Ryan Zelnis, Principal Consultant, Supply Chain
According to the North American Industrial Forecast Report, the warehouse distribution sector will achieve a net absorption of 655 million square feet between 2017 and 2019. You may be one of the many businesses looking at moving operations to a new distribution center or even making new investments to your existing warehouse. But how sure are you that the investments you make today will drive the results you want in the future?
“There are many paths to both success and failure when it comes to creating a distribution center that will grow with your business,” explains Chris Elliott, supply chain consultant at Blue Horseshoe. “While it’s easy to get caught up in the possibilities, like the use of robotics and drones, you need to understand your existing state and the smart investments you need to make to future proof your distribution centers.”
To help you make smarter investments to make sure you have a distribution center that will grow with your business, Elliott offers the following recommendations.
Know Your Customers
Many companies are not aware of each customer’s value and they have a one-size model to serving them. Instead of trying an all-or-nothing approach, Elliott recommends focusing on the customers that will drive future growth.
“The customers bringing in the bottom 20% of revenue tend to cost you more with little ROI,” Elliott says. “The customers bringing in 80% of your revenue are the ones to focus your attention on.”
Our clients have found that these higher value customers are usually more loyal, willing to spend more and will advocate for your brand. It is common to see companies give these customers incentives such as free shipping if they spend over a certain dollar amount or free gifts with purchases.
Understand Your Organization’s Current State
Characteristics such as decision making, key performance indicators (KPI), motivators, and goals can make up a company’s DNA. Elliott suggests looking at your company’s goals and KPI’s as a starting point. On time shipments, order fill rates, and internal order cycle time are just a few of the most common KPI’s our customers have.
After using this information to lay out your company’s DNA, look at the data floating around the company.
“Is it siloed? Is it relevant? Who collects the data and where is it stored?” Elliott asks. “Data should be cleaned up, in line with goals, and relevant to the company.”
Streamline your data so that it can be accessed by everyone who needs it and start the analyzation process to find other data to collect in the future. Successful companies found that knowing their
DNA and important data helps them define a clearer path to the right DC design for the organization.
Define Your Future
Now that there is an understanding of your company’s current state, you can start to develop a roadmap for your future. Make sure to keep in mind flexibility, safety, and the future workforce.
“Add flexibility during peak demand by allowing for 20% extra piece pick locations and 15% extra reserve location to be open,” say Elliott, “design your facility ‘on wheels’ by making it able to change to fit future needs.”
DC’s should also be built with safety in mind. If there is a potential issue, break out the yellow guardrails and warning signs to protect warehouse workers. You never want to compromise employee safety so invest in this area whenever necessary.
With workplace norms changing, it is important to try to meet the need of employees. Many of our future thinking customers are building Mother’s rooms and wheelchair ramps to empower a diverse team of employees.
Evolve Your Processes
“Old isn’t always bad,” say Elliott, “instead of new a new facility, maybe a new approach is all you need. Analyze the supply chain or bring in an expert to identify bottlenecks and improve current processes.”
Use your employee’s firsthand experience by involving them in the identification of current issues. Look at different ways to change the layout of the current warehouse or new ways to train employees to be more accurate.
Elliott explains that if you are a food and beverage company, you typically do not want to store items with different expiration dates in the same place. This can lead to unutilized space if your facility isn’t organized efficiently. This would be a prime example of a time you could restructure your current facility to meet future needs.
Transform Where It Counts
To copy and paste the strategy of another company would be a waste of resources. Use the knowledge you collected about your company and its data to make decisions. Find platforms that will track KPI’s, metrics, and goals in a way that makes sense for your company.
Hire consultants to help you determine what should be implemented, updated, and added to the DC.
“Many try to solve problems with brawn but it’s the brain that can make the difference,” advises Elliott. “Invest in employee’s training and education. Work with them to drive innovation and push the company into the future.”
Questions? Contact Blue Horseshoe.