Engineering a New Crop of Distribution Centers

With their tilt-up concrete walls and sheet-metal roofs, today’s distribution centers, from the outside, appear as nothing so much as a more hardy breed of barn. Their most frequent location, filling what was formerly farmland along city-skirting interstates, only adds to this low-tech perception. However, the M/E/P engineers who design the systems that keep these facilities running know just how misleading such appearances can be.

No longer a simple warehouse, the modern distribution center has evolved to become a vital player in today’s just-in-time management strategies. Yes, they still house miles of racks fed by tractor-trailers and forklifts. But those racks now reach up to 30-ft. high, thanks to sophisticated software that can quickly track locations of out-of-sight stock. As far as forklifts, they’re often radio-frequency operated, including programmed routes. This capability, along with tighter turning radiuses, allow for even closer rack spacing.

Additionally, some of these facilities are blurring the lines between old-style warehouses and assembly plants, with crews pulling apart and recombining shipments—and even creating sub-assemblies from newly arrived parts—to meet customer demand when and where it arises.

These factors are raising the bar on operational requirements for owners and creating the need for engineers and third-party vendors to design facilities that are significantly more customized than the old-school warehouses prevalent even a decade ago.

“When I came into this business and someone said we were going to build a distribution center, I just visualized a box,” says Atlanta-based Denny Stamm, director of industrial services for Spartanburg, S.C.-based Lockwood Greene. “Now, it’s a whole new ballgame.”

Growth Potential

And this new game is leading industry observers to see opportunities for growth in this portion of the industrial sector. Researchers at the real estate services firm Grubb & Ellis, based in Northbrook, Ill., note in their 2004 Global Forecast that continued consumer spending through the recent economic downturn helped maintain the need for distribution space, despite U.S. manufacturing woes. These experts note the predominance of five major distribution hubs—Southern California, Atlanta, Dallas, Chicago and New Jersey—but also see some smaller markets growing, as well. In particular, the G&E analysts see demand growing in several areas offering easy access and lower property costs: Reno, Nev.; Charlotte, N.C.; Louisville, Ky.; Columbus, Ohio; and Pennsylvania’s Lehigh Valley.

The changing nature of distribution centers has made designing new facilities not only more interesting, but also client-specific, engineers say. The biggest driver, say some, is the “lean transformation” that’s pushing manufacturers and distributors to get stock in and out as quickly as possible. “One of the key elements is speed,” Stamm says, speaking of the challenges facing today’s distribution managers. “And you can’t let your warehouse become the weak link in your supply chain.”

Other observers see the current attention on distribution centers as part of a natural progression, now that many companies have automated their manufacturing facilities.

“All of the work we were doing 10 to 15 years ago was on the manufacturing side,” says Ken Thouvenot, vice president of project management and marketing for St. Louis-based FKI Logistix Alvey Systems, a leading maker and integrator of material-handling equipment. Now, he says, manufacturers are looking to achieve similar savings in other areas of their operations. “The proliferation of SKUs [stock keeping units] has driven some of it. The need to take inventory out of the supply chain has also driven some of it. And now, the technology has come along to help that take place.”

Recognizing the growing impact distribution centers can have on their clients’ bottom lines, many engineering firms are responding accordingly. Some groups are creating new teams that pull together industrial engineers and other experts, along with M/E/P professionals, to optimize the systems and processes that a distribution center will house before design begins. These firms say the resulting plans can then provide a better solution for meeting overall client business needs.

“We think real money can be saved by thinking things through before we get to detailed drawings,” says Bob Ruuhela, a senior vice president at Chicago-based A. Epstein & Sons, Intl. He’s part of a team Epstein has formed, called “Strategic Services,” which helps clients address broad issues, such as siting and process design.

Similarly, Lockwood Greene has a methodology they call “visioneering,” which brings in clients across the range of distribution center functions for a two- to four-day planning session, resulting in a concept the firm then uses to develop a performance specification.

Changing needs

The need to meet increasingly sophisticated end-consumer tastes is adding another layer of complication for companies seeking to implement just-in-time strategies—and for the engineers designing distribution centers.

For example, much of Epstein’s industrial work is directed toward food processors, distributors and marketers. It only takes a trip to your local supermarket to understand the demands consumers are making on such clients for product diversity and availability. Ruuhela notes that the number of individual products, or SKUs, carried in a typical supermarket has grown to 40,000 from 20,000 some 10 or 15 years ago. Customers may not be buying imported arborio rice with every visit, but they expect it to be on the shelf the next time a new risotto recipe is on the menu for a special celebration.

