Companies frequently need to make old, outdated facilities more efficient, particularly as a means of expanding capacity. This is not surprising. In todays financial climate, a brand new ware-house or distribution center can easily cost over $1 million. Consequently, nearly 70% of companies elect to try to revitalize an existing older facility when expansion is needed, rather than build a new one.
The payoff for a good plan can be immediate and very positive. Redesigns of existing warehouses can generate immediate improvements of 30%, 40%, even 50%, measured in terms of the number of items picked or shipped in a given time. Tremendous savings in labor and productivity almost always result from well thought-out redesigns.
It is very important to avoid major mistakes in the redesign due to inaccurate planning, bad data, poor communications and other factors. One company redid a facility that claimed to be picking an average of 87 cases/hour. In fact, they were really picking closer to 155 cases/hour. Eventually, they were up to 287 cases/hour, but these kinds of miscommunications caused problems and delays. Fact finding upfront is critical.
The key is mutual trust. The operations management and staff must be able to trust the designers because they will have to give them closely-guarded, real-world data. In turn, the designers need to trust the operations figures, because they will (literally) build on that data. The figures must be accurate if they are to design a facility that will be significantly more efficient and productive than the existing one.
Productivity Breakthroughs
The place to start is the locator and picking systems you will be using in the redesigned facility. This is determined partly by the nature of the products you are shipping (mops and buckets often require different systems than aspirins and tuna fish cans), partly by the needs of your customers and partly by your anticipated volume and velocity.
Will you be picking and shipping pallets of packages? Cases? Or does your business require that you piece pick? Will you pick directly to a pallet, or does your shipping plan require picking to a conveyor for later sorting by truck and route? Can you pick using a label on the goods, which permits use of a scanner? Is it possible for you to go to a paperless order picking system? These are the kinds of choices your warehouse redesigner will go over with you.
Another key is the equipment such as racks, shelving, conveyors and lift trucks. The choice of equipment for your redesigned distribution center is linked to the picking and locator systems you use. A majority of companies in older warehouse facilities today are likely using sit-down rider lift trucks or forklifts. These trucks are fine, but they are not always the most efficient choice to maximize SKUs in a facility. They can usually drive right onto the trucks to load pallets, which is an advantage if you can pick directly to pallets. But they typically require 12-feet to 14-feet aisles on the floor.
Switching to a standup, counterbalanced lift truck will still allow you to pick pallets, but you can cut down to 10-feet aisles, permitting more racks and more product. Reach trucks allow you to go to 8-1/2-feet to 9-1/2-feet aisles, providing more pick faces. Maximizing the SKUs in a facility can be achieved by using a turret truck. These versatile units can operate in six-feet aisles, and for safety, they usually move on rails or a wire guide that is embedded in the floor. However, you should have 30- to 40-feet high ceilings to take full advantage of the turret trucks capabilities.
Your material handling distributor should be capable of evaluating your entire lift truck fleet and making specific recommendations for each unit. If some of your trucks are not able to operate with the increases in throughput, it may make economic sense to trade them in and buy or lease new models in the interest of increased productivity. Switching to a new aisle configuration may dictate different models of lift trucks to take advantage of the anticipated productivity improvements. This, too, is part of your warehouse redesign.
Sharing Your Data
What information will the designer ask you for? He will ask you what types of products are currently picked and shipped, the number of cases picked and shipped in a single day under the existing system and the number of SKUs in stock presently. He may also want to know what types of locator and accounting systems you presently use. For example, a first-in, first-out (FIFO) accounting system suggests a flow rack up to 20 units or more deep loaded from one side and picked from the other, to properly rotate stock.
It would also be a good idea to share your future plans and growth with your designer. Many companies fail to realize that even with no volume growth, a companys inventory (particularly in industries such as food, pharmaceuticals and sundries) can see three to five new products added each month. Space must be allocated for this growth. In addition, warehouse redesigns are often sparked by new product lines and even by acquisitions. It is essential to know the planned acquisition strategy several years out in order to correctly plan a redesigned facility.
Figuring the ROI
How can the ROI for a redesigned warehouse or distribution center be predicted in advance? Each company must make its own calculations of ROI, but a few important facts argue powerfully in favor of redesigns.
Inventory turns are one of the key measures in calculating ROI, and virtually any redesign of an older distribution facility will significantly improve inventory turns, simply because of improved efficiency and productivity.
Equipment should not negatively influence the ROI calculation because these are capital expenditures, which will be depreciated.
The real savings will appear in labor costs up to 30% to 40% in most cases. Labor is a major component of operating costs, and these large labor savings will be seen almost immediately, within the first 90 days the new system is in operation. This will be a major positive factor in ROI calculation.
Establishing Goals
The material handling distributor/warehouse designer will have three key goals in trying to make your redesign pay off for you:
1) Be able to pick the same amount of product in less time with less people; 2) cover needs for current inventory, plus new product growth at three to five SKUs/month, exclusive of any acquisitions, expansions or new lines added; and 3) meet projected usage for at least five years, assuming there are no unforeseen changes.
If your distribution facility is meeting your current needs, and you have room to grow a little, youre in good shape. But if you anticipate running out of space soon, for whatever reason, get started on a redesign right now. The ROI and productivity improvements could make it one of the best business decisions of your career.
Harvey Levin is an allied product manager at Material Handling Supply, Inc. (MHS LIFT), a full-service material handling equipment distributor. For more information, call 888-MHS LIFT or visit www.mhslift.com.
