MMD

Trusting flexibility

Planning and building a new distribution centre


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Designing and building a new distribution centre is something very few people get to do. Some spend their entire careers in supply chain without the opportunity to start a new facility from scratch.

To provide some guidance for those who find themselves lucky enough to be on the ground floor of a new project, MM&D brought together a panel of experts who discussed the entire process from first concept to getting the new DC up and running.

Before any company starts construction on a new distribution centre, a very basic question must be asked and answered: Is a new DC necessary? And while it may seem a simple question with an obvious answer, it’s not. Instead it’s merely a starting point that leads into a complex set of evaluations taking into consideration a variety of factors, including, first and foremost, the business need.

Stephan Lauzon, partner, advisory services, KPMG Canada in Montreal, Quebec, said that when a client first expresses the need for a new DC, it’s usually because of a change in the “business model, the business product line, the client base or the geography. But it’s a business need. I like to say first that a DC is a tool because I’m dealing with big retailers and their business is retailing. Distribution centres are tools for them to be able to get their product to the stores. The store operation is their business.”

Just because a business model or a product line has changed, it doesn’t automatically mean a new DC is called for. Sometimes the best approach is reworking an existing facility and making it operate better, says Gabe Mazzetti, president of Oakville, Ontario-based Redirack/Konstant.

Charlotte, North Carolina-based Ross Halket, executive director, automated systems division for SSI Schaefer, provides an example to illustrate that just because a business expands its product line, it doesn’t automatically require it to move to a bigger DC.

“There’s a proliferation of SKUs these days, so what used to be 2,000 SKUs is now 6,000 SKUs. And if you have 2,000 pick faces and that’s all you have space for, then you may look for another building.

“But we can also compress that footprint and put 6,000 SKUs into a smaller footprint inside the existing building. “So a lot of things need to be taken into consideration.”

Processes and technology

Planning a new DC shouldn’t just involve thinking about a new physical structure. It should also take into account new processes and procedures, along with the equipment and technology to support the new ways of doing business.

Markham, Ontario-based Jeff Lem, vice-president of viascan and president of its qdata subsidiary, says that when he’s speaking to clients about moving to a new DC, “the first thing I ask is, are you adding anything new that you’re not doing now in the current DC?

“If you’re going to shorter picks, smaller picks, or your unit of measurement is going from cases to eaches, that implies a whole new technology on top of that.

“What we try to do is look at the entity—what kind of technology platform can we put there?—and then build off that.”

Although it’s fine to start with your current requirements as the basis for a new DC—what you need to change now in order to make your operations run more smoothly—it’s imperative to think about the long term.

Richard Kaplin, architect and partner at Gross Kaplin Coviensky (GKC) Architects in Montreal, Quebec, says, “in terms of planning a building, we’re usually trying to foresee at least five years’ progress. Of course that’s not easy, but it’s what we try to get our clients to analyze.”

Expanding on that idea, Gord Smith, vice-president and general manager of Mississauga, Ontario-based Automation Associates, points out that the ability to expand and adapt to changes in business requires flexibility to be built into every aspect of the new DC.

Click here to read a quick summary of some of the newest DC design trends, as described by our roundtable experts.

“We talked about being about to expand from 2,000 SKUs to 6,000 SKUs. A lot of that can be software-driven, but it can also be the physical layout of the building, with the locations and the makeup of the bins. And then you have the information that the software systems bring into play, so you understand better what your facility is dealing with on a daily, monthly and yearly basis. So if you know what your growth plan is, and you expect your business to grow, you need to manage the ups and downs of your business. If you have flexibility in all the components then you’ll have a state-of-the-art DC. You’ll be able to deal with things as they occur.”

That includes being able to make your new DC work with business models that may not even exist today, or that are rapidly evolving. E-commerce and the demands it puts on a DC are prime examples of why a facility needs to be flexible, according to Lem.

Gord Smith, Automation Associates (RF Pathways)

He says a traditional retailer could be used to packing totes with dozens of items to send to individual stores. If that retailer decides to add an e-commerce component to its business and handle the processing from the same DC, then it’s probably expecting to alter its process to allow for orders of ones or twos. But that may not be the way e-commerce is done in the (very near) future. Free shipping and loyalty programs are altering the way customers shop online and that means the way their orders must be handled is also changing.

People

In order for a new DC project to ultimately be successful, it needs the right person driving it. Smith calls that individual the champion, the person who will take the time to learn and understand what the primary needs are and go to bat within the organization to ensure those needs are met.

