What’s in Your Warehouse?
The latest ways to optimize proficiency in your distribution facilities.
Perfection in warehouse operations is an unachievable goal, so supply chain managers must focus on ways to improve operating conditions and upgrade distribution facilities to provide for progressive efficiencies. Keeping up with the latest warehousing trends is key. Because warehouse facilities play a vital role in today’s overall supply chain operations, optimizing distribution center (DC) space is a top priority.
Warehouses have advanced significantly since the days of 14-foot ceiling heights and 90-foot truck court depths. With upgraded lighting systems, towering clearance heights, and voice-activated retrieval order fulfillment, modern distribution facilities are equipped to support increased levels of throughput, along with upgraded operational and safety efficiencies.
When the holidays approach, we talk to our kids about the difference between needs and wants when it comes to gifts. They need clothes but want toys. We need a new refrigerator, but we want a jacuzzi. Prioritizing warehouse upgrades can be similar to deciding on holiday gifts and home improvements. With the latest tools available to upgrade operational efficiencies in a distribution center, where does a DC manager start when it comes to prioritizing building and technological improvements?
When evaluating potential upgrades in a distribution center, it’s important to ask the all-important question: Who’s paying? If your company owns and operates its own DC, then any building upgrades will fall into the leasehold improvement bucket and can be depreciated over time, depending on the improvement. If your company leases a warehouse facility, however, then the landlord can fund certain upgrades as part of the lease renegotiation. Even today’s most stubborn landlords set aside tenant dollars for building improvements—as long as the requests aim to upgrade the building’s functionality. So, whether you want updated warehouse lighting or a new load leveler, don’t hesitate to request reasonable facility improvements during a lease renewal discussion.
Let There Be Light
Lighting upgrades are the most logical place to start when considering steps to reduce long-term costs and energy consumption. The payback on new lighting installations is immediate due to noticeable savings in energy costs. T5 and T8 LED lighting packages provide clean, white illumination in a DC, creating up to 30 percent more light and reducing energy consumption by as much as 50 percent.
“T5 fixtures work better than T8s in a higher ceiling configuration due to the T5’s higher lumen output,” says Knox Culpepper of Atlanta-based Rooker, a national design/build contractor of distribution facilities.
Fluorescent and metal halide lights have become dated and far less energy efficient. In fact, as of 2010, these antiquated fixtures are no longer manufactured, making replacement bulbs a challenge to find. Unlike metal halide light fixtures—which take time to illuminate—T5 LED systems activate immediately without even flipping a light switch. Forklift or foot traffic functions as the on switch in a sensor-activated lighting system.
“Lighting upgrades have expanded beyond the interior walls of a warehouse,” explains David McDaniel, partner at national real estate development firm Huntington Industrial Partners, headquartered in Denver, Colo. “We now add clerestory windows for natural light above every third loading door, and LED wall-pack lighting on building exteriors. And parking lot pole lights now have an LED component for better outside lighting and energy savings.”
Efficiency and safety are the objectives when choosing dock equipment upgrades. The days of driving a lift truck over a freestanding metal dock-plate into an unsecured empty trailer have long passed. For more than two decades, modernized safety equipment has been in place to prevent forklift accidents when traveling from the loading dock into the trailer.
Advanced dock packages can save time in the loading and unloading process, while also promoting safety. And the cost of dock equipment has remained relatively stable since 2005.
The price tag for loading dock equipment can range from $2,000 for a basic 35,000-pound-capacity edge-of-dock (EOD) leveler to $7,500 for a heavy-capacity “pit-style” leveler, according to Rick Schroyer of Southern Dock Products, a national dock equipment supplier.
An EOD serves the same general purpose as a more expensive mechanical load leveler, as both help forklift drivers navigate the slope differential between the loading dock and a trailer or ocean container.
Durability is also a major factor in dock packages. “Upgrades in new dock equipment can yield a substantial ROI, providing up to 20 years of useful life,” notes Schroyer.
