“We shape our buildings; thereafter they shape us.”
Everytime we come across a poorly run warehouse, we’re reminded of Winston Churchill’s famous quote above. Warehouse design is a science and can be challenging (something we covered closely in our last blog) and those who believe otherwise end up complaining about their warehouses. Factors they identify as issues are really just symptoms of their failure to “shape their building.” The science of warehouse design follows five simple steps, yet it is also firmly rooted in the reality external factors require, as well as the pull and push from internal stakeholders.
However, before we get into the five steps, we felt it is important to point this out: Though most of our examples are for company-owned warehouses (as GST savings are imminent for manufacturing companies who tend to own warehouses in India), these steps work for anyone building a new warehouse regardless of country or region.
Factors [inexperienced warehouse designers] identify as issues are really just symptoms of their failure to ‘shape their building.’
Step 1: Start with a high-level model of real estate needs
Finalising land is very time consuming, hence you may want to complete this task first. (In an ideal world, the land would be finalised during the final step, but we live and work in an imperfect world!) However, before having the real estate team scout for land, it is best to create a mathematical model that calculates the total area requirements. A bottom-up calculation of every operational area (inside and outside of the warehouse) is key. The model should consider throughput, SKU profiles, and productivity. This step does not require complete accuracy regarding land need, but it should be within 10-15% of the total requirement. Such a model, often spreadsheet-based, also helps to run various growth scenarios, different automation scenarios, etc. to get the area ranges.
Step 2: Design the desired process around business requirements
The initial step of process design work is to create an ideal process for the warehouse. Since there will be many constraints such as technology readiness, customer change management, etc. to get there, you should create phases for the process implementation. Process mapping helps designers visualise how an order flows through the warehouse. It is important to run these process workshops with all the business verticals together to avoid silos and to facilitate the sharing of good ideas. Each process activity drives two components: (1) area requirement and (2) labour productivity — both of which have a direct influence on cost. This step also helps the design team generate business requirements (along with the priorities) for systems and technologies. We often see the systems dictate the warehouse processes — it should be the other way at this step in the warehouse design.
Step 3: Complete concept design
Equipped with a strong understanding as to area requirements and process needs, the next step is to create a concept design or “operational layout.” This will require you to divide the warehouse area into standard blocks and determine activities at each level. This is also the time to engage with the latest technology vendors, and the clarity of the process and business requirements will be helpful in these discussions. The spreadsheet model built in step one will be refined further with more specific details of the area calculation. Additionally, the CapEx and OpEx picture should also emerge at this point. Once a concept design is complete, some of the technology procurement work can start (as they tend to have long lead times as well).
Step 4: Draw a detailed “construction ready” layout
The moment supply chain teams decide on a new location, many would like to see the layout; however, based on our experience, layout should always come last. It is an important drawing that defines the next many years. Hence, all the planning we can do before entering that step helps ensure long-term value. As much clarity one can provide the architects, the better the design will be. All the deliberations and process workshops come handy while reviewing the layouts drawn at this stage.
Step 5: Run the simulation
The designs must be tested for the complexity, safety, and flexibility of operations for various growth scenarios. Depending on the size of the warehouse and level of automation or mechanisation, a full-blown simulation can be run (using the engineering layout from step 4), or a conceptual simulation is enough (can be completed after step 3 itself).
Another, more complex, activity included in this step is to run a “conference room pilot.” This involves, literally, completing all the activities that occur inside a warehouse in the same sequence to test physical material flow, information flow through systems, and safety aspects and more. Potential bottlenecks, incorrect system input/output assumptions and many other operational pitfalls will come out during this exercise.
Some of these steps, especially one through three and steps four and five are inherently iterative, but the overall sequence must remain the same. The multiple stakeholder workshops throughout these five defined steps are also effective for change management. The layout would not feel dictated but rather more of a collaboration as each stakeholder contributes to the design’s evolution. Before groundbreaking takes place, the company’s supply chain function should have finalised the process and visualised the end-to-end movement of staff, material, and vehicle. Most of the complaints we come across stem from the fact that no such process mapping or simulation was completed first.
Following a reverse sequence may have worked for Christopher Nolan. But, we are supply chain engineers — we want it to be in the right sequence! 😃
If your organization needs help with an upcoming warehouse design project, be sure to utilize the right resources and expertise of experienced professionals to ensure your company achieves the optimal layout to support your operations and business needs.
Vikas Argod is a Sr. Manager in the Supply Chain Operations competency at Chainalytics. Vikas specialises in warehouse design, process assessment and benchmarking, and service delivery processes in project-based business environments
Bennet Nelson Panikacherry, a Sr. Manager in Chainalytics’ Supply Chain Operations competency, has expertise in warehouse operations, 3PL operating model design, transformation program, and mergers & acquisition management.