There are no rules about who this person should be. It can be an internal executive, or somebody brought in from the outside, but the consensus of the panel is the champion should be somebody who knows and understand the needs of the DC, but also has experience in other areas of the business, so he or she can see how the warehousing operations fit in with the bigger picture. The champion also needs to be open-minded and able to listen to new ideas and approaches. Diplomacy and communication skills are also vital, as it will be up to this person to moderate disagreements between internal groups who want to prioritize the needs of their own business areas, and those who hold the purse strings and want to exercise control over the project. The champion also needs to be somebody who can work with outside vendors and who has the ability to trust the hired professionals to provide advice and do their jobs.

“I find that mistakes are made when vendors aren’t put close enough to figure things out for the company,” says Mazzetti. “They’re trying to figure things out for themselves but things get complicated and suddenly there’s a stairway in the wrong place or a beam is too low to get a truck through. I think once you’ve got to the point where you’ve picked your vendors and your experts, you really need to depend on them to talk to each other.”

Halket says that because of the sheer numbers of projects vendors and consultants are involved in, they have a level of experience that is hard to match. At SSI Schaefer, he says “we’ve been building a project responsibility matrix. It probably started off with 200 lines about 10 years ago. It’s now about 2,000 lines of the things you need to pay attention to, and it’s growing with every project.”

Knowing your business

Stephan Lauzon, KPMG

One of the major impediments to any DC build is not having accurate data or measurements of what exactly is done in existing facilities. While the perception is they have all of the information they need to understand and run their businesses, Lauzon says it’s often difficult for clients to put their fingers directly on the numbers, which makes it difficult for any partner in the construction project.

“We’re still struggling with getting the proper information. Companies handle tons of information, but they just don’t know how to pull it out of their systems. It’s not accurate, and that’s a very, very important part, especially since the base of any project is the data,” he says.

“It always stuns me. We’re in 2013, but when you ask for product information, they won’t even know if they have the dimensions for each case or skid. And if they do, they don’t know where it is. And if it’s there, they’re not sure it’s accurate.”

Location

Richard Kaplin, GKC

After deciding a new DC is necessary and exactly what its capabilities need to be, the next step is picking the right location. Undertaking a network analysis should result in a rough location or geographic region in which to begin a hunt for property, but that’s only the first step. The trick becomes narrowing the location down to the right municipality, as “each one has regulations that are going to affect things like the height of the building, the cladding materials, trucking access, and outside storage,” says Kaplin.

Picking the right lot is as important as selecting the correct municipality, and Kaplin says one of the most important features of land is often overlooked: the soil.

“The most important part of the warehouse is the floor, and the floor is only as good as the soil underneath it. We’ve seen lots of cases where people thought they were buying a piece of land and we found out it was soup underneath that couldn’t support the loads on the floors, so they’ve had to give up and find a different location.”

Other important things to keep in mind are access to skilled employees (and how easy it is for those employees to get to the location using public transit or their own vehicles), seismic stability, distance to borders, and access to Internet and communications networks, not to mention municipal services such as water and electricity.

Building design

Along with a floor strong enough to support both the inventory and whatever racking and automated systems are in the new DC, it’s important to get the rest of the physical structure of the building right. The roof and ceiling, in particular, can cause grief, says Halket. “It used to be about 120 percent of the wind load/snow load was available, because that’s just the way they built them. Now it’s so tight that I can’t hang anything from the ceiling. So if I want to hang something, I have to go into a big structure.”

Getting the equipment in the right place in the building is absolutely critical to having a properly functioning DC. That’s why Lauzon says the way a DC should be built is to start with the job that needs to be done in the facility.

“We usually start with the materials handling equipment or the distribution centre—not the building but the actual operation centre’s design. The processes, the equipment, whether it’s automated or not, that’s where we start and then we put the building on top of that.”

Ross Halket, SSI Schaefer

While it’s important to have a building that is able to support the basic warehousing and logistics functions, that’s not enough says Kaplin. A well-designed DC should take into account how the people working in it will want to use it.

“You have to deal with employee culture. You have to deal with the corporate culture. Is it a must-have to have a certain type of cafeteria, fitness room or daycare? Is that that a want-to-have? Is it a must-have to be LEED certified, or is it a nice thing?”

Kaplin says these decisions typically come from top company executives who have heard the feelings and input of staff members at all levels and have made decisions about what is really necessary in the new facility.

It also needs to comply with municipal codes and regulations. According to Kaplin, sometimes code requirements for things like emergency exits and fire ratings conflict with how warehouses need to be designed to function efficiently, so architects in charge of DC projects often need to produce time-movement or smoke studies to prove the building will meet the spirit of the code, if not the letter of the law.

There are also often practical details that are easy to overlook, such as accommodating IT equipment, says Lem.

Jeff Lem, qdata and viascan

“Whenever we go in to do an installation we ask if there is a proper server room, a wiring closet to put routers and switches. Because I’m always shocked it’s an afterthought. You go into the IT manager’s office at the DC and all that stuff is right next to his desk. And it’s hot in that room. It’s noisy and it’s not very secure to say the least. So I always plan for a room that can be locked down, cooled, and certainly big enough to hold some racking.”

