Finding Your Ideal Commercial/Industrial Building - Part VII
Welcome back to the next part in our series! Warehouse Layout and its impact on site selection.
One of the most important areas to any business is its warehousing. Whether you are talking about a typical warehouse, a stock room, or just a cabinet for office supplies, proper control and replenishment of your inventory is critical to the success of your business!
Sadly, warehousing is also one of the most overlooked areas. Most businesses have spent the last several decades trying to optimize their production area, the front office, the back office and customer service. But when it comes to inventory and its control the attitude seems to be “don’t worry, we will find some place to put it”. Which is rather surprising when you consider that inventory is often the largest single asset value in a company. If materials are improperly replenished, stored, and picked then extra costs and longer time lines can result, both of which are very bad news in any modern business.
So what does this have to do with acquiring a new building? A little foresight before you select that perfect building and layout can save a great deal of grief later on!
How much space do you really need?
That depends on your business: Do you just have finished goods, or raw materials, or MRO stock (Maintenance, Repair and Operations), or some combination of those inventories? It is of benefit to have a clear understanding of your target inventory levels for each type of stock and how much cubic space (volume) is needed to warehouse it. Target inventory levels are a strategic decision that senior management usually makes, preferably with the help and advice of a Supply Chain Specialist. Once that decision is made, calculating the cubic footage required is generally fairly straightforward.
A generally accepted practice is that planned warehouse usage is no greater than 80% of the available space as anything higher than that will tend to start eroding operating efficiencies. In addition (to name a few considerations): Keep in mind the local fire codes and the associated sprinkler clearances, along with the safe height stacking limits (load & stability), the stored material compatibilities and the potential need for segregation, at this design layout stage. Finally, consider how much space is likely required for planned growth over the next several years.
How should the space be organized?
Again, this depends on your business. The main consideration should be centered on material flow (refer to Part VI for more on this topic). To simplify somewhat, material should be stored to reduce overall movement, to make locating the needed material as easy as possible, and to allow easy movement without creating traffic jams in the aisles.
Some questions to ponder:
- Can you store raw material close to the point of use?
- Can you use flow through racking?
- Can the floor plan layout be designed as a U design or I design ?
“U” design has shipping and receiving at one end of the building with material moving around the inside of the building from Receiving, to Raw Material storage, to Production, to FG (finished goods) storage, to Shipping.
“I” design is a straight through material movement with receiving at one end of the building and shipping at the other. The material flows straight through the building and out the other end.
How high is the storage area? Cubic size is generally cheaper than floor level (only) area palletting / racking and its square footage usage.
What (specialized) equipment is required to store, pick and move material?
Do you have any bulk storage requirements? If so, how will the material be pumped into and out of the bulk storage vessels?
How will bulk transport get to the inlet ports?
How will you track and locate the material in the building?
There are many choices, but you might want to consider RFID methodology. With the new IoT technology that is available, RFID is no longer only about location; it can also be an integral part of the production, quality, and audit processes as well. The cost savings and continuity safeguards available can be absolutely staggering.
We mentioned office supplies earlier in this post, which probably surprised a number of people as that is rarely thought of as inventory item. Yet, it has all the same issues as warehouse materials – and if left with no controls in place, there can be stockouts, even while there are still supplies available!
Sound like a strange thing to say?
This is because supplies normally get hoarded away from the official supply point / cabinet which is why 5S (see previous post) can be spectacularly successful in an office.
For example, one day take a walk through your office and see how many pens, pads of paper and clips are on each desk. Calculate the total of each of these and then compare that to whatever your target inventory is in the applicable office supply storage cabinet. You will probably find you have a 3 or 4 time that target quantity, or more. Lastly, please consider office supplies as a type of MRO stock, and note that you will probably find this same hoarding behaviour in any MRO stock in the production area as well.
Finally, in today’s modern businesses, specialists are often called upon – in areas such as Finance, Sales & Marketing, Production, Engineering, to name a few.
For this important process of choosing your new building and its set-up, give us a call and let us help you help yourself.
Stay tuned for upcoming posts!
Contact us when making your next move!
Edward Drennan, P.Eng. 30+ years Industrial / Commercial Experience
Your Trusted Partner in Real Estate
Ed White, CPIM CIRM CSCP CPF 6sigma – Jade Trillium Consulting
Making processes & organizations more effective
Not intended to solicit buyers and sellers currently under contract with another brokerage