Supply Chain Profitability - The Facility as a Profit Center
How One’s Building Can Effect Profitability
The keys to optimizing operations and reducing costs include: Facility Size; Facility Configuration; Column Spacing; Ceiling Heights; and Dock Placement and Design.
One must acquire a large enough facility to accommodate planned growth yet continuously use the smallest possible footprint within. By traveling shorter distances in a smaller footprint to process orders, stock product or materials, or manufacture, we reduce the amount of effort to complete the task by minimizing travel time. Therefore staff can be reduced and less equipment is required (for less staff) to perform these operations while increasing speed (less distance traveled) which improves customer service at the same time.
The facility configuration or shape combined with dock door placement can allow one to design a tight, efficient, economical operation, but the wrong facility or design within can result in unnecessary constraints making it more difficult to operate efficiently and it more costly to do business.
- A deep narrow building can be a nightmare for a distribution operation because of forced long travel distances for all products (whether fast, medium, or slow selling products) through a long path to and from the dock. It can support a manufacturing operation very well as product moves continuously with no back tracking over long continual distances from raw material storage to production to WIP to final assembly to storage or staging to shipping.
- A squarer shaped building and/or with dock doors on a wide side wall will allow many fast moving items to be stored close to and opposite receiving and shipping doors which shortens travel paths from and to the dock which optimizes distribution. But will cause too much back-tracking, truncated production lines, and longer travel distances for manufacturing.
When acquiring a building one should look for column spacing that will support planned operations, not be an obstacle to them.
- It is important to know required aisle sizes (very narrow, narrow, wide, etc.) for the selected lift truck equipment and be sure the building columns ideally are placed in the pallet rack flue or within the rack if need be to support your layout. Ideally columns will support a narrow aisle system in one direction and very narrow aisle system in the opposite direction for optimal flexibility.
- In a distribution operation, too many columns or poorly spaced columns can result in wider than desired aisles being required to bury columns within pallet rack causing wasted space and added costs for staff and equipment.
- In a manufacturing operation, too many or poorly spaced columns can interfere with production lines or block proper placement of large machinery or conveyors.
Optimal ceiling heights are subject to specific operational requirements.
- A manufacturing company may do well not to pay a premium for a building with tall ceiling heights when most operations take place on or close to the ground.
- An importer will do well to acquire a taller building as the extra safety stock required (additional travel time to the facility from overseas) can be stored in the upper rack levels allowed by a taller building. This can also reduce the amount of square feet required.
- A distributor might have a combination of low and high ceiling height requirements (lower for non-pallet rack areas) or acquire a taller building with the potential to use a mezzanine for future growth.
A detailed study may be required to determine optimal ceiling heights relative to costs.
Improper dock placement and/or design can be most costly.
- When sizing a new building many companies in an attempt to save space plan docks that are too small resulting in staged inbound or outbound freight blocking functional aisles and leaving no room for potential cross docking.
- Buildings with all dock doors on the same side of the building support distribution as faster moving products can travel shorter distances to and from the dock while manufacturing may experience extra looping or backtracking.
- Buildings with dock doors on opposite sides of the building support manufacturing by allowing continuous flow from one side of the building to the other, but make distribution more costly as fast moving items must travel the length of the building from receiving to storage to shipping rather than be stored close to the dock. It is preferable for a distributor to only use dock doors on one side of such a building rather than both sides.
Choosing the right building with characteristics that support the operation rather than constrain it are a key component in a distribution or manufacturing center becoming a profit center.