Making the right decisions at the right time
Some companies are dealing with issues of space. That may raise questions as to whether it is advisable to scale up. The issue is that the timescale for this process can go up to five years to develop an appropriate business plan. Another option might be to construct or hire a new facility to create space for merchandise. This article considers some key issues you will have to consider when trying to mitigate the risk of running out of space.
Why space is becoming a premium product
Many markers are currently dealing with the issue of limited space to store merchandise. Where it is available in selected markets, space is costly and hits the bottom line very hard. Cushman & Wakefield recently reported that the national industrial vacancy rate was 4.1% in the third quarter of 2021. To contextualize the statistics, this has been the lowest industrial vacancy rate since 1995. On the other hand, the news was not much better, with average rents rising by 8.3% to hit $7.18 per square foot.
Making the right decisions with a cool head
There is a standard checklist for considering the possibilities of storage options. It acts as a mechanism for monitoring and evaluating all the solutions that are eventually implemented. You need to think about the ability of your current and potential e-Commerce fulfillment facilities when making these decisions. The checklist comprises the following:
- Thorough homework: Ensure that you have done all your homework before visiting a potential site for storing your products. You need to be very clear about what your requirements are. Also determined by how much your current requirements exceed the capacity that you currently have access to. Data collection and analysis are of the essence when engaging in this exercise. However, the resultant information will help determine how long you need a facility and the capacity you need to fill the gaps you are facing.
- Quantifying current spaces: Think about the square foot or cubic space in your grasp or within reach. You should not forget to consider the contribution of ancillary spaces that are not part of your mainstream storage space. At first, this may seem like a relatively straightforward process. However, companies that rely on multiple smaller bulk facilities may need to examine their capacity carefully. The same can be said of companies that store trailers and pallets in yards. You should also consider the access you have to short-term rented space. Remember that your needs cover your entire product range and not just one product.
- Future capacity requirements: You need to make an educated guess about what your future capacity needs ential. This is particularly important for businesses with plans that are developed at a high level. The dollars of sales must be clarified as well as the inventory that is currently available. Businesses require accurate statistics concerning their turnover, sales, storage size, bulky packages, and preferred locations. Think about the number of Stock Keeping Units (SKUs) you are dealing with and the value of your inventory. These statistics are then broken down into patterns such as peak weeks, weekly averages, planned SKU growth, typical averages, and the percentage of stoke that is obsolete. Specific changes in your product mix could impact your space requirements. It is essential to consider the details, such as the number of bays of pallet rack storage that you need in your business. Think about how all these needs can be accommodated by constructing a clear span. Develop an understanding of your current cubic and square footage for a building that can meet your needs. Think about how many years it will take before you need to expand further or acquire a new facility.
- Departmentalize requirements: Apart from the generic requirements for space, each department will have unique requirements that merit consideration. This is the difference between storage and allotted spaces. For instance, inbound receiving space requires a detailed profile of the incoming shipments in terms of their peak and averages. You need to know the pallets, cases, and containers you will receive. Create space for quality assurance tasks as well as for those products that are waiting to be put away. In terms of outbound shipping space, you need to know the number of shipments you will be making per month in terms of their averages and peaks. Think about the typologies of the shipments, including LTL, pallets, and small packages. Space may be needed to account for package accumulation among specific carriers.
- Shortcomings and wish lists: There may be current shortcomings that need to be addressed. The company also has a wish list of items and frameworks that need space. Consider where the current facility falls short of your expectations and needs. One option is to increase efficiency by handling changes in product flows within a new facility. Evaluate how additional space may be required for custom racking, which could help your company depending on inventory levels. Having a wish list can help you distinguish between and among options that look similar.
How to assess the facility
Certain aspects are critical when assessing and evaluating a facility:
- Transportation: Think about the proximity and access to the major highways, ports, and carrier hubs you will use. The yard should ideally contain space that allows the dropping off and storage of trailers. Security is another critical consideration. A case in point is the desirability of having separate traffic flows for employees and visitors.
- Receiving and shipping dock doors: If you do not have appropriate doors, the costs of adding them can be high. Think about the number of dock height doors needed and those on the ground height level. These doors should be able to cover outbound, inbound, and dedicated routes for staged pallets and trash.
- Shapes and order flow: Think about how the shape of the building affects order and product flows. For example, you may be dealing with footprints that have odd shapes, hence creating avoidable inefficiencies. Think about how inbound products will flow from the receiving docks. Other considerations include returns processing, QA to bulk reserve, value-added operations, and staging. Plan and lay out the strategy for order fulfillment and forward picking.
- Cubic space usage: Think about any opportunities to go vertical when storing merchandise. Ideally, you should avoid an unnecessarily larger footprint because of a lower ceiling. Ask whether there is a clear span and the maximum number of pallets that can be stacked. There may be building codes that speak about sprinkler clearance. Think about the aisle width and column separation to optimize spaces for rack capacity.
- Floor conditions: The floor of the storage space must be in excellent condition. This is because such a floor must support significant rack weight. If the floor has issues, then this can limit your potential for automation and material handling.
- Robotics and equipment: Be very clear about the kind modules, sortation, and robotics you will use. There will be merits and demerits of using automated equipment in specific facilities.
Additional facility requirements to consider
Do not overlook any of the following:
- Electrical, lighting, and communications services
- power requirements and Forklift charging stations
- equipment rooms and Maintenance
- Meeting room services
- Training room services
- Conference room services
- break rooms and Employee lunchroom
- Bathrooms size to cater the expected number of employees
- Information technology or IT server rooms
Because space is a premium in logistics, you must carefully consider whether your current needs are being met. The choice is between expansion and building from scratch. Each of these choices has merits and demerits that must be evaluated before making a decision. This article has provided some key considerations.