Say no to space splurge
January 1st 2011

Logistics managers can sometimes be wrongly convinced that they need to expand their warehousing facilities to cope with demand.Martin Elliott, sales director of integrator Savoye UK, argues that in most cases, the rush to build new premises to create additional capacity is unnecessary

Ihad a conversation recently with a logistics manager that is not uncommon as we emerge from the grip of recession.

"We're really starting to see some consistent growth in our market now," he said. "And we're struggling to cope with demand at our existing warehouse.We've put off the cap ex decision for two years now, but the time is right for us to build a new facility that will double capacity and see us good for the next ten years." This is a story I have heard several times in the last year and one that usually leads me into a far more involved, detailed and fundamental conversation about the business, its markets, customers and logistics processes. Nine times out of ten, the conclusion of the debate is clear; the business in question did not actually need to invest several million pounds in a new distribution hub; it just needed to organise its existing system better or perhaps invest in some appropriate automation to improve efficiencies within the warehouse.

When faced with the question of warehouse expansion, it is easy for logistics managers to be seduced by the lure of bright new equipment, when a better understanding of the warehouse function is really what is needed.

In simple terms, a warehouse facility is there to complete a process and this can be analysed from three different perspectives: the amount of space taken up; the automation equipment used in the warehouse and finally, the human resources required to complete the task in hand. It's all about space, kit and people.

Any professional logistics consultant or warehouse integrator will be 'au fait' with the concepts of warehouse flow analysis, demand forecasting, value engineering and process mapping/simulation.Without a fundamental understanding of the warehouse process – where the costs are and where the value is added – it is impossible to make intelligent recommendations about the system. A good integrator will be able to show their client a plausible set of automation options that make clear strategic and commercial sense before making a final system recommendation. A poor automation partner will simply install the only system they have and try to make it fit with your business. That is why we see instances of inappropriate automation systems being installed when savvy salesmen have encouraged naïve logistics managers to invest in impressive technology that does not deliver business benefit or flexibility.

If we return to the recent conversation with the logistics manager of a UK drinks company, this makes the point clearer.

While we began our dialogue with the assertion that the "business needed automation" (in his words), after a site visit and basic process analysis, it became clear that that was not the case at all.

Our overview of their distribution depot highlighted the fact that the warehouse was not very well organised in terms of product flow and storage. It also did not employ many people to undertake picking and packing work as the volume of products being processed was not high.We recommended that the best option was to simply re-plan the layout of the warehouse so that goods in-flow was simpler and more efficient.We also recommended that more modern, high bay racking was used to improve the amount of useable warehousing space available.

Other than that, no other automation was required.

This project involved a relatively small total investment, compared to the several million pounds the planned extension would have required. Thanks to these relatively simple enhancements to the warehouse, efficiency was improved by approximately 10 per cent, with storage capacity increased by an impressive 25 per cent.

This more systematic and strategic approach to warehouse automation projects shows that often, poorly performing sites do not need automation, but an input of analytical rigour to really understand the process.We increasingly see the value of undertaking 'logistics audits' that provide an impartial and professional view of a business's warehousing operations. This more consultative approach is gaining much more credibility among the logistics industry, that is slowly coming to the conclusion that opting for impressive technology or expanding warehousing sites as an expression of corporate virility are no longer seen as sound management decisions.

There are plenty of sharp suited salesmen in the logistics sector ready to sell you the latest in automation that you may not actually need.Make sure you take the time and effort to get under the skin of your own warehousing function before you invest. Getting that kind of decision wrong can drag down your operational performance and take years to correct.

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