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DC Designing the perfect.

From warehouse management systems to material handling equipment, here's what it takes to design a distribution center for today and going forward.

The mission seems simple enough: Get product to the customers when, where and how they want it. The objective appears a little more daunting, however, when it becomes what it takes to complete that task. Classic warehousing--receive, store and ship--is in danger of going extinct, as distribution centers have evolved into an integral piece of the supply chain, designed to manage the integrated flow of product. And with SKU proliferation, product customization, more frequent orders and just-in-time inventory demands, this process has become ever more complex. Indeed, without the proper warehouse from which to move items fast and accurately, getting product to the customer could easily turn into Mission Impossible."

"We're getting a lot more calls from into people in the grocery industry for high-end warehousing," says Steve Simonson, managing principal for Tompkins Associates, a Raleigh, N.C.-based warehouse design and operations consultancy. "1 design they're becoming interested because they feel the pressure. It's not just about forklift trucks and pallet racks anymore. You really have to look at your overall system in order to compete."

While no two companies have entirely similar goals or the same corporate strategy, operating a streamlined distribution center depends in large part on a few key components working in harmony to ensure efficiency. From warehouse management systems and material handling equipment to picking technologies and dock areas these components must be given considerable attention when designing a facility that's not only effective, but will sustain future trends and technology advancements.

"One of the biggest challenges in designing a facility is ensuring that the design is current," says Mike Umano, senior vice president of global sales, CS Integrated LLC, a Liberty Corner, N.J-based operator of refrigerated warehouses and distribution centers. "In most cases, the information that you used to design your warehouse is one to 2 1/2 years old by the time design and construction are completed and the warehouse is ready to open. We try to maintain some level of flexibility in our design as well as providing for convertible space."

Doug Pope, distribution specialist with The Facility Group, Smyrna, Ga., a distribution planning, engineering and construction company, agrees that the facility design should be flexible enough to handle today's requirements but be able to "accommodate the changes in products, services and handling methods that will be required in the future," he says. "Trying to anticipate how a DC's supermarket is going to evolve over the design life of the building, and how those changes at the store level are going to impact distribution operations is crucial to the design process.

With the increased speed at which inventory must move these days, sound material handling and automation systems are also fundamental parts of the DC and will become more so in the future. According to Simonson, taking cost out of the grocery store and putting it into the warehouse is one way a company can achieve more efficiency, and investing in automation offers a good start. "Material handling is going to get a lot more critical. Most grocery warehouses I've seen aren't highly automated right now. Increasing automation is going to give you more flexibility and more power to service more stores efficiently," he says.

But deciding to automate today for the future may not be economically feasible, notes Rich Schieler, principal and director of material handling for St. Onge, Ruff & Associates, York, Pa. "Flexibility to change the layout as the world changes while minimizing investment dollars that can't be economically justified with today's business model is always a big challenge," he says.

And with so many different systems from which to choose, how does a company determine what equipment would be most effective for their operation? Ed Romaine, director of marketing and e-commerce business development for Remstar International, a material handling supplier based in Westbrook, Maine, cautions that no one technology is the solution. "You have to look at your business and match the material handling equipment with your business objective. The automated system depends on the amount of SKUs, the velocity, the amount of orders, the size of the facility and the budget," he says.

Information technology systems have had a significant impact on warehousing in recent years. Whether it's the implementation of a warehouse management system (WMS), enterprise resource planning system (ERP), transportation management systems (TMS), stand-alone software components or Web-enabled programs that link partners via the Internet, the technology to manage and "see" product flow as it travels to and from the warehouse through the pipeline is becoming more of a requirement and less of an option, say observers. "The biggest effect of B2B e-commerce on the warehouse in the future will be supply chain synthesis," says Simonson. The incorporation of supply chain execution systems will increasingly link suppliers, growers, food manufacturers, distributors and grocery chains together, he notes. "That's going to facilitate a lot more turns and a lot more cross-docking to get product through the supply chain quicker while reducing costs," says Simonson.

Pope agrees that the implementation of information systems helps create a more effective cross-docking operation. "The ability to utilize the various forms of cross-docking is the end result of sharing information between stores, distribution centers, the marketing function and suppliers," he says. "The better the flow of information, the more cross-docking becomes a viable handling technique with less investment."

Reducing the amount of manual labor needed for basic transactions is among the goals of many of these information systems. "The holy grail for everyone is complete automation," says Steve Broadway, vice president of market planning, Esker Inc., Stillwater, OkIa., which offers a software package that automates back-end processes. "But that's still years away. We focus mainly on what we consider the weakest link-because if you're not involved with EDI, you're printing and mailing or faxing the documents to move goods."

Greg Drevs, senior sales consultant, distribution sector for IBM Retail Division, Raleigh NC., sees a beginning trend toward Web-architected WMS technology. "What this allows is visibility of the entire supply chain, Not lust of all the inventory, but of all the processes," he says. "You have companies that are linking their internal processes and external processes, creating a personalized and secure portal directly from the WMS to your supply chain partners and your internal sales as well."

