Consultants in Logistics

Warehouse Design: Planning for the Future

Warehouse Design: Planning for the Future

Optimum Warehouse Design - 7 Key Factors to Consider

  1. Operational Requirement: The number one consideration is to determine how the warehouse is to be used. Within most logistics operations the depreciation and funding cost, or lease cost, is usually a small part of the total annual operating cost. Labour, MHE and other operating costs are usually the most significant items.  The priority, therefore, is to design a building to suit the operational requirement with regards to receipt, storage, picking and despatch, as opposed to designing an operation to fit in a beautifully designed building that is not ideal for purpose. This means determining storage and picking requirements, loading docks, yard area, etc., and constructing the warehouse around the activities.

  2. Size: The size of the building will be determined by today’s requirement and planned future growth. Subject to the investment required, and the cost of transfer to a new site, the warehouse should support growth for a minimum of 10 years - possibly 15. It should always be remembered, however, that spare capacity is still incurring local authority rates, maintenance and utility costs and it is unlikely that renting it out for third party storage will cover the standing charges of the spare space. Careful consideration should therefore be given to designing a building that can be expanded when the space is required, minimising disruption to the existing operation whilst the extension is built.  This means giving considerable thought to the location of fixed structures including offices, loading docks, fuelling stations and vehicle wash, as well as future parking requirements and the capacity of site services (gas, water, electricity) in order to minimise both cost and disruption.

  3. Location: The optimum location of a warehouse for any given operation is a trade off between the costs of land, labour, and transport (both inbound and outbound), and service levels to be achieved. A labour intensive operation, where distribution is by parcel carrier, is likely to be better located in the North of the country where land and labour costs are lower and transport costs are broadly independent of location. A high throughput warehouse, using dedicated vehicles, is more likely to be located to minimise transport costs and for a national operation that would tend to favour a Midlands location. In addition to the area consideration needs to be given to road, and perhaps rail, access both now and in the future. Congestion is only likely to get worse, and half an hour added to each journey in a transport intensive operation quickly adds up. 

  4. Number: For many operations the number of warehouses required is self evident, whilst for others, for reasons of cost or service, this is not so obvious. Determining the optimum number, location and size of several warehouses can be highly complex, requiring advanced modelling techniques to optimise the tradeoffs between all the input variables including property costs, labour costs, MHE and transport. In addition, different configurations require different levels of stockholding and sortation and picking methodologies. Consideration can be further complicated in determining whether it is better to expand existing facilities in the future or to factor in new sites in complementary locations.

  5. Future Flexibility: Few operators know exactly what the future holds more than a few years ahead. Considerable cost and disruption can be avoided by implementing low cost investment now that might be advantageous in the future. Possible examples include strengthening the floor for installation of a mezzanine, preparing the ground outside a building for later installation of loading docks, installing electrical switch gear to support additional equipment, or installing sprinkler and fuel tanks that allow for the extension of the building. In addition to saving cost later, a key benefit is the minimisation of disruption when the operation is likely to be at capacity ahead of any future expansion

  6. Insurance An important factor in the design and internal fit out of a new building is the view of the insurers, consultation early in the process can avoid problems later. The view of the insurers will be particularly important with regard to such items as fire detection and suppression systems and sprinkler systems, design of racking, storage and mezzanine floors will need to take this into account. The need for ‘flues’ within the racking to allow for the penetration of water can increase the space required to meet a particular storage requirement.

  7. Funding & Disposal: Even for those companies intending to keep a building for the long term, it is desirable to have the option to undertake a sale and lease back on the property as a means of raising additional capital. Institutional investors have a clear idea of what does or does not make a building attractive, and it is strongly recommended that consideration is given to the attractiveness of the building to future operators. Low eave heights, limited parking space, poor location, poor access, lack of space for loading docks and poor energy ratings are just some of the factors that could limit the number of prospective operators that would be interested in the site and therefore its future value. Investing in items such as increased eave height, or number of loading docks, may not be strictly required but would make the building more attractive to an institutional investor or different operator.  At the same time, care should be taken to avoid over specifying. For example, items which may result in an excellent rating for sustainability could well discourage potential operators because of high operating costs. Green roofs, waste water recovery and louvred external blinds are just some examples of investments which future operators may see as ‘costly nice to have’ rather than economically justifiable.

Determining the optimum design of a new warehouse requires a clear understanding of the organisation’s development plan and competitive strategy, access to representative data, and the tools and skills necessary to evaluate all the alternatives.  Over the years Davies & Robson has helped many companies determine the optimum location, size and configuration of a warehouse(s) to meet particular requirements. 

To find out how we can help you, give us a call on 01327 349090 or contact us.

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