This morning’s fluffy white clouds have turned into a full-scale thunderstorm, but it’s only when you walk out the door that you remember your umbrella on the front seat of the car, a half-mile away in the last row of the parking lot. There’s nothing left to do but get soaked. Your shoes squelch through puddles, your shirt sticks to your back, and the cover of your briefcase gets soggier by the minute. You’re soaked and irritated and you feel foolish about your oversight. It happens to all of us. But that’s nothing compared to the cold shower of reality faced by those who overlook the need to plan adequately for a distribution center, and find themselves buffeted by storms that last not for minutes but for years.
Lack of planning has become an all-too-apparent trend in distribution facilities. Many companies are careful when evaluating and purchasing expensive business software systems, but the same companies often fail to place the same importance on the development of distribution center operations.
Companies frequently fall into a vicious cycle in which an initial failure to plan can result in an inability to plan efficiently ever again. This failure can result in a distribution center’s operations closing down sooner than expected, which in turn causes a rush to expand or build a new facility to make up for earlier oversights. If planners fail to take into account the entire site plan or need for expansion, the result is liable to be nothing more than a maze of inefficient space. Ignoring overall site design or expansion space can also result in increased building expenses from later having to remove dockyards or permanent walls to maintain operations efficiency.
This trend is not restricted to one type of business. It is apparent in multiple industries, including retail and manufacturing. Constantly changing customer requirements make planning more challenging, and the demand for on-time delivery of orders has remained critical to the bottom line.
To break or prevent the cycle of planning failure, a company must begin now to estimate the life span of its current facilities and the growth rate of the business. Warehouse operators and managers constantly ask such questions as: Is my facility space being used efficiently? How can my labor costs be reduced? How can we increase throughput? Labor and throughput requirements are key measuring sticks for planning distribution center operations, space, and equipment. The effectiveness of a distribution operation depends on much more than just erecting four walls; it depends on how efficiently the space, equipment, and people inside the facility are utilized.
Designing a structure that will remain functional and efficient over a decade or longer is a complex task, compounded by the need to balance short-term budget and scheduling goals with the mission of developing a long-term facility operations plan.
DC planning seeks to resolve these seemingly competing demands based on the assumption that it is possible to design a building that is economical to build, efficient to operate, serviceable for decades, and easily expanded.
Conventional building practices often overlook the interrelationships between a facility and its operational components, its surroundings, and its occupants. An overwhelming focus on keeping initial construction costs low can obscure the effects an immediate design decision will have over a building’s life cycle. Decisions about column spacing and wall location offer a good example. Building a temporary wall might save pennies now, but it may not save money in the long run, or be cost-efficient over the life of a building.
DC planning requires a multi-disciplinary approach to development that considers a building as a whole. The multi-disciplinary method means that every team member — logistics/industrial engineer, architect, and civil, structural, and mechanical engineers — influences important building elements. For example, mechanical options will affect architectural decisions, and architectural elements will determine the size and complexity of mechanical systems. DC planning regards a facility as a totality that should operate in concert rather than as a collection of individual parts. By getting all those players together you can optimize the needs of all parties and arrive at the best design and lowest overall cost.
Companies generally demonstrate one of two philosophical approaches in developing a plan for their distribution centers — biased and unbiased. The biased approach is one that uses a supplier who represents specific equipment or systems. This approach limits the design based on the resources available to the supplier. The result is a plan that may not maximize available universal resources.
Consulting firms that do not have exclusive alliances with suppliers can create a plan on the basis of the unbiased approach. An unbiased logistics plan involves developing best-practice solutions and defining the future planning required in detail. This approach has the significant advantage of considering unlimited potential resources in the distribution center operations design. The result is planning that considers the full facility expansion capability on the available distribution center site and maximizes space, equipment, and labor resources.
Regardless of the particular type of approach used in planning, developing a logistics plan is the critical first step necessary to design and build an efficient distribution center. Many companies have internal logistics or industrial engineering groups that are used to develop these plans. Others use outside consultants to develop concepts and plans. Either way, once it is developed, the concept plan is given to an architectural/engineering design firm to develop the detailed construction documents used as a guide to build the distribution facility.
You can construct or expand a facility more rapidly if the same source provides both logistics and architectural/engineering services. Having DC logistics planners in-house to explain or convey the plan to the design manager and engineers may be more efficient. Conveying the logistics concept plan intact to the architectural/engineering documents is a critical process that ensures that the right plans are being developed in all areas.
Beyond the horizon
The first step in planning is to understand and analyze operational data to build a foundation for a solution. Once you establish a foundation, you must apply business growth data to the current operational requirement to project future requirements. A critical step in this process is to establish the planning horizon. If a company is building a new DC, how many years will it want to operate the facility? If, as in most facility expansions, the company has a fixed site plan, then how many years of activity will the site support? All DC logistics plans should involve the entire site plan, even if the planning horizon does not require that space. Typically, each plan phase is designed to support five years of estimated business growth. That way, when a business grows after five years, it already has a plan that allows efficient expansion.
Common planning data required to define the future design requirements include customer order history to develop activity profiles, inventory snapshots to establish storage requirements, and a stock-keeping unit (SKU) master list that defines product characteristics such as units per case, case length, case width, and case height.
