People often ask me: what is the secret to distribution centre (DC) design? I’m not sure that I have a secret to share, just logic, common sense, and experience (including a lot of mistakes on the way). However, I will share four design tenets that I’ve found useful and formed into the acronym FACT.
– is about ensuring that goods can be moved around the DC in an efficient manner. Easy? Not so!
For your facility to flow properly, there are six critical processes to cover:
- Inwards goods staging.
- Picking and packing.
- Outwards goods staging.
Depending on your business, there maybe two additional ones: returns and value-adding tasks.
Bottlenecks and double handling can occur at any one of these points, if flow has not been correctly addressed. How do you know if your flow is suspect? Symptoms include multiple handling of goods, waiting time, pedestrians mixing with forklifts, long travel distances to goods, and accidents.
In planning for optimal flow, it is useful to think ‘one way’, and to allow plenty of room for movement. Avoid giving in to the temptation of jamming storage into a building. If you do, you will more than likely suffer from excessive operating costs.
This is related to flow. It is critical that all products, in their various forms, e.g. pallets, UBC, cartons, units, litres, etc. are available when they are required. The rule here is: unfettered access to your stock. No blockages, hinderances or bottlenecks. Easy? Not so!
“Avoid giving in to the temptation of jamming storage into a building.”
Too often, operators find that the stock they need to pick is hidden behind banks of other items. Recently I was asked to review a timber yard that specialised in various sizes of timber beams. I noticed that all the same profiles were stored together, regardless of length (which were in 0.3m increments). So, when it came to picking two beams of 5.7m long for an order, the operator spent 42 minutes to complete the pick: 40 minutes to travel to the pick face, move all the other goods, and put them back, and only 2 minutes to pick the required two beams.
In terms of the pick to total time ratio, it is 2/40 or 5%. Only 5% when it should be 90%. In this operation, if we can improve accessibility of stock by providing more pick faces for the range of sizes, we have the potential to improve the ratio by 85%. That’s worth going for.
– is about providing enough space within storage modes, for current and future operations. Capacity is related to flow and accessibility – you might have guessed that by now. But here’s a mandate for you. Always provide for enough capacity to satisfy your storage and operational needs. Easy? Not so!
Consider an example that I came across recently. I was asked to review a DC that had outgrown its capacity, to the extent that stock was being stored in aisles and staging areas. This badly affected flow and accessibility. I was told that the DC had 10,000 pallets in capacity. To be sure, I checked, and counted all the locations. Yes, there was indeed 10,000 pallet storage locations!
But something disturbed me. This warehouse was in ‘gridlock’. They could barely operate, and moving pallets in and out required multiple movements. But there was something else: 250 pallets were stored in aisles and staging zones, and 9,000 saleable pallets were recorded as ‘in stock’.
My survey revealed a combination of storage modes, i.e. block stacking, drive-in racking and selective racking. Also, I noticed 150 pallets of returns, and 500 pallets of obsolete stock awaiting write-off by the accountant.
What is the capacity of this warehouse, and what would I advise my customer? Before I cover the maths, here a few truisms to consider:
- All storage modes have different utilisation factors.
- A warehouse cannot operate at gross capacity.
- Obsolete stock and returns take up valuable storage locations and detract from overall efficiency.
So, what is the capacity of this warehouse. My survey of the facility revealed:
- 1500 pallet spaces (gross) of block-stacking in 5 deep x 3 high configuration.
- 1000 pallets of drive-in racking in 3 pallets deep x 5 high configuration.
- 7,500 pallets of selective racking including ground-level pick faces in 5-high configuration.
Now for the maths. To determine capacity, we must consider utilisation factors associated with the use of specific storage modes. Then, we must discount gross capacity to net capacity – net capacity being the maximum that I would recommend to avoid gridlocked operations. Once we have done that, we deduct the non-saleable stock since these pallets are taking up valuable locations for saleable stock.
In this case, my customer has 1,525 more pallets in the facility than it can feasibly operate with. That’s what is causing gridlock, bad flow, lack of access, multiple handling and a capacity crisis.
What should be done to improve the situation?
Firstly, speak to the accountant and purge returns stock and obsolete stock as much as possible, redesign the facility considering alternative storage modes, and if necessary, move excess reserve stock off-site to an alternative facility.
Finally, never forget this truth: never, ever plan your warehouse operations on gross capacity. Only its net capacity.
Supposing we have flow, accessibility and capacity nailed. Our next focus is traceability. We must make sure that when stock is moved in, out and around the facility, that it is correctly traced. Easy? Not so!
“Logisticians, please do not forsake the physical, for expediency in recording electronic data.”
With volume increases, expanded ranges of SKU, batch management and use-by-date sequencing, stock management has progressively become more complex. To the point that without sophisticated management and recording systems, operators cannot guarantee accuracy of their operations.
Thus, it’s imperative that distribution centre operators invest in appropriate systems to trace and control stock.
These include radio frequency (RF) scanning equipment and/or voice and visual technologies.
Logistics processes will be different for each DC, but all processes should have a check and confirm transaction sequence tuned to the physical movement of goods. That brings me to the physical vs. electronic rule: physical processes have priority over electronic processes. In other words, design the electronic recording of stock movements to suit the physical process, not the other way around. Sadly, many systems are implemented by well-meaning, but often misguided IT people who do not understand physical logistics. Are you with me? Physical movement is where you burn your costs. Logisticians, please do not forsake the physical, for expediency in recording electronic data.
To recap, applying the FACT tenets, Flow, Accessibility, Capacity and Traceability, is useful to guide one’s thinking in reviewing, designing and running a DC. The outcome of good planning around each of these is reduced risk of gridlock, design flaws and excessive operating costs.
Mal is manager, consulting with the Logistics Bureau, where he works with local and international organisations to guide them in specification preparation, establishment and review of outsourcing contracts. He holds qualifications in engineering, business operations and logistics. For more information contact Mal on 0412 271 503 or email firstname.lastname@example.org.