The Sky’s the Limit
As new distribution centers are constructed, the question of optimal stacking heights comes into play. The progression of higher warehouse ceiling heights has evolved since the 1970s, and racking capabilities are now approaching the 40-foot level.
Warehousing experts and rack consultants continue to debate the optimal ceiling height in a state-of-the-art distribution center. Higher ceilings provide the ability to maximize cube space in a warehouse, but additional storage capacity can create new concerns.
Higher ceilings lead to the need to invest in extended rack systems, specialized high-bay forklifts, and potential sprinkler system upgrades. So, the question remains: How high is too high, and at what point do we reach an inflection point of inefficiency by storing inventory at dangerously high levels?
As stacking heights reach new levels, upgrades in building sprinkler systems may be required by code. Early suppression/fast response (ESFR) systems have been the standard for most modern warehouses built since 1995. But as ceiling capacities reach the 40-foot threshold, in-rack sprinklers may be required by code in most municipalities.
“In-rack systems allow the flow of water to reach pallets in lower rack positions in case of a fire,” says Patrick Cordi of Wiginton Fire Systems, a regional fire sprinkler company based in Sanford, Fla. “Otherwise, an ESFR system at 40 feet doesn’t generate enough water velocity to douse a burning pallet 30 feet below the sprinkler head.”
Major distribution companies favor an optimal stacking height of 32 feet, according to industry research. Most speculative distribution buildings today, however, are constructed with a 36-foot clearance.
“Increasing ceilings another four feet is a significant expense for a developer, but if the higher ceilings capture the tenant who actually needs 36 feet, then the added height is worth the expense,” says McDaniel.
Rack and Roll
When upgrading a warehouse with the latest technology and materials handling equipment innovations, rack systems don’t necessarily rack up interest. As stacking heights rise to new levels, however, DC executives are turning an eye to newer warehouse racking concepts.
Rack system innovations take into account maximizing storage capacity, ease of inventory access, and safety. The latest trends in warehouse storage systems include gravity flow, pushback, drive-in, carton flow, and tilt shelving.
Gravity flow and tilt shelving are common in e-commerce facilities or DCs with high order-picking volumes. These systems are popular for fast-moving parcels, consistent with high SKU volumes in an e-commerce facility. Cartons slide down a set of rollers that can be adjusted to an appropriate angle so that the package “flows” to the edge of the rack as the previous order is picked.
As distribution center managers are faced with the dilemma of expanding warehouse capacity, an upgrade to pallet racking may be the answer to maximize throughput and expand storage capacity. One solution is a pushback pallet rack with rollers, which allows up to six pallets to be stored on a single level.
With upgraded racking systems come progressions in pallet design. The grocery industry was the first to embrace the idea of plastic pallets, but the trend is gaining traction among traditional dry-goods distributors. While the expense of plastic pallets can be as much as three times the cost of wooden pallets, the useful life of a plastic pallet can extend beyond 15 years, according to global pallet manufacturer Chep USA.
Profiling is another way DC managers get the most out of their space. This strategy involves slotting and staging high-velocity SKUs in order to optimize throughput. Inventory is categorized for easy access in placement and retrieval processes, minimizing transit time between storage racks and loading doors.
Approximately half the labor in a DC is allocated to order selection, so implementing effective slotting and profiling strategies is crucial to achieving productivity in warehouse management. Integrating practical slotting techniques based on shipping velocity can reduce costs and lead to lean operational practices.
While profiling and slotting strategies involve mostly a common-sense approach, warehouse management software (WMS) is available to organizations with high SKU counts. The profiling software tracks historically high inventory velocity, and slots SKUs in strategic pallet and rack positions, reducing travel time in the order retrieval process.
I Hear Voices
In the 1980s, the mental image of materials handling (MH) equipment included propane or diesel forklifts and hydraulic pallet jacks. But in 2015, the term has a more expansive reach. Particularly in modern e-commerce fulfillment facilities, MH equipment has evolved to encompass multi-use conveyors, RFID readers, voice-directed order pickers, and even robotics.
While considered an emerging trend in inventory management, voice-directed retrieval systems were introduced in 1995. Nearly one million workers are using voice technology in today’s workforce, according to industry estimates.
