Rarely does everything come up roses in a warehouse expansion. Most likely, the bouquet of equipment, systems, and layouts that started out fresh and perky droops swiftly as the poor planning that went into it becomes evident.
As most managers practice it today, planning rarely receives the attention it deserves and never seems to get the input of its victims. Whether you’re refurbishing a fulfillment facility, setting a plant maintenance program, or installing a new IT network, a holistic approach to planning will give you far better results than will viewing each project in isolation. “Integrated planning” is my label for a process that involves all of the employees affected and does so in a timely and thoughtful manner.
QUESTION: After nearly twenty years of dealing with fulfillment companies and their expansion projects, one question reverberates in my mind. Why is it so arduous to fund the improvements necessary to accommodate growth?
I appreciate that the competition for capital within any company is fierce, and that decision makers are always beset with difficult choices. But how can the need for improved fulfillment capacity create such emotional upheaval within so many organizations? I have seen shouting matches, smoldering resentment, and outright insults exchanged when the subject of warehouse expansion overcomes otherwise rational workers.
PROBLEM: Buildings and systems are very expensive. Cost justification is complicated. Similar operations are hard to find. Real agreement about the numbers across departmental boundaries is fugitive. And, because of their distance from the strategic discussions that forge long-term direction, operations folks tend to work at a cultural disadvantage within the hierarchy of most companies. They also tend to be viewed as doers rather than thinkers and are, therefore, more frequently told than asked. When operational requests for improvements can no longer be ignored, they usually need to happen yesterday. This causes hard decisions to be made quickly, increasing the chances of an unsatisfactory conclusion. Haste really does make waste, and waste usually damages careers.
HYPOTHESIS: If the relationship between demand and capacity could be discussed rationally at a time when the need to do something was not imminent, a long-term solution based on collective agreement would be more possible. Perhaps the result would be the creation of a “blueprint” of expansion, a combination of challenges and solutions that would be carefully anticipated and scrupulously shopped for. Such a document would link volume milestones with industry standards and infrastructure investment in a way agreed upon in advance and awaiting only growth to meet pre-determined levels to justify necessary improvements.
But how can busy people beset with the pressures of everyday duties be convinced to invest their precious time in long-range planning? And what kind of question would trigger the willingness of all the constituencies involved to participate?
SITUATION: “How much expansion does our current warehouse property permit before we run out of space?” King Arthur Flour Company asked this seemingly innocuous interrogatory of us 18 months ago. (Yes, dear reader, Bread Loaf Corporation and King Arthur Flour were made for one another, if for no other reason than their names.)
After a ten-year relationship with this merchant, Bread Loaf has built an office headquarters, a retail and teaching facility, and a distribution center for King Arthur Flour and its catalog operation, The Baker’s Catalogue. As a well-funded start-up, the company purchased its facilities and the real estate that goes with them. An employee stock ownership program has been put into place recently, and all of the company’s employees are gradually becoming owners as the founders step back from day-to-day operations. So strategic questions like this one are increasingly on the mind of president Steve Voigt and his staff.
SOLUTION: After a careful programming effort, we all concluded that the call center (now more appropriately referred to as a “customer contact center”) needed to join the DC as the second-floor addition of a Phase Two expansion. The result was a final build-out of 39,200 square feet of future development space, some of it low clearance, and some of it up to 40′ clear for high-bay storage.
By using consultant Bill Kuipers’ “2001 Distribution Metrics and Benchmarks” and its space allocation conclusions, we were able to assign specific sizes and areas to the expanded facility as we projected growth for the years 2003 and 2008. Combining these suggested assignments with our own database of designs, we arrived at milestone utilization goals based on projected gross volume figures provided by The Baker’s Catalogue.
We asked key department managers their opinion of various spatial allocations and reviewed spreadsheets of periodic analyses. The ensuing discussions led to additional alternatives.
PLAN: After all the team members got their oars in the water, several expansion plans emerged as adequate to address the predicted volume levels in the predicted time frames. Once the architecture and equipment were outlined, preferred vendors joined the group and made suggestions about retrieval equipment.
Following close conversations with the DC staff, the team evaluated equipment and prices, discussing the specifics of packing stations, pallet picking and bulk storage options, and zone picking configurations. Then, and only then, did “all-in” price implications join the rest of the operations data in a chart that embodied the best thinking of all the participants. This single document contains a well-informed vision of the future that tells every stakeholder what the growth/cost relationship of the future looks like.
BENEFITS: The characteristics of The Baker’s Catalogue operation are revealed in stark detail in the snapshot views of the years 2002, 2003, and 2008. All of the current and future requirements of every related department in the organization can likewise be predicted.
FEATURES: How much does all this cost? How long does it take? Who should be involved?
Of course, the two things that do not show up are the real cost in terms of the time and determination of the participants. The Baker’s Catalogue was lucky enough to ask a triggering question that led the company straight into the “briar patch” of integrated planning. The process of answering one question led to another, with each new question revealing the need for additional information and team members. As a seminal example of where vertical thinking and integrated planning can lead a whole company, the King Arthur Flour project stands as the best case I have had the pleasure of working with to date.
