Conserving Capital in a Clever Warehouse Design

July 14, 2017 BY Charles Fallon

Warehouse Design

When it’s time to revamp your operation, how do you figure out the right warehouse design plan? In this case study from a LIDD client, Charles Fallon shares some of the important factors to consider.

The Situation – A liquor distributor had been operating from the same distribution centre since the early 1980s. Decades later, their business model had changed dramatically and with it the SKU base grew from 2,500 to 17,000. Shipping volumes had also grown year-over-year with no end in sight. To manage this growth, the distributor began with a single outside storage facility, but this soon became three outside facilities feeding the original, main DC. Operating costs were out of control and the complexity of coordinating inventory in four locations had become a major service risk that left customers unhappy during peak shipping seasons. The distributor knew it was time for a new distribution centre and turned to LIDD for the solution.

Issues & Decisions – When you embark on a new warehouse design, you must begin by understanding your needs. Those needs come from modeling your warehouse space requirements in great detail and projecting those requirements into the future. Those requirements must be expressed in terms of throughput, variety and storage.

Most distributors have a wide variety of material handling system options that can be reasonably applied to meet their needs – from conventional designs to mechanized or fully automated systems. Each approach can meet the warehouse requirements with different capital and operating cost outcomes, as well as different risks and human resource considerations. Site availability and configuration can also play an important role in defining the right solution.

Finally, many distributors underappreciate the critical links between IT capabilities and warehouse design. This can create a bias towards a particular design solution.

The Results – Our new supply chain design came after a careful look at all reasonable technologies, including fully automated “lights-out” systems. Our recommendations came with one surprise for the client: retain use of the original, main distribution centre to house slow-moving product and cross-dock that product for consolidation with fast-moving product that the distributor would stock in the new distribution centre. We recommended the re-purposing of the original distribution centre in recognition of the fact that while the facility had value as an operation, it would be difficult to dispose of the asset. Therefore, its greatest benefit would be to reduce the capital needed to build the new facility.

Interested in learning more? Download LIDD’s eBook Infrastructure: Supply Chain’s Missing Linkto read about how key infrastructure assets drive operational performance.

Supply Chain Infrastructure