Many distributors are sitting on their hands relative to making facility and operational upgrades. For some, their improvement projects were conceived before the economy turned sour. Now there’s the uncertainty of the economy that provides an excuse for doing nothing that requires capital spending approval. While they are waiting for just the right conditions, time is slipping by.

Before any capital project can be approved it must first be defined, and that process does not usually require capital approval. So, now that the economy is beginning to show signs of recovery, perhaps more distributors will be motivated to begin at least the defining stage of a DC upgrade/improvement project. That way, when funds are available they will be ready with all the required planning and paperwork to move forward and maybe get a jump on the competition.

Planning Your Way To A Successful Upgrade Project

To get the ball rolling, begin by considering how you can accomplish a facility and/or operations upgrade while at the same time continuing to pick and ship orders. No distributor can shut down completely for an extended period of time. However, by breaking the overall project into smaller more manageable parts, that can be completed between peak shipping periods, and by planning for a few long weekends and clever workarounds, flow and order processing interruptions can be avoided.

The key to having a successful upgrade project is to first develop a detailed step-by-step plan. The following are a few ideas on how best to do that:

Create A Current Facility Arrangement Layout

Start by measuring every physical aspect of the building, including the yard around the building, the dock doors, building columns and grid, offices and employee facilities, material handling equipment and system layout, rack systems, mezzanines and anything else that take up space, noting clearance heights and fixed in place obstructions (e.g., power panels, battery charging area, fans, ceiling heating and air conditioner units, drain downspouts, lighting, piping, emergency exits, etc.).

This information is then fed into an AutoCAD system to plot the current facility arrangement, from which you can calculate the facility’s useable cube capacity. By the way, don’t be surprised if you find (as in some extreme cases) that as little as 25% of building cube is being used for product and the rest is aisles, dock space and otherwise unused air space.

Most companies try to forecast and plan for 3 to 5 years out. The upgrade plan needs to take that information into consideration.

Evaluate Vendor Packaging

The idea here is to determine how well the product(s) that are received into the DC from suppliers (external and/or internal) fit into its carton. There is often an excessive amount of air in vendor cartons. Logistics companies can gain considerable storage space savings in total footprint of their facility by requesting or specifying more conservative carton sizes and/or configurations. Don’t assume that you have no influence over this important aspect of the supply chain.

Also, look at the pallets and cartons to assess how well the cartons fit on the pallets and the pallets fit in the racking. While in the racking system - check for honeycombing, and the amount of partial pallets stored in full pallet locations.

Assess Your Customers’ Needs

Another good approach is to step back and look at the building as if it were empty. Then consider what’s best for your customers. For example, think about how product should be sequenced and loaded onto the trucks to facilitate unloading, staged to make that loading scheme possible, packed to facilitate that staging, picked and staged for packing the order, and so on? In other words, go step by step back through the process to conceptualize the optimal flow based on your high value customer’s order and service requirements.

Digging Deeper

Some distributors look at product movement in term of dollars, instead of how often each item is accessed. Movement data should include sales of units, pieces, cases and pallets in order to identify the volume and item peaks and valleys. In this way you expose the true physical nature of the business – how often you have to go to a particular stock location. This analysis shows what kind of pressure the operation experiences during the study period.

In addition to order history, customer order profiles should be analyzed to determine whether orders typically comprise one line item, 100 line items or 1000 line items. Most DCs are a hybrid of two order types – large and small. This is often where you have the greatest opportunity for bottlenecks and pick/pack slowdowns. Therefore, it is one of the most important areas to optimize in an upgrade project. By re-slotting your inventory – locating stock items to reduce travel time and increase velocity – distributors can go a long way towards improving facility efficiency. If you compare an efficiently slotted DC with an inefficient one, most experts agree that you could see a 25% to 30% improvement in labor productivity.

Crunch the Data

The output of all this data is the basis for the upgrade plan. This plan should run the gamut from re-slotting the facility all the way to re-designing the flow, tearing out existing equipment, systems, outdated controls (hardware & software), and installing new systems where required, or perhaps adding a mezzanine in the free space over the receiving/shipping dock, and so on. It’s not uncommon for a company to consider several upgrade plans at once, and evaluate what makes the most sense economically and operationally, as well as short term and long term benefits.

Develop a Phased Implementation Plan

By breaking the project into smaller and smaller tasks, you will be able to think through where the domino effect of changes can be executed so that events and people can be scheduled without oversight. When you do this you come up with a step-by-step phased implementation plan. Using appropriate project management programs, you can create a detailed project plan, assigning resources to each step, and determining the linkages and interdependencies between steps. Depending on the scope and complexity of the project, a full-time dedicated and experienced Project Manager may be beneficial.

Final Thoughts

By touching on all of the critical planning bases you will have a better understanding of the details involved in implementing the project along with having a good handle on what the real benefits are going to be, thereby improve your changes for project approval.

However, no matter how well you plan, problems invariably arise. Be sure to let your key customers know upfront what you are planning and what the expected benefits are. That way they can plan for potential hiccups and there will be fewer unpleasant surprises.

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