The purpose, and consequently the requirements, of every warehouse will differ. Any guidelines should be viewed as variable building blocks not as fixed rules because demands will vary depending on circumstances and the environment.
Identify a competent logistics consultant
Unless you have great expertise in-house you need to identify a consultant to help walk you through the development process. The consultant will provide an analysis of your situation and outline available strategies, technologies and infrastructures that are relevant. An awareness of best practices in your area of operation is vital to making the right competitive decisions, and an examination of alternate approaches could provide useful insights.
If the consultant gives you imperfect advice, it will result in substandard facilities. If the consultant gives you good advice, you will have a world-class facility that will give you a competitive advantage.
The choice of logistics consultant should be based on the consultant’s experience, for example, how many facilities has the consultant built for companies in your industry; does the consultant have the right expertise in your industry; and does the consultant’s corporate culture match that of your company.
Cost should not be viewed as the driver, as the logistics consultant costs will be only a fraction of the development cost. Rather be prepared to pay for the best – as it will become a significant saving downstream.
If the decision is taken to undertake the development in-house, and therefore a consultant is not required, ensure you have people with real skills and broad knowledge so they can reduce risk and optimise operations.
Review the business strategy
Before taking the decision to build anything, it’s important to look at the company’s overall business strategy and ensure that the way your business operates is logical and efficient. It serves no purpose to build a ‘shiny new facility’ if the company does not have a clear, balanced, long-term business plan that makes sense.
Be clear about why you want a new warehouse. Will any new facility improve your service to your customers? How will your customer benefit? If you cannot clearly improve customer service, you should not embark on the development of any new facilities simply for the sake of creating something new.
In parallel with the development of a logical business strategy, you need to undertake a short (under five years), medium (3-7 years) and long term (five-15 years) projection of the business. The development of a new warehouse facility is a long-term project and you need to make a best guess at where the business is going and couple this to the projected design of infrastructure.
Typically a new warehouse should offer a service period of 10-15 years. Initially, the warehouse should be fitted out for at least five years and allow for a re-fitment in 5-10 years. Medium to long-term projections are an essential element of the decision-making process.
Constraints
This is a good time to examine the constraints that limit the potential of a business. Typically questions that need to be considered include: will the new facilities eliminate bottlenecks and help grow the business; what constraints can be eliminated if the new infrastructures are developed; and how does the existing infrastructure need to be modified to remove constraints?
At this point it is also essential to carry out a complete risk analysis. Some of the questions that need to be considered include: what happens if growth targets are not reached; what happens if growth is greater than projected; what happens if the market changes; what do we do if there is government/local instability; what if the rand appreciates/depreciates; what if we acquire another company; what if another company acquires us; what will happen if we have a major disaster at the new facility – what will happen to our business; how will the new facility affect labour/operational stability; are we placing all our eggs in one basket – and should we be doing this?
Own or outsource
Should the company own the new facility? Should a developer own it and the company rent it from the developer? This is highly dependant on issues such as:
• Corporate policy (does our company own warehouses?)
• Cash flow (do we have the resources to pay for the facility or borrow the money?)
• Planning horizon (for how many years does the company require the facilities?)
• Length of time for go-ahead and approvals (if we own how long will it take to get approvals?)
• Local risk issues (do we want to own in the local environment?)
• Local market stability (how stable is the local environment?)
Best location
Along with all the strategic planning, it is necessary to determine the best location for the new warehouse. A number of considerations will apply, including: availability of industrial land, which is becoming a major hurdle in developing new facilities; distance to customers; distance from supplies; distance to port or rail head if relevant; stability and quality of local labour; security in the local environment; local freeway and roads infrastructure; road congestion; access by workers and management and transport infrastructures to facility; local services, such as electricity, water, telephone, power, sewerage, banks and post office; local rates, taxes and levies; attitude of local authorities; local tax benefits; ability to get planning permission; and local environment, for example, pollution and weather.
Understanding processes
To develop any warehouse infrastructure, it is necessary to understand the existing operational processes and project these into future processes. Here one analyses business needs in terms of: service, inputs, outputs, customer profiles and storage needs; transport; reverse logistics; controls; security and quality.
It is important to understand the macro and micro processes and project these into the future. It is also important not to simply continue with existing processes, but to also optimise projections to ensure future operational effectiveness.
Once there is an understanding of the strategic purpose of the new infrastructure, its operations, its best location and the nature of what has to be built, sketch designs of the new facility need to be created to understand the size of the new facility and the land requirements, and the costs that will require funding.
The aim is to roughly develop the infrastructure requirements to project an overall appreciation of the business needs and confirm strategy, location, infrastructure, and the many other factors that will inevitably arise.