When the activity profiles, inventory profiles, and all other statistical data are defined, a company is ready to develop solutions that support future growth. A typical distribution center plan begins with the reserve storage area and includes an order-picking area, dock area, returns area, a material handling design, office space, battery-changing area, and maintenance area. The reserve storage and order-picking areas are the critical spaces for future growth, but equal emphasis must be placed on all areas to ensure a design that supports the required growth.
The reserve storage area should be designed based on specific future requirements. An efficient storage system involves the evaluation of inventory and movement profiles, SKU characteristics, load stackability, SKU selectivity, material flow layout, and storage philosophy.
To select the most effective storage equipment, perform an inventory profile to define the unit loads per SKU to be stored in inventory. Inventory profiling is used to define the location openings required to maximize the cubic feet of storage volume. Calculating the movement of inventory allows planners to determine, if automation is required, the type of material handling equipment necessary, and in addition it supports the slotting of SKUs.
Understanding the characteristics of stored SKUs — characteristics that include load dimensions, weight, and special handling considerations — is essential to designing an effective storage system. The stack height capability of a load restricts the number of loads that can be stacked on top of each other. Consideration of pallet rack structures to increase the stacking height affects the design of storage areas.
The ability to select product from the storage position is a critical logistics planning issue. Storage design should address first-in/first-out (FIFO) and last-in/first-out (LIFO) selection requirements. For example, drive-in rack is not a feasible solution for a FIFO requirement.
Layout and material flow design involve the relationships between storage equipment, material handling equipment, and aisles. The choice between fixed and random storage methods affects the way in which products are stored. The fixed storage method assigns a SKU to a specific location. A random storage method makes any empty location in the zone of a particular SKU available for storage. The random storage method is commonly preferred because it provides a higher rate of utilization for empty locations.
There are four methods to establish storage area zones: storing by popularity, similarity, size, and special characteristics. Storing by popularity involves storing high-frequency items in the space most accessible for handling. Stocking by SKU similarity stores together items that are typically ordered together. Locating SKUs by size considers the items’ physical characteristics. For example, heavy SKUs are stored on lower levels and close to the point of use. Storage by special characteristics is normally required for certain SKUs such as hazardous materials.
DC systems and technologies
A warehouse management system (WMS) is the backbone of an efficient distribution center operation and should be considered in the logistics plan. However, you should choose a WMS to support the most efficient operation, rather than require an operation to change in order to fit the WMS functionality. From task interleaving to system-directed operations, a WMS can drastically affect the labor requirements of a distribution center operation. An efficient WMS increases the availability of information, increases labor utilization, improves inventory accuracy, and reduces data entry errors. The application of warehouse technologies such as voice and pick-to-light systems should be evaluated to further enhance operations.
In a radio frequency terminal system, the terminal initiates and completes orders and displays the location and quantity of each product on a hand-held or wrist-mounted terminal screen. Voice recognition system terminals convert electronic text into voice commands that guide the operator during picking. The operator uses a scanner to initiate and close orders while he receives information on a headset using a radio frequency terminal secured around his waist. In a pick/put-to-light system, the operator uses a tethered or radio frequency scanner to initiate orders. Bay and location displays on the merchandise storage equipment are illuminated to guide the operator through the picking area. The operator follows the lights and displays to complete orders.
Developing a high-quality distribution center logistics plan may take six to twelve weeks, but the time is well spent to guarantee the long-term, efficient use of DC space, equipment, and labor resources. Not planning is almost certain to affect your operation negatively when your business requirements change faster than expected. If you plan for the future, you can avoid or at least reduce the expenses and inefficiencies resulting from an unplanned DC expansion or new facility.
Norman Saenz, Jr., is the manager of logistics distribution in the retail and distribution division of Carter & Burgess, Inc., a national logistics, engineering, architecture, and construction management firm based in Fort Worth, TX. He has over ten years of progressive experience in logistics and industrial engineering working with a variety of companies and industries and specializes in distribution operations design, warehouse management systems, and network strategy solutions. He can be contacted by e-mail at SaenzNE@c-b.com.
A breakdown of the customer order history into SKU line velocity and SKU cubic velocity profiles is required to define the best pick area solution. In addition, data from the customer order file help to define the pick types, including piece, case, or pallet. SKU line velocity profiles are used to support or define the following:
- SKU classification (slow, medium, fast)
- Slotting — throughput and ergonomics
- Material handling equipment
- Usage of advanced technology (pick-to-light, voice, RF)
- Selection of pick zones and methods (discrete, batch, zone)
SKU cubic velocity profiles are used to support or define the following in the picking area:
- Location size (length, width, depth)
- Storage equipment selection (shelves, carton flow racks, carousels)
- Days-on-hand requirement
- Replenishment method
- Slotting — size of location
The application of industrial vehicles and conveyor systems is part of the overall DC logistics plan. The product load length, width, and height and the SKU throughput requirements determine the selection of material handling equipment. When comparing the use of conveyors to industrial trucks, the following conditions support the use of conveyors:
- High SKU line and cubic velocity
- High material handling labor costs
- Material moved between specific points
- Material moved over fixed path
Advanced automation, including automated guided vehicles and monorails, should be considered in any future planning. Even if the estimated future requirements do not support the use of this type of automation, a design might consider its use beyond the planning horizon.