WAREHOUSING & PERFORMANCE MEASURMENT

Hotrodding the

Conventional Warehouse

Track 4 Session 5

2 0 0 5 M A T E R I A L H A N D L I N G & L O G I S T I C S C O N F E R E N C E S P O N S O R E D B Y H K S Y S T E M S

Steve TippmannTippmann Group / Interstate Warehousing


Abstract

In today’s third party logistics environment,successful providers must balance thedemands of multiple customers’ businessprofiles, oftentimes within the confines of theirfour walls. Facilitated by a 3PL owner-operator, this session will focus on labor costdrivers, facility layout and designconsiderations, utilization of new technologiesand master site planning all presented from afirst-hand perspective. This fast paced andinteractive discussion is focused on theflexibility required for success in the 3PLenvironment.


FLEXIBILITY –The Key to Success in a 3PL Environment

1 – Multiple business profiles

2 – Labor cost drivers

3 – Facility layout & design considerations

4 – Master site planning

5 – Utilization of new technologies


1 – Multiple Customer BusinessProfiles

Variables that Determine Difficulty ofBusiness

– Product turnsRange from 3.5 to 120 per year

– Case pick percentageRanges from 0 – 100%

– Term of contractApprox. 70 % of contracts are 30-day contracts

Less than 2 % of contracts are 5 years or longer


2 – Labor Cost Drivers

Labor is One of 3 Primary Cost Drivers inWarehousing

– Labor = 33% of Revenue

– Capital = 15% of Revenue

– Utilities = 4% of Revenue



Labor Cost Drivers– Who pays for the Start-up “Curve”?

– Start-up curve (runs approx. 1 year)Customer either has to pay that curve, or the margin on the handling andterm of the deal must make up for the start-up cost

– Example: 4,000 pallets of storage 20 man operation

Excess labor associated with the start-up $600,000 +# of Employees

Months During Start-up

Labor Cost for 20 Employees

True Cost w/Start-up Curve



Labor Cost Drivers not Normally Includedin Fixed Handling Cost

– Inaccurate truck info on shipments

– Freight consolidation / order changes

– Cut-off times

– Catch weights

– Add ons


3 – Facility Layout & DesignConsiderations

Construction and Utility Costs are DrivenMostly by Square Footage– Energy cost in region & how are those costs made up

No off-peak cost in some areas

– Cost per kilowatt hourRanges from 2.5 cents per hour to 11 cents per hour

– Labor cost - determines amount of automation paybackRanges from $12.00 per hour to $40.00 per hour

– The higher you go, the better off you areMaterial handling equipment, along with insurance/codecompliance are the limiting factors in a conventional warehouseceiling height



Automation in a Manual (Hybrid) Warehouse

– Why automate a facility? – Stop & Shop Case Study




– Why automate a facility? – Stop & Shop Case StudyLabor availability & cost

Accuracy

Multi-VelocityWarehouse

Product turns(26 turns per year)

– Challenges

Cost justification– Ratio of reserves

to pick facingsdrove it to asingle-deepracking layout




– Why automate a facility? – Stop & Shop Case StudySlow-Movingproducts go incenter bay

Fast-MovingSKUs stayon 110’ Dock





Safety (actually safer than conventional warehouse)– Netting on pick aisle to prevent falling cases

– Laser beams on crane to detect foreign objects in crane aisle





– Another challenge – wet produce cooler with mistersspraying

GalvanizedRacking

Floor Drains



Fire Suppression

– In-rack sprinkler systems are traditionally the most codecompliant, but not necessarily the best option

– As many as _ of the sprinkler systems installed inwarehouses operated below 32° F are not operational

Advantages of in-rack sprinkler system– Insurance/code compliance

– Only option for high density storage

Disadvantages– Maintenance nightmare

– Loss of flexibility on rack layout/beam height

– No long-term viability as a fire suppression system that can becounted on



Alternate Fire Suppression Option # 1

– No sprinkler system in Warehouse

Variance process

Required to pay more attention to Life Safety details– Early detection (smoke & temperature)

– Additional egress

– Enhanced fire fighting design / access

Advantages– Maximum flexibility

– Reduced maintenance

– Reduced capital

Disadvantages– Insurance issues



Alternate Fire Suppression Option # 2

– Ceiling-only sprinkler systems

– Large Drop

– Potassium Lactate

Variance process

Advantages– Maintenance

– Flexibility to change rack layout/beam height to maximize thecube

Disadvantages– Capital cost

– Large volume of water needed can require on site waterstorage tank and water pump



Other Considerations

– Related to Business ProfileDedicated facility

– 250-300 foot deep warehouse / suitable for varyingproduct turns

Dock depth

– Low-turn business – 35 foot docks

– High-turn / high labor business – 85+ foot docks



Dock Equipment

– Dock doors / open truck doors from inside



Dock Equipment

– Continuous pit vertical dock plates

» Better seals

» Improved ability to clean / sanitation




– Refrigeration systemsPenthouse vs. Long-Throw Adapters


3 – Facility Layout &Design Considerations


– Refrigeration systemsInfrastructure of systemdesigned for max-build onsite

Design system for theminimum amount ofrefrigeration chargefrom a safety standpoint(tapered vessels)

Temperature & humidity systems control

No valves inside therefrigerated space




– Safety / interior designMachine room

– Separate structure

– Only place in the building where we have refrigerationvalves

Ballard protected walkways

Shipping / receiving office locations


4 – Master Site Planning–KeyConsiderations

Site Selection

– Size (acres)

– Location (population, Interstate access, laborconsiderations, quality of life, growth trends)

– Not just one dedicated customer for the facility

– Is the site consistent with the image desired?

– Market saturation / competition



Rule of Thumb for Size of Site:

– 700 feet deep & as long as you need itProvides enough room for:

– Truck traffic

– Staging across from docks

– Set backs

– Facility itself



Traffic / People – Separate Car & PedestrianTraffic from Truck Traffic– Trucks & truck drivers

– Office & warehouse associates

– Visitors

– Customers

– Overall traffic flows

State & Local Incentives

Ability to get Sprinkler Variances

Availability of Utilities



Community Support

Zoning Issues / Timing on the Project– Is the zoning appropriate?

Site Development Cost

– Land cost

– Access to utilities

– Soil conditions

– Road development / infrastructure

Understand Business, Growth &Operations needs BEFORE Selecting a Site


5 – Utilization of NewTechnologies

Material HandlingEquipment– Battery technology

Battery charging room– Automated or manual

Opportunity charging ondocks

– Lift height continuallyincreasing

WMS Technologies– Online customer access

Inventory reviews

– Directed put-aways– Voice pick


Key Takeaways

Be Flexible in Design

– Allows for more options when business profileschange in the future

– The only thing we know about the future is thebusiness model we know today will be different inthe future

Questions?

WAREHOUSING & PERFORMANCE MEASURMENT

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