Planning and building a new distribution centre
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.