Opening a new fulfillment facility – whether it’s an existing building or build-to-suit (BTS) project - is an expensive and long-term commitment. Oftentimes, facilities do not open on time or within budget because of inadequate planning and conditions that arise. Issues such as construction delays and systems/automation testing lengthen the start-up timeframe and increase costs. We’ve helped a lot ecommerce, retailers, multichannel, wholesalers, manufacturers and service companies with opening a new fulfillment facility. We’ve also learned a lot in our 35+ years assisting clients identify strategic distribution objectives; develop fulfillment center requirements; perform site location studies; draw up budgets and plans; and manage projects.
We use the term “shortcoming” rather than “mistake.” Every company tries to do these tasks to their best ability. Here are 10 time tested practices we use to improve project success. Hopefully some of these practices will improve your new warehouse planning.
Resist the urge to go see warehouses and “analyze” buildings without detailed requirements. The longer the time horizon a warehouse needs to last, the more “iffy” and inaccurate the knowledge of what the business’ needs will be. Often, a warehouse does not last as long as expected.
Not only do you have to accurately analyze your current space needs if you are at capacity. But, you must also find a potential facility that meets a high percent of what is required to meet the company’s strategic multi-year growth and expansion goals. If suitable buildings are not available, then a longer-term strategy of build-to-suit (BTS) is necessary.
Here are some critical discussions to have within your company:
People often go out touring buildings and make “preliminary decisions” without requirements and a way to compare buildings. In the end, you may not remember details and make less than accurate judgements about a building. Identify all of the detailed space requirements first.
Often relocation projects get off to a bad start because a fulfillment team agrees to a plan and a timeframe with insufficient time to plan and move into the new facility.
Typically, for an existing building, it may take 12 months or longer and 24 months or longer for a build-to-suit facility from the contract date. This time includes detailed planning; layout and design of fulfillment floor; ordering and installing material handling and racking; planning the move; transportation of merchandise; and opening. Know your options for distribution center expansion.
Warehouse space is still at an all-time high occupancy rate. Many buildings, because of age, clear span, or layout, are less desirable.
Do research 6 to 12 months in advance of the lease signing. Realize you may lose the building if it takes management a long time to approve the project.
Management often puts constraints on budget and picks an opening date without detailed planning.
Have you assumed implementing a new system and opening a new warehouse at the same time? Have you factored in decreased productivity initially from new facilities and potential new employees and new systems? What overtime or temporary workers will be required to operate two facilities? How many trailer trucks are required to move inventory? What additional forklift and other equipment is required for two facilities? Who will manage the project and at what cost?
READ MORE: How to Budget for Moving a Fulfillment Center
Balance using Bureau of Labor (BLS) data with “boots on ground” interviews with other businesses.
We had a large ecommerce client do the appropriate BLS labor studies, but they never interviewed local businesses to get their input about the warehouse labor market. Soon after, they came to the realization they would have to pay $2.00 more per hour and make changes in benefits to be competitive.
READ MORE: Identifying the Right Labor Market for Your Distribution Center
Project management is the key to opening the warehouse on-time and within budget. Who in management has the time and experience to dedicate to this? Should you consider outside resources or a consultant? Another critical element is to develop a detailed warehouse move plan and update all stakeholders weekly. It takes a lot of planning and meetings to resolve problems and keep everyone informed.
There is nothing worse than opening a new center and immediately having inventory problems.
Here are a couple aspects to consider:
In this manner, the new facility can start with an accurate and stored inventory.
READ MORE: How to Move Inventory in a Fulfillment Center
There are hundreds of tasks and decisions involved when locating the best facility that you can afford; planning its storage and operational processes; and installing new systems and automation. More detailed planning and experienced project management are keys to opening on time and within budget.