be able to improve overall efficiency by at least 20%.

“We will be looking at two things,” Fleming says. “First, we will be having someone take a close look at our primary pick-pull operations to find out, what is the optimal layout?”

Designing the new warehouse will be challenging in some respects: Replacements, Ltd. works almost like a reverse model of a typical DC, in that it accumulates inventory and then holds it so it can sell it later. This is a contrast compared to today’s high velocity DCs, where the goal is to move the product out the door as soon as it comes in.

At the same time, “20% of our patterns drive 80% of our sales,” Fleming explains. “So the question is, where do we locate those more popular patterns? What is the optimal layout for the merchandise? Right now, in our main facility, our shelving goes up 16 feet high to take advantage of the ceiling height, so were not wasting space, and we have people who have to go up ladders to pull product. I don’t think that’s efficient.”

He says the consultant “will not only help us decide on the optimal layout – but also how high we should go.”

The next and final step, he says, will be the implementation of a warehouse management system, to integrate with the company’s existing, custom systems, “so we can track the flow of the product from start to finish throughout the building.”

Eliminating the need to have employees dispersed across four facilities – plus eliminating the need to transport product between locations – will result in significant cost savings, Fleming says.

“November through January is the busy season for us -- but during that period were not optimal at all in terms of labor,” he explains. “The opportunity to have the inventory arrayed differently, and pulled more effectively, should save us a considerable amount of money, in terms of labor costs. And that savings will come year after year – by not having to add as many people.”

Fleming says right now he’s open to ideas as to how to design and automate the new warehouse.

“It’s not highly automated, at this point, at all,” he says. “But I do think there’s going to be opportunities to automate it.”

Bottom line, he says, “I have no predisposition at all -- I just want to make the best long term decision for the company.”

For more on the trend toward mega DCs, click here.