Warehouse Design Factors

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Warehouses and distribution centers do not function in isolation; they form nodes of a distribution network mapped onto the modal transportation system.

The location of each warehouse directly relates to market coverage and effective and efficient distribution system coverage.  Therefore, Location should be the foremost consideration in the design and construction of warehouse facilities.

As in most real estate decisions location is the primary linchpin in selecting and determining which property to select. It is very important to start the selection process by realizing that a facility's location performs one main function—getting a company close to its customers.  Next, companies should decide whether they need a stand-alone warehouse to serve nationwide demand, or want to complement an existing network with a new facility or a replacement for another facility. 

Companies should base location decisions on the dimensions of their customer service and cost objectives. Other overall objectives may include:  Providing a high service network, operating a low cost network, or designing a network that is superior to their competitors.  Most networks are designed to minimize costs within a given service objective.  Typically, warehouse network designers normally ignore competitors. Smart warehouse designers should note competitors' warehouse locations and service levels, and then design a network that provides better service, gain sales and market share as a result.

When designing a warehouse facility it is very important to understand the inter relationship between customer service and costs.  When designing a warehouse network, it is imperative for companies to understand what they need to serve their customers. Do they need high availability levels? Short lead times?  Or Both? Do they need warehouses close to customers? Will they increase sales if they improve service? Will they lose sales if a competitor provides better service?

Most warehouse designers cannot answer these questions clearly, and many don't even ask them. Not understanding the role of customer service can cause a company to over-design and over-spend on its warehouse design.  Warehouse network designing controls and impacts four primary budget areas: inbound and outbound transportation; inventory; facility costs; and labor. These costs fluctuate depending on warehouse network design, and should be accounted for carefully.

Once a company has determined the general location for a facility, it must decide between an urban or rural setting.  Typically labor costs will be less the further away from a concentrated populated urban area versus a rural area. Wal-Mart, for example, often locates warehouses in rural areas where labor costs are low. They sacrifice some transportation expense but can save a great deal on labor.

Collecting operations data should be the next step in designing a warehouse.  Database development is the most important part of any warehouse sizing and design process.  From that data, companies can model actual facility throughput, based on daily shipments and production/receiving cycles. Next, they can add a safety stock number to the throughput information in order to accommodate fluctuating inventory levels. The database development effort starts with identifying exactly what needs the warehouse must satisfy.  Reviewing the amount of anticipated shipments, both inbound and outbound should be determined, together with the characteristics of aspect shipments and warehousing.  From that data, companies can model actual facility throughput, based on daily shipments and production/receiving cycles.

Next, they can add a safety stock number to the throughput information in order to accommodate fluctuating inventory levels. The database development effort starts with identifying exactly what needs the warehouse must satisfy.

Companies should also assess what percent of shipments arrive by ocean container, full truckload, less-than-truckload (LTL), and package delivery. They also should consider the amount of air freight they pick up at the terminal, and how often they need to send an LTL truck to a consolidator to pick up less-than-container load imports.

Companies should determine how often they receive orders that are palletized and ready to be put away, versus shipments that need to be sorted and re-stacked. They also need to project requirements five to seven years into the future.

Projecting inventory levels is the most difficult task associated with sizing and designing a warehouse to meet future operating requirements.

Dock operation is another critical warehouse design factor. Dock capacity shortfalls can significantly constrain warehousing operations.  Key elements to determining the required number of docks and associated operating space include: arrival times of receiving and shipping vehicles; wait times; unloading and loading times; the number of SKUs handled; and breakdown and handling requirements.

One new trend impacting warehouse design is the desire to maintain environmentally friendly facilities.  A lot of companies are interested in 'green' or sustainable warehouse design.  Green requests include reducing the use of artificial light through skylights and clerestory windows; specifying white reflective roof material to reduce heat gain; and bringing outside air into the facility to improve indoor air quality.
The designs should address material flows, picking and storage modules, materials handling equipment, information systems support, building configurations, and layout.

After selecting the design, an evaluation should examine ROI, or other investment criteria, as well as practicality. 

Quantitative analysis should assess these elements: 

Flows. How well do materials move into, within, and out of the facility? Do bottlenecks exist in the process or a layout that restrict movement or throughput?

Picking and storage modules. Do the picking modules hold enough inventory to avoid excessive replenishment? Are the storage modules appropriately sized? Special consideration must be given when lot number control is an issue.

Mobile equipment. What are the right mobile equipment types and capacities for various functional requirements? Will the equipment handle peak requirements?

Conveying and sortation equipment. Does each zone have the right equipment and capacity? Will the system satisfy design requirements?

Staffing. How many people will be required to run the operation?

Capital budgets. Does the capital budget include facility-related costs, equipment, and information systems software and hardware?