Wearable technology is changing warehouse automation. Instead of holding a clipboard, tablet, laptop, radio, or smartphone, workers can retrieve pertinent data while maintaining unencumbered mobility, increasing safety and productivity through hands-free applications.
Investing in a voice-directed WMS is not as expensive as other technology-driven applications. The ROI payback period is brief—only six to 12 months—and systems are user friendly. The learning curve to train workers on voice-activated systems is only a matter of weeks, and the software is offered in 46 different languages.
As fulfillment centers attempt to operate lean facilities and minimize labor costs, warehouse automation is evolving, particularly in the area of robotics. Automated and vision-guided vehicles (AGVs and VGVs) are surging in popularity, particularly in larger DCs, yielding lower labor costs and fewer injuries associated with operating traditional lift trucks. Integrating AGV/VGVs in distribution centers is sometimes limited by the initial capital investment, but leasing programs from established driver-less equipment suppliers are commonplace today.
Using automation and robotics for repetitive motion functions, high speed requirements, and consistent accuracy is gaining traction in major DCs, replacing repetitive and laborious tasks for humans—such as unloading a floor-loaded ocean container. The industrial robotics market is projected to grow more than six percent annually through 2020, according to a recent Transparency Market Research report.
Lean and Green
Lean operating systems were originally adopted to optimize workflows in manufacturing facilities, but DCs have implemented several Lean practices in recent years. Lean inventory management has been the latest focus, but the Lean concept now expands beyond inventory optimization to incorporate waste elimination in operational functions such as motion, waiting, and scheduling.
Distribution center managers today are implementing Lean methods to improve key performance indicators (KPIs) by using Japanese models of operations management, such as the kaizen concept of continuous improvement. Recently, the concept of Lean has evolved beyond operational efficiency to include sustainability.
Leadership in Energy & Environmental Design (LEED) sets the standard for sustainable design in commercial construction. The LEED program is administered by the U.S. Green Building Council (USGBC) and uses a point system to establish if a specific property meets one of three tiers in LEED certification: Silver, Gold, or Platinum.
“We build all of our new distribution facilities to a minimum LEED standard,” says Dayne Pryor of Panattoni Development, a Newport Beach, Calif.-based developer of distribution properties. “It’s up to the tenant to establish further LEED qualifications above our sustainable building standards.”
Although LEED certification is more common in new construction, existing DCs can also apply for LEED designation by following the USGBC’s compliance and certification point system. LEED-compliant upgrades at a DC include:
- LED lighting systems
- recycled rainwater for landscaping
- solar implementations
- white heat-reflecting thermoplastic polyolefin roof systems
- low-flush toilets
- bicycle racks
As the economy continues to rebound, developers have renewed interest in designing speculative warehouse buildings to LEED standards, and environmentally conscious firms are refocused on sustainability across the supply chain. In fact, most major corporations prefer to do business with vendors, suppliers, and third-party logistics providers that operate in LEED-certified facilities and embrace sustainable initiatives.
In one recent consolidation, OfficeMax leased a speculative 415,000-square-foot DC from Panattoni. The fact that the building was constructed to the LEED Silver standard appealed to the office supply giant, but the tenant was not inclined to pay additional rent for the higher sustainability standard.
“Corporate America wants to operate in LEED-certified facilities, but it’s rare that they’ll pay additional rent for the designation,” Pryor notes.
Here Comes the Sun
Rooftop solar technology is one of the latest trends in creating sustainable distribution facilities. Since 2005, solar energy systems have gained momentum across the country, particularly on the flat rooftops of distribution centers, as roof space is often an idle and underused warehouse component.
In California alone, 4,316 MW of solar electric capacity was installed in 2014, according to the Solar Energy Industries Association. Other states, particularly in the Sun Belt region, have also embraced solar technology as a viable means of power generation—not only for the distribution center itself, but also as a source of power for the local energy grid.
While expensive to install, a solar installation’s payback period can be as brief as seven years when factoring in tax credits, according to George Mori, executive vice president of Atlanta-based solar design firm SolAmerica Energy.