This phase is developed by the logistics planner rather than the building team. It is at this stage that frequent brainstorms of the infrastructure designs will create the initial operational processes.
This allows an examination of alternate technologies and operational methodologies that will optimize building operations, equipment choices, support services, operations, life-cycle costs, and customer responses.
Procurement of land
Once the design and the shape of the development, as well as the optimum location, have been established, the land on which the new facility will be established must be identified and procured.
A number of factors must be evaluated when considering buying land:
• Shape: the shape of land must be right for the facility to be built
• Slope on site: excessive earthworks can cost more than the land and it is uneconomical to optimise land costs if earthworks become prohibitive
• Soil conditions: bad soil conditions can substantially add to building costs
• Access: easy access to the site is essential to facilitate moving goods in and out of the facility
• Building lines and servitudes: servitudes can carve up what could have been an excellent building site
• Rates and taxes: excessive rates and taxes can make a given piece of land uneconomical
• Zoning: the identified building site must be zoned, or easy to zone, or development could be delayed even for years before it is useable.
The professional team
Building a warehouse requires a large number of professionals who do the detailed engineering of the facility. A thorough selection process is essential, based on the skills each one brings to the project.
Project manager: manages the project and controls the development
Land surveyor: determines the boundaries and site contours
Soils engineer: evaluates the ground and founding conditions
Civil engineer: manages earthworks, roads, foundations, concrete, drainage and much of the structure
Structural engineer: responsible for the steelwork
Environmental engineer: monitors environmental impact assessment development
Architect: designs offices, sets out plans, develops a site development plan, submits plans to the local council, details much of the infrastructure
Quantity surveyor: controls the project finances
Electrical engineer: designs the electrical reticulation, alarms, CCTV and access control
Mechanical engineer: designs ventilation and air-conditioning systems, and other mechanical equipment required
Fire consultant: designs sprinkler/fire systems
Space planner: lays out and designs the offices
Materials handling engineer: designs the materials handling infrastructure
Landscape architect: designs gardens and landscapes the site
Legal adviser: controls any legal documentation
These professionals need to be managed, guided and controlled. This is the task of the project manager and, as a result, the choice of the manager and the team is core to the success of the project. For warehousing projects, the project manager may typically be the logistics consultant or the architect. For larger projects, a specialist project manager may be required.
While the cost of all professionals is high – 10-14 percent of the project value – poor decisions by these consultants can lead to major cost increases and the provision of incorrect or inadequate infrastructure for the business needs. It is essential, therefore, to identify and appoint the best-suited consultants to ensure the best end facility. However, high fees are no guarantee of good design; expertise is the key to success.
Detailed design
The detailed design of the facility is undertaken by the full professional team working in unison. This includes the full development plan on the chosen site, which enables an accurate costing to within about 5 percent.
Once designed, the supply of the infrastructure is put into the marketplace. This is usually implemented by the quantity surveyor in the form of a bill of quantities on which suppliers tender.
The submitted tenders are evaluated, and usually shortlisted. The lowest tender may not be the best offer and tenders need to be carefully examined to determine who makes the best overall offer, in terms of price, reliability, quality and reputation. Finally the main contractor and sub-contractors are chosen.
Implementation
Building and equipping the facility is relatively simple – if proper planning has taken place. Ideally, all resources are brought together in a well-planned process to ensure a high quality facility is implemented. In parallel with the development of the buildings, equipment and services, it is necessary to create a world-class warehouse management system (WMS). This may involve the upgrading of the existing enterprise WMS or introducing a new best-of-breed ‘free-standing’ WMS integrated into the enterprise network. The WMS typically requires a long planning and implementation process and is key to achieving operational efficiency.
Changing organisational culture
Perhaps the most difficult task in the creation of a new facility is to change the organisational culture and attitude towards the new working environment. There is a need to train, educate and manipulate personnel to ensure all staff will embrace the new facilities and operations. This may require appointing some new personnel and/or replacing some existing personnel. This is a delicate matter that requires expert management, and may even require bringing in an independent consultant.
Commissioning the facility
Once the facility has been equipped, the WMS installed, the staff trained, and all the services put in place, the facility can be commissioned. This involves an extensive planned process, and if properly implemented, can run smoothly and efficiently. If poorly implemented, the commissioning process can lead to facility failure and staff, supplier and customer resistance, with resultant disruption to the business processes.
Once the facility has stabilised, it is advisable to undertake an audit to evaluate if the facility has met the expectations of the original planned objectives. A complete facility audit should be carried out, and the facility benchmarked against cost, customer service and general efficiency expectations. As a matter of course, audits should be done on a regular basis, perhaps annually, to ensure that the facility is operating at optimum efficiency. In this way, corrective actions can be implemented if deemed necessary to overcome any under¬achieving areas.