“Loads may be coming in with more and more products, so there’s more sortation going on,” Ruuhela says, explaining the challenges of meeting both operational demand for greater efficiency and consumer demand for greater choice. “You have a combination of storage and fast movers. The number of SKUs means that you have a number of slow movers, but customers expect things quicker. And forecasting isn’t an exact science.”

For designers, this growth in inventory can mean a distribution center needs to accommodate more cross-docking (transferring stock directly from one truck to another without moving it into storage first) and sorting/assembling areas. However, such requirements are by no means universal, emphasizing the need for a more customized approach than might have been the case in the past.

“You design the operation first,” says Ruuhela, “and then you design the shell to support it.”

Stamm agrees, saying simply, “It’s a form-follows-function situation.”

Because the material-handling equipment layout is so important to the final project’s success, engineers often work closely with these third-party vendors to ensure building systems meet equipment requirements without interfering with placement. Professionals on both sides of this relationship agree that the challenges in making it work lie not with each other, but with clients who may not understand the importance of involving equipment makers early in the process.

“The challenge we have is not so much from the engineering side,” says Thouvenot. “We’ve typically had good relationships with the mechanical and electrical engineers. But one of the concerns we’ve had is that customers don’t have an understanding of the need to integrate the material-handling systems and building systems early on.”

Instead, Thouvenot adds, many customers separate their equipment and building budgets, which can make for a less successful design.

“The customer should really be looking at what should be the total cost of the facility,” he says. “If they had looked at them both up front, they may have been able to build a more efficient facility.”

Design and equipment engineers also can face challenges getting the operational details they need to ensure both buildings and machinery fully address functional requirement. Professionals from both groups need a range of data, covering such issues as shipping volume and particularly fast- or slow-moving SKUs, to ensure the finished facility meets client needs. Tracking down this information, however, can be more difficult than anticipated, engineers say.

“For 18 years, the biggest problem has been acquiring valid data on which to base the design,” Thouvenot says. “They don’t have good electronic data; they have a lot of paper.”

Stamm notes that he and fellow team members have spent hours paging through boxes of old shipping receipts to determine shipping loads. And, in situations where electronic data has existed, it has often been in databases that client personnel don’t understand. This scenario is changing, Stamm adds, as companies incorporate more sophisticated electronic systems, but engineers in search of historical information may still have to do some digging.

One new technology currently attracting a great deal of attention is radio-frequency identification, or “RFID.” Two of the largest distribution center operators, Wal-Mart and the U.S. Dept. of Defense, are both pushing at least their largest suppliers to begin incorporating RFID tags in their shipments within the next year or so. Theoretically, such tags will enable easier automated identification and location of shipments. However, experts note that some roadblocks remain to successful real-world implementation.

For example, notes Thouvenot, both physical and electronic interference can make it difficult to read tags attached to individual pallets or cases in sequence when numbers of such containers are being conveyed through a receiving line. Matching data to its related inventory is essential if that item is going to be successfully retrieved later. However, he adds, the major players backing the approach appear dedicated to its adoption.

Looking forward

Industry participants see technology becoming even more important to distribution center design as companies continue to focus attention on inventory management. Online shopping has created much more demanding consumers: They want what they want, when they want it. And today’s narrow margins are driving managers to consider any new methods that can help them push costs down and profits up. Yesterday’s product-barn warehouse has been targeted as an obstacle toward meeting these goals. As a result, engineers entering this field need to stay a step ahead of their clients in their understanding of new technologies’ promises and pitfalls—or face being put out to pasture themselves.

NFPA 13 Raises Sprinkler Issues

The 2002 edition of the NFPA’s “Standard for the Installation of Sprinkler Systems” (NFPA 13) is just beginning to work itself into local building codes, but this revised document’s provisions could have a big impact on distribution-center design.

Among other provisions, NFPA 13 includes tougher requirements for solid-shelf rack sprinkler systems which could have a big cost impact on distribution center operators. Developers may face additional expenses, above the cost of the sprinklers themselves as they are forced to consider how the added equipment and supply lines will be protected and how their presence might interfere with operations. “The standards have drastically changed with these new requirements,” says Gerald Schultz, a principal of The Fire Protection International Consortium, based in Downers Grove, Ill. “It’s only now that we’re beginning to see the real impact. It increases costs beyond just the cost of the sprinklers themselves.”

Shelving manufacturers are starting to address these concerns, Schultz notes, as facility designers are expressing greater interest in shelving that’s at least 50% “open.” Shelving that meets this criterion is exempt from the more stringent guidelines.

The revised NFPA 13 is not a retroactive standard, Schultz says, so facilities approved under a previous version should not have to retrofit new shelf-based sprinklers now, unless a local fire marshal were to determine the presence of an unacceptable risk.

“But nobody’s doing that, that I’m aware of,” he says.

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