Stephen Harris is senior account representative at Bread Loaf Corp., an architecture and construction services firm based in Middlebury, VT. He can be reached at (802) 388-9876 or at [email protected].
Spaced Out
| Under $30 | $30-$100 | Over $100 | TOTAL | |
|---|---|---|---|---|
| Receiving | 10% | 11% | 7% | 13% |
| Reserve | 17% | 36% | 38% | 34% |
| Picking | 56% | 37% | 35% | 45% |
| Packing | 8% | 8% | 7% | 8% |
| Shipping | 6% | 6% | 7% | 6% |
| Returns | 3% | 3% | 6% | 4% |
| Source: “Space Allocation,” Key Indicators: 2001 Distribution Metrics and Benchmarks, Spaide, Kuipers & Co. |
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Stocking Stuffers
| 1 Stock-picker | $27,000 |
| 1 Reach-truck | $32,000 |
| 2 Walkie riders | $8,700 each |
| 2 Pallet jacks | $425 each |
| 2 VNA | $70,000 each |
| 1 Reach-truck | $32,000 |
| 2 Stock-pickers | $27,000 each |
| 4 Pallet jacks | $425 each |
| 2 Walkie riders | $8,700 each |
Pick a Number
| Area Description | Kuipers’ Model (100K sq. ft./$45 MM) |
Current KAFDC (33.25K sq. ft./$10MM) |
Expanded KAFDC (55.34K sq. ft./$25MM) |
Program Conclusions |
|---|---|---|---|---|
| Receiving | 8% | 5,320 (16%) | 5,320 (10%) | slightly long |
| Reserve | 44% (4,763 pallets) |
9,310 (28%) (1,088 pallets) |
12,775 (23%) (3,090 pallets) |
400 pallets long for $25 MM/yr. |
| Picking | 33% (20,842 lr. ft.) |
6,650 (20%) (3,360 lr. ft.) |
14,630 (26%) (9,240 lr. ft.) |
2,285 lr. ft. or 2,720 sq. ft. short |
| Packing | 10% | 3,990 (12%) | 3,990 (7%) | 1,540 sq. ft. short |
| Shipping | 3% | 1,330 (4%) | 1,330 (2.4%) | 329 sq. ft. short |
| Returns | 2% | 910 (3%) | 910 (3%) | adequate |
| Offices | 7,000 sq. ft | 3,170 (10%) | 3,070 (6%) | 3,871 short |
| Mezzanine | D.N.A. | 0 | 9,310 (17%) | 4,589 sq. ft. picking, packing, and shipping |
| Repack | D.N.A. | 2,082 (6%) | 2,082 (6%) | D.N.A. |
| TOTALS | 100% | 99% | 97.4% | 55,340 sq. ft. |
| Source: “Key Indicators: 2001 Distribution Metrics and Benchmarks,” Spaide, Kuipers & Co. | ||||
Bread Loaf Recipe
| 2001 | 2002 | 2003 | 2008 | |
|---|---|---|---|---|
| FEATURE | PHASE I | PHASE I MODIFIED |
PHASE II | PHASE III |
| Volume/yr. (total sales) | 12 MM | 14 MM | 16 MM | 29 MM |
| Square footage of DC | 33,250 sq. ft. | 33,250 sq. ft. | 47,950 sq. ft. | 72,450 sq. ft. |
| Pallet locations (bulk) | 1,050 | 1,050 | 1,722 | 5,829 |
| Pallet locations (pick) | 16 | 36 (2 deep) | 54 (2 deep) | 54 (2 deep) |
| Flow rack (SKUs) | 462 | 504 | 634 | 634 |
| Static shelving (SKUs) | 1,090 | 1,800 | 2,052 | 2,052 |
| Peak week (no. of orders) | 7,500 | 9,333 | 10,666 | 19,333 |
| Total pick fronts | 1,568 | 2,340 | 2,740 | 2,740 |
| Est. throughput (pkgs./hr.) | 233 | 268 | 311 | 667 |
| Est. product. (pkgs./packer/hr.) | 8.1 | 11.6 | 13.3 | 24.2 |
| Conveyor (linear ft.) | 180 ft. | 250 ft. | 1,340 ft. | 1,390 ft. |
| Packer stations | 23 | 20 | 20 | 20 |
| Pickers/checkers | 8 pickers | 8/2 | 7/2 | 7/2 |
| Budget cost, equip. instal.* | $10 K | $65 K | $327 K | $395 K |
| Budget cost, bldg. improve.* | N/A | N/A | $2.71 MM | $2.26 MM |
| Total budget, bldg. & equip.* | $10 K | $65 K | $3.04 MM | $2.65 MM |
| *Estimated 2002 $; table shows proposed Bread Loaf expansion plan. | ||||