Tax credits have been a major driver of recent solar applications across the country. While most state tax credits have already sunset, federal tax credits of 30 percent are still in effect today, but will drop to 10 percent at the end of 2016. Do solar installations make sense without the use of federal tax credits? Apparently so, according to Mori. “Prices on solar installation costs have dropped by as much as two-thirds since 2012,” he says.
Manufacturers and other heavy power users have traditionally been the more likely candidates for solar applications. But with the ability to sell solar-generated power into the electrical grid, distribution buildings provide a logical facility solution for a solar farm.
“Industrial rooftops are typically located close to consumers in growth markets, near the higher energy load,” Mori adds.
Up on the Roof
A few major industrial landlords, such as Prologis, have taken a slightly different directive with rooftop solar technology. Because most commercial leases provide the landlord with rights to the roof structure, building owners have adopted the approach of integrating industrial rooftops as an additional source of revenue. Rather than entering the solar business themselves, landlords lease roof space to solar integrators—third-party experts who better understand the intricacies of solar operations.
Rooftop solar technology will continue to be a force as installation costs drop and building owners recognize the sustainable and economic viability of solar power as an energy source. Given some of its complexities, harnessing solar energy is still an unknown to warehouse managers and executives, but rooftop solar installations are gaining momentum. “We still have a lot of runway remaining to promote the solar message to distribution building owners—and the public in general,” Mori says. “Rooftop solar can be found money for a building owner.”
Leading-edge designs have been a driving force for upgraded features in distribution centers. Distribution tenants today demand a quality facility that not only includes higher racking capabilities, overflow trailer parking, and LED lighting upgrades, but also flatter and stronger floor slabs that are free from cracking and moisture issues. The wet warehouse floor phenomenon, known as sweating slab syndrome, has created serious safety concerns for years, so warehouse professionals are demanding assurances that a distribution center’s floor slab is moisture free prior to occupancy.
Aside from structural integrity, warehousing innovations address increases in throughput demand and heightened speed-to-market expectations dominating today’s supply chain. In 2015, e-commerce fulfillment centers are refined to meet the demands of same-day and next-day deliveries, and the traditional warehouse of tomorrow will become more specialized and highly automated.
It’s Payback Time
With the expense of investing in robotic order retrieval systems, WMS software packages, and auto-guided lift equipment, supply chain executives are forced to evaluate the payback and return on investment for various operating upgrades.
Installing T5 LED lighting, for example, is a minimal capital investment and provides immediate energy savings and lighting enhancements. Similar to LED lighting, basic dock equipment upgrades are inexpensive in relative terms and result in instant loading efficiencies.
On the other hand, expensive upgrades—such as solar panel installations, robotic engineering, and WMS software platforms—warrant extensive research before implementation.
While customer demands in today’s e-tail world require faster turnaround times from the dock door to the front door, a variety of high-tech and low-tech implementations create a more productive warehouse.
As futuristic distribution concepts evolve—such as delivery drones for small packages and robotic retrieval systems—capital upgrades will help reduce DC operating costs and promote safety and proficiency.
In short, warehouse operations no longer allow for “business as usual” practices. New initiatives and strategic investments in capital improvements will lead to greater returns in productivity, profitability, and customer satisfaction. Investing in the latest materials handling equipment, WMS technology, and physical building improvements will result in a fully integrated distribution center.
Top 5 Ways to Modernize Your Warehouse
- LED lighting— T5 warehouse lights are relatively inexpensive and provide a quick return on investment due to energy savings.
- Voice-directed order management— New technology has reduced the cost of software and hardware, resulting in more efficient pick speeds.
- Slotting/profiling strategies— SKU proliferation has increased the need for effective inventory placement and racking strategies in a DC.
- Loading dock equipment— Upgrades to dock equipment include multiple varieties of load levelers, dock lamps, and dock locks.
- Lean operations— Implementing a lean warehouse operations program can cost as little as zero, but may yield multiple returns in efficiency and elimination of unproductive activities.