Cliff Holste, Materials Handling Editor

Most agree that in general, distribution center operations are growing more complex, as the velocity  of product flow and scope of what is required to be executed in the DC continue to expand for many companies.

But can that DC complexity be measured?

It’s not an entirely academic question. First, an ability to measure DC complexity would perhaps help DC managers and logistics executives gain insight into distribution center requirements and corresponding strategies.

Second, that type of analysis might also help logistics executives better articulate to senior management why investment in new technology or other improvements may be required.

This might be especially so for Warehouse Management Systems (WMS) and other DC software technologies, where to a certain extent "tier 1," best-of-breed solutions are thought to best for “highly complex” DCs, and the ERP WMS module or less "state of the art: solutions perhaps appropriate for the more modestly complex DCs. An ability to pinpoint where a given operation is on some scale might bring some clarity to the debate.

As is usually the case, the analysis will be a matter perspective to a certain degree, and based on one’s own experience.

There are some interesting nuances when considering the question of DC complexity. To use an analogy, to the driver of an automobile, a manual transmission is more complex to operate than an automatic one. However, to the designer and mechanic, an automatic transmission is many times more complex than a manual transmission.

This analogy can also apply to a DC when you consider (from a DC operations manager’s point of view) a manual operation that needs hundreds of people to function compared to a fully automated operation that needs only a dozen or so. However, designing and maintaining an automated DC is considerably more complex than a non-automated DC.

It is relatively easy, as we list below, to come up with a list of DC complexity drivers, but the ultimate analysis or scoring approach based on these or a similar list is more challenging.

For example, the number of SKUs managed in a facility is one potential driver of DC complexity – but there are also many service parts DCs that handle 100,000 or more SKUs that are at best modestly complex because the turns of those SKUs and total DC volumes are often very low.

DC size is another variable, and certainly in general, the larger a DC, the more difficult it is to manage effectively. Still, a 1 million square foot DC that has relatively low movement velocities and involves mostly handling full unit loads will usually be much less operationally complex than a much smaller DC with high throughput velocities and more varied handling units (full pallet, case picks, each picks).

Having said that, below are the key vectors we believe contribute to DC complexity or lack thereof. This week, we simply offer our list of these complexity drivers. Next week, we will put them together in a type of complexity scorecard that readers can use to assess their own level of DC complexity.

Facility Throughput: The higher the throughput/velocity of DC operations, in general the more complex it is. This includes both unit/cases out the door and inbound operations.

Inventory Velocity: How fast does inventory in a DC turn, on average? The higher the inventory velocity, in general the more complex DC operations become.

Handling Unit Variability: Managing a largely “pallet in, pallet out” DC tends to be less complex than those handling a variety of units of measure. But even 100% “split case” DCs might be less complex than facilities that handle roughly equal mixes of pallets, cases, and eaches. Other handling units, such as “garment on hanger” or odd units such as “feet” of say cable, also add complexity.

Facility Size: For the same handling unit mix, the larger the facility, the more difficult it is to manage, especially in terms of worker productivity.

Facility Layout and Constraints: Those with straightforward, rectangular DCs with plenty of storage and dock space will score low on this complexity driver. But others are dealing with more oddly shaped or multi-building facilities, and/or are severely constrained in terms of space that may as a result require supplemental offsite storage, or simply lack adequate dock doors or staging space given throughput levels.

Number of Associates: Almost by definition, the more workers employed in a given DC, the harder it is to optimize those human resources.

Number of SKUs under Management: All things being equal, the greater the number of SKUs being handled in a DC, the more complex it becomes to manage.

(Distribution Article - Continued Below)

Hours of Operation: A single shift five days a week is easier to manage than a 7 x 24 operation. Other scenarios obviously fall in-between.

Number of “Channels” being Managed: If a DC handles a number of different sales channels that have important differences in fulfillment requirements, this adds complexity. The easiest example is a consumer goods manufacturer that must support traditional fulfillment to retail DCs and also the company’s own e-commerce channel.

Inventory Management Requirements: Does a DC have complex inventory tracking and allocation requirements, such as date code tracking and different date ranges for different customers? Or the need to manage inventory at an individual serial number level? Both and related requirements add complexity.

Value-Added Service Levels: The level of order customization and “postponement” type services in the DC continues to increase for many companies, adding greatly to DC complexity. Services can range from basic customer labeling and price ticketing to complex kitting requirements to light assembly and product customization operations that come close to being manufacturing operations.

Level of Automation: This is a tricky one, in that often automation is deployed to better managed DC complexity, but nonetheless automation adds a complexity factor, certainly in the level of software support and system maintenance required.

Returns Processing: Many DCs handle little or no returns, either because they simply have little returns volume, or because specialized or outsourced facilities manage the reverse logistics process for the company. If return volumes are high, this adds much complexity to DC operations.

Transportation Management Responsibilities: Some DCs have significant responsibility for planning and executing transportation plans. Others have this done by a central transportation group. But heavy management of transportation in the DC adds complexity.

There are certainly other factors that could be added, or but this represents a pretty comprehensive list of the most important DC complexity drivers.

Check back next week for a scoring system that takes into account these factors to build a total DC complexity score.

What would you add or change in our list of DC complexity factors? Would the ability to quantify DC complexity in some way be useful? Let us know your thoughts at the Feedback button below.

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