Whether you’re orchestrating a move to your own fulfillment center, or a different 3PL facility, the process is time consuming. There are many details and logistics to consider and plan.
Moving your fulfillment center is disruptive change. Many people have problems dealing with change initially, even in the most organized businesses. Developing plans which all the stakeholders collaborate on and buy into helps minimize lost employee time and focus.
Here are six task categories you should consider in developing your fulfillment center move plan:
1. Develop project plan and budget
Develop a comprehensive project plan and establish realistic dates for the tasks involved with the move. Task dependencies become extremely important.
Develop a budget for labor; capital (e.g. racking, conveyance and automation) and one-time costs (e.g. fully loaded inventory move costs) to open the new facility. For most companies, it is not realistic to reuse existing MHE and racking from an active existing facility. Other assets like forklifts can be rented until the old facility is shut down.
The fully loaded cost of the move may surprise you. Even for a 15 mile trip, the cost of transportation, loading costs from existing facility, unloading and put away at new facility, overtime costs, contingencies, etc. might average between $200 and $300 per load. There are only 24-26 single stack pallets per trailer truckload. Large facilities require hundreds of loads to transport inventory.
2. Communicate with customers and all stakeholders
Establishing a reliable opening date during the planning process is essential. Make a list of all parties that need to know about the new facility including suppliers, manufacturers, common carriers, expedited shippers, the phone company and USPS, to name a few.
If your business is direct-to-customer, you’ll need to tell the customer where to send returns. This necessitates changing the website and the return instructions that may be on the shipping documents.
If you also have a wholesale channel, communicating with customers will be important so they understand the new shipping point and any changes that you have implemented which could affect their order processing and IT systems. Are there any dates where service will be suspended? Is there any new contact information? Are there changes in systems or processes that need to be communicated? If the opening date has to change, communicate this as early as you can.
3. Plan sufficient time
With smaller footprint facilities, it may take only a couple months. However, for larger facilities with complex operations, it often takes six months from when the landlord gives you access to the building. The facility may need some adjustment in terms of lease hold improvements, racking and material handling equipment. New conveyor systems and automation are often on an 8 to 12 week delivery timeframe minimum once the design is completed and purchase orders are written (which can take 4 to 6 additional weeks). This does not include installation and testing of conveyance and automation.
4. Overlap operations and expenses
For some period of time, you will have two facilities operational. Early on, a skeleton staff may be in the new facility. Later on, they are needed in closing up the old facility. What contractual obligations do you have for totally removing the old racking and automation, and emptying the facility? What additional payroll dollars for overtime or temporary workers will you require? Will you need to pay bonuses to ensure workers stay until the end?
5. Plan for lost productivity
Evaluate how much time will it take to get the new facility up to its target goals. This is often a cost – an operational issue – that isn’t considered in the planning process. For a large new facility and new employees, it might take six months or longer.
6. Consider inventory practices
You want to move as little inventory as you can to the new facility, considering the costs above. Best practice is to allow sales and inventory turnover to run down inventory positions. Determine what date you can write purchase orders to vendors for new product deliveries to the new facility.
New facilities often start out with inaccurate stock counts. In terms of transferring inventory, perform a physical inventory. Map out the new facility’s storage and identify where each SKU is going to be put away. Try to not create mixed boxes of SKUs. Palletize and identify the new stock location; don’t move loose cases of product. This is the most accurate way to move the inventory.
Accurate planning of these six categories ensures success when moving a fulfillment center. There will be dozens of tasks and dependencies required to efficiently move in, control costs and manage risk to the business with least lost time and disruption.