Although the design and construction phase may not seem like the time to think about software systems and network infrastructure, Smith says it makes a lot of sense to do so.

“When you’re setting up your racking , we’d like to be in there setting up your network infrastructure, putting in your access points and planning your coverage.”

Smith says factors like building layout, the use of microwaves in or near the building, the DC’s power plan, and even the type of inventory being stored (and how it’s being stored) can affect network coverage.

Trends and innovative concepts

Staying on the cutting edge when it comes to DC design is fairly difficult, because of the quick spread of technology and concepts. Rain water and grey water collection systems are starting to become common. So are landscaped green roofs or roofs with solar panels and photovoltaic cells or wind turbines. Energy efficient HVAC, lighting and refrigeration systems have essentially become standard, and sophisticated management systems are being relied upon more and more to manage those components. Fast-charging stations are found everywhere. LEED certification has become a familiar process.

One relatively new trend starting to take hold is the building of taller facilities. Putting up a structure that’s 70- or 100-ft high often means rethinking the basics such as lighting or racking, but taller buildings tend to be more efficient and require less real estate.

The construction phase

In addition to understanding municipal regulations, it’s also import to fully comprehend provincial rules and restrictions involved in any construction project as they can limit what can be done and can also force additional, unwanted responsibilities on parties during construction. This is happening in Ontario, says Mazzetti, where the province’s Ministry of Labour is compelling some businesses to take on the role of constructor.

Gabe Mazzetti, Redirack/Konstant

“The general contractor might leave at one point and ask us, the trade, to become the constructor. It opens up a whole new can of worms and adds some more liabilities. And most vendors aren’t willing to take that on. And the client’s not crazy about it because there are all kinds of tradespeople there he doesn’t want to be responsible for. It’s something that can happen on a project that people need to be aware of. It has only come up in the last year or two, but it’s been a headache for us.”

Rules about unionized workers and skilled tradespeople also vary from province to province. Mazzetti says anybody involved in a construction project needs to keep a checklist detailing who is allowed to do what, just to ensure the project is in compliance.

One thing that’s important to remember during the construction phase is that projects don’t have to be completed all at once. They can be put together in stages, even if they are envisioned as a unified whole, says Halket.

“We design for the end state. So right now we’re designing buildings for 2020 and even 2025. But the important thing is not to build it all up front, because, inevitably, the business will change, as it has done with almost every client I’ve ever had. We have an end goal in sight, but we phase it in so the cap-ex is not huge up front and you grow into it and move dynamically into where the business grows.”

The big move

Planning doesn’t stop when the blueprints have been finalized. The act of moving into a new DC is no longer simple. Instead it’s an orchestrated process that needs to planned down to the last detail says Lauzon.

“The smooth move doesn’t exist” he says, noting that he is currently working with a client to plan a move that is scheduled for 10 months in the future. He says the client is implementing new software and that requires training for the staff and testing for the systems.

“In the manual world, you could do these big bang moves over a weekend. Hire one hundred temps and let’s go. Now, with technology, if you hire one hundred temps, what kind of handhelds are you going to give them? Because they can’t work manually, unless you have people key-punching everything they’re doing on paper. So temps aren’t an option any more. They are, but they need training and equipment.”

Budgets and money

While nobody wants to spend more money than they have to, Kaplin suggests being totally transparent about how much budget is truly available for a new construction project is the best approach.

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“Be honest about your budgets and expectations. I’ve found, too many times, often clients think that they have to minimize the budget that they’re allowing their consultants to work with to keep them under control. And what happens is they will often make compromises because they can only afford so much on that budget. And, really, they can afford more and they’ve got budget that they’re sort of keeping in their back pocket.

“During the construction or during the installation they say, ‘Well, I really would like to have that.’ Then they end up paying a lot more for it. So if they can be honest about their budgets and expectations up front, they have to trust that the consultants they hired know how to work with a budget and will give them the most value they can. Because it’s always going to be more economical to do something when it’s planned, not when it’s a retrofit.”

Conclusion

Above all, the common theme all panellists kept returning to was flexibility. Building a new DC is a chance to learn about new techniques, procedures, technology and equipment. It’s a chance to revise a company’s operations and improve its efficiency. But that can’t be done if people are locked into rigid ideas about what a facility should look like or how it should be built.

Working with experts—with vendors and consultants, architects and engineers—means their experience and knowledge is available for the benefit of the client. The challenge for the project leader or DC champion is to learn how to ask for an opinions, listen to the response and then consider the response in light of the business needs, and the budget. Taking that approach means the odds are much better the DC will meet the immediate and future needs of the company and be considered a success.

FROM THE SEPTEMBER 2013 MM&D PRINT EDITION