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Think you need a new DC?

Think you need a new DC? First, make the most of what you’ve got.

As a business expands, the time may come when it has outgrown its warehouse facilities and it decides that a larger or additional distribution centre is required. This is often categorised as a ‘nice problem to have’ as it is the result of success, and as such the project may swiftly gain board approval. However, if you find yourself in this position I would recommend taking a step back and asking whether you have really maximised the potential of what you already have.

Additional or larger facilities usually add cost and are often under-utilised initially. Also any such project carries a significant risk and it is very common for unbudgeted dual running costs to be incurred as the new operation takes longer than expected to function satisfactorily.

Does anyone really understand the capacity of the existing DC? Throughput capacity is a surprisingly slippery animal, as multiple constraints will apply, with differing units of measure – for example:

  • Inbound capacity is linked to vehicles that can be processed through the gatehouse, unloaded at the doors, pallet spaces in the inbound marshalling area, pallets per hour that can be put away
  • Outbound capacity is linked to picking congestion, outbound marshalling space, loading capacity through outbound doors, timing of vehicle despatches
  • Overall capacity is dependent on being able to store sufficient stock to support the required throughput level

Once the capacity is properly understood, a variety of measures can be used. For example:

  • Streamline gatehouse, unloading and put-away procedures
  • Make sure existing racking / shelving is being properly utilised and consider replacing or adding equipment to increase storage density
  • Employ outside storage during peak periods
  • Increase trailer ratio to allow more pre-loading and reduce pressure on outbound marshalling

There are many others, depending on what constraints are applicable. You should also consider changes that reduce pressure on the DC:

  • Work with suppliers to improve inbound vehicle fill and hence reduce number of vehicles to be processed
  • Consider origin picking for initial allocations and / or promotional lines
  • De-expedite stock receipts until closer to the point of requirement
  • Address obsolete stock issues and ensure inventory parameters are optimised

In summary, when it seems that you are outgrowing your distribution centre, treat this as an opportunity to review your supply chain and logistics operations – you may find that you can manage for longer than you think, and save cost into the bargain.

Note: It may be useful to engage external expertise as your own team will almost always be over conservative when estimating DC capacity. A good consultant will apply a step by step approach and work with operational management to create ‘buy-in’ and ensure changes can be implemented. They will also bring knowledge of what has been an achieved elsewhere, perhaps expressed through a simple indicator such as cases shipped per ft2per annum.

New Distribution Centre

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