Stanz Foodservice, a South Bend, Ind.-based distributor that operates a 100,000-square-foot warehouse, uses a Web-based system called PowerNet, from Integrated Distribution Solutions (IDS), Omaha, Neb., to enter and maintain orders via the Internet. "We're finding out that more and more people are comfortable using the Internet," says Mark Gaddie, vice president of information technology for Stanz. "They go in and get their accounts receivable or track usage based on specific vendors, dates, etc. There's also less training involved with an Internet package because it's browser based, and they don't have to learn some proprietary system."

Stanz has been using PowerNet for about a year with much success. "We've heard good comments from customers," Caddie notes. "They like having the control of placing an order when it's convenient for them rather than whenever a salesman shows up at their door."

In addition to PowerNet, IDS offers 12 different power modules that utilize varying depths of technology, which must be added to its base IDS ERP system. "Labor is probably one of the biggest expenses for any distributor. If you can streamline that and optimize warehouse tasks, the power modules help improve productivity," says George Marin, chief operating officer for IDS.

Just as the warehouse has changed over the years, so too has the role of the shipping and receiving dock. Tight inventory demands placed on how products are received, turned around and shipped have made the dock area a hotbed of activity. "The most valuable piece of real estate in your entire warehouse is your dock area," says Thomas L. Freese, principal, Freese & Associates Inc., Chagrin Falls, Ohio. "Nothing happens within your operation without passing through the dock area. Unfortunately, loading docks receive at best only token consideration in most layout and design efforts."

According to Freese, today's docks must be designed with more flexibility and efficiency to accommodate an increased number of items and types of shipments. While the dock area is a fairly low-cost investment, maintenance costs can add up. For example, dock doors often result in costly repairs when they're damaged by equipment. Installing a tough dock door is one of the best ways to keep maintenance costs down at the dock. "Nothing beats up a door faster than using a forklift to pry the thing open," says John Mays, warehouse maintenance supervisor for Spartan Stores' distribution center in Byron Center, Mich. "We started using TKO Doors on the dry portion of the warehouse and liked it so much we asked them to come up with a version for cold storage."

The future of warehouse design will depend greatly on the trends prompting changes in the way product moves through the supply chain and how companies react to those transformations. The trend toward industry consolidation is expected to play a role in the size and number of distribution centers as DCs begin servicing more stores from one warehouse. Companies will also begin using more third-party logistics providers to accommodate the increasing number of items and speed and frequency with which those items must e delivered.

"Stores are trying to differentiate themselves by offering a lot more SKUs," says Simonson. "And they want all the product out on the floor on a timely basis because they don't want to warehouse it." That puts much of the onus on the DC, says Simonson, and will ultimately force them to become larger. "I think you're going to see the size of the warehouses increase. The amount of technology inside it will also increase in order to accommodate all of the customized SKUs." Simonson points to Wal-Mart as an example. "As everyone knows, Wal-Mart is moving heavily into grocery, and they have a very good distribution and logistics system. This is going to put a lot of pressure on players in the grocery industry to up the bar going forward," he says.

Richard C. Kappmeier, senior vice president of market services for CS Integrated, believes that while future warehouses will look primarily the same on the outside, the inside will be quite different "The impetus in the industry is for less inventory, turning faster, with smaller, more frequent shipments. Therefore, the facility design will include more one- and two-deep selective racking, more clock doors, RF infrastructure and will be as energy efficient as technology allows."

Many distributors have begun incorporating voice-directed logistics systems in their warehouse particularly to improve picking accuracy. "The are three main companies that offer voice-based logistic--Voxware, Vocollect and SyVox--and a lot of people are testing it out in there warehouses. Voice-based applications allow you t leverage radio frequency technology in the warehouse by moving instructions to the labor using voice and getting a response back in voice," says Drevs, who notes the system has improved reductions in case-pick error by between 75% and 90%.


Before the facility design is put to paper, before the. concrete is poured, before the steel rods are erected, the site for the DC must be selected. What's involved in selecting a site? More than you might imagine. "Site selection is probably one of the more important elements of putting up a DC," says Tom Schroyer, president of Claycorp Inc., the real estate subsidiary of Clayco Construction, St. Louis, which handles all of the site selection and construction for the distribution facilities of Save-A-Lot. "When we're out looking for facilities, we usually look in a multi-state region and at virtually hundreds of sites that eventually get narrowed down to one site in one community."

According to Schroyer, there are a few critical factors for determining the best location. For example, Save-A-Lot is concerned about the community in which it operates. It's not only important the community wants Save-A-Lot's corporate presence, but that the community offers the services necessary for making a long-term commitment to that area. Those services may include having a good fire department, police department and solid school system.

Logistic demographic is also important when considering where and how a site is selected, says Schroyer. This includes factors like trucking distances, access to interstate highway systems, trucking costs and routes to supply chain users. Workforce availability plays a key role as well.

Other critical considerations include site demographics, which involve factors like the availability of proper utilities and the configuration of the site. "The configuration of a site becomes important when considering the possibility for expansion and environmental issues we need to be cognizant of like wetlands," says Schroyer.

And then there are cost considerations. Land costs, real estate taxes, equipment taxes, sales taxes and inventory taxes--which are required in some states--must factor into the decision. Utility costs weigh heavily for food distribution facilities, which often require high electricity usage to operate freezer/cooler facilities. "Once the building is built, probably two of the biggest costs moving forward are taxes and utilities," says Schroyer.
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Publication:Grocery Headquarters
Date:Oct 1, 2001
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