Distribution and Materials Handling Focus: Our Weekly Feature Article on Topics Related to Distribution Management and Material Handling Strategies and Technologies  
 
 
  -March 25, 2008 -  

Logistics News: Is Design-Build for Distribution Center Automation a Smart Choice (Part 2)?

 
 

No, Says EnVista’s Jim Barnes – the Goal of Selling Equipment too Often Drives Recommendations; Look for an Unbiased Consultant Instead

 
 


This is Part 2 of our Point-Counterpoint series on the merits of “Design-Build” for distribution center automation. Design-Build refers to an approach in which a single firm does the design, engineering and implementation of an automation system, such as a Sortation system. In traditional approaches, one outside firm or the company itself does the design, and then contracts with another firm for implementation.

Last week, Gene Forte, Forte Industries’ president and chief executive officer, wrote about the customer benefits of Design-Build. (See Is Design-Build for Distribution Center Automation a Smart Choice?) This week, EnVista’s Jim Barnes says Design-Build usually doesn't work well for the client. What's your take? Respond at the Feedback button at the end of the article.

By Jim Barnes

There is difference of opinion in the material handling and industrial engineering consulting arena as to how to design a distribution center. Who is most qualified, and who can produce the best solution for a client?  For example, let's consider a distribution center that is a 450,000 square foot facility and is used to distribute merchandise to 100 retail stores. The prospective client is considering using an industrial engineering consulting firm that is focused on a solution design that is unbiased, versus the use of a Material Handling Integrator (MHI) whose livelihood is based upon selling and installing equipment. In some cases, the MHI will propose a “Design-Build” approach, taking full responsibility from design through implementation.

I’ll note the discussion below is not about “right versus wrong,” but “what works” for the client versus “what does not work.”

Let's explore the approach and differences between an unbiased industrial engineering consulting firm and a material handing integrator using Design-Build. The approach and methods by the two parties is based upon the end goal. Yes, both parties will explain to the client that their perspective solutions have the client's best interest in mind.

However, we will look at the metrics used by each party to determine the best solution for a client. The metric that is predominantly used by both independent consulting firms and material handling integrators to evaluate facility design solutions is Return on Investment (ROI). To paraphrase Elli Goldratt (author of “The Goal”), “Metrics drive behavior. Tell me how you measure me, and I will behave accordingly. If you measure me illogically, then expect me to behave illogically.”

(Distribution and Materials Handling Article - Continued Below)

 
 
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Equipment Often Drives the Design in Design-Build

Barnes Says:
The use of an independent consulting firm will allow a company to strategically plan and implement the most cost effective system where material flow and data flow are synchronized, ultimately producing the lowest total cost of ownership and positive ROI.

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There is a key distinction between independent consultants who have no affiliation with equipment vendors and who receive no compensation for their designs, versus a material handling integrator who has the main objective of selling and installing equipment. A material handling integrator's metrics drive the entire organization (sales person, design consultant, project manager) to design solutions in which the equipment (conveyor, racking, warehouse control system, sorters, ASRS, etc.) are the focus of the design.

Many MHI vendors have started process improvement consulting practices, or facility design consulting practices, as part of their total services solution. It is my experience that the MHI vendor will heavily discount, if not provide these services for free. Is it because the MHI vendor is a non-profit organization? Or is it because the MHI vendor would rather discount a solution design knowing that the forfeit cost of service can be overcome by selling equipment to the client where the profit is greater? The selling strategy is creative, but does it warrant the best and unbiased solution for the client?

In addition, are alternative designs and conceptual solutions free of bias? If your depository of services offerings were pick-to-light, conveyor and racking, and you had no experience with WMS or voice technology, would the MHI evaluate the latter? The goal of many MHI vendors is “to convert the facility design to metal,” as stated by former facility design consultant.

The design approach for both an independent consulting firm and MHI vendor are similar, but there are key differences during the entire design life cycle, in my opinion often to the disadvantage of the client.

The use of an independent consulting firm will allow a company to strategically plan and implement the most cost effective system where material flow and data flow are synchronized, ultimately producing the lowest total cost of ownership and positive ROI.

What’s your opinion on the merits of Design-Build? Do you have experience with the results – either way? Let us know your thoughts at the Feedback button below.

Jim Barnes is president of enVista, a leader in providing logistics and transportation cost management services.

 
     
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