Five simple steps to design a new warehouse

“We shape our buildings; thereafter, they shape us.”

Every time we come across a poorly run warehouse, it reminds us of this famous Winston Churchill quote. Warehouse design is a science and can be challenging. Those who think otherwise end up complaining about their warehouses. Factors they identify as issues are merely symptoms of their failure to “shape their building.” Getting the design right is more important than ever, as ecommerce has changed the nature of how traditional warehousing and order fulfillment gets done.

The science of warehouse design follows five simple steps. Yet, it’s also firmly rooted in the reality that external factors require and the pull and push from internal stakeholders.

Organizations should employ the following five steps when designing their warehouse to meet today’s ecommerce needs:

Step 1: Start with a high-level model of real estate needs

Finalizing land is time-consuming, so you may want to complete this task first. (In an ideal world, finalizing the land would happen during the final step, but we live and work in an imperfect world.) However, before having the real estate team scout for land, it’s best to create a mathematical model that calculates the total area requirements. A bottom-up calculation of every operational area (inside and outside the warehouse) is key. The model should consider throughput, SKU profiles and productivity. This step doesn’t require complete accuracy regarding land needs, but it should be within 10–15% of the total requirement. Such a model, often spreadsheet-based, also helps run various growth, automation and other scenarios to arrive at accurate estimate of area needs.

Steps 2/3: Design the desired process with business requirements in mind and then complete the concept design

Equipped with a strong understanding of your area requirements and process needs, the next step is to create a concept design. This “operational layout” requires you to divide the warehouse area into standard blocks and determine activities at each level. It’s also the time to engage with the latest technology vendors; clarity of your process and business requirements will be helpful in these discussions. Refine the spreadsheet model built in step one with more specific details of the area calculation. Additionally, the capital expenditure (CapEx) and operating expense (OpEx) picture should emerge at this point. Once a concept design is complete, some of the technology procurement work can start (as it tends to have long lead times).

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, the layout should always come last. It’s an important drawing that defines the next many years. Therefore, all the planning we can do before entering that step helps protect long-term value. The more clarity you provide the architects, the better the design will be. All the deliberations and process workshops will come in handy while reviewing the layouts drawn at this stage.

Step 5: Run the simulation

Test the designs for the complexity, safety and flexibility of your operations for and various growth scenarios. Depending on the size of the warehouse and the level of automation or mechanization, you can run a full-blown simulation (using the engineering layout from step 4). Or, it may be enough to run a conceptual simulation, which you can complete after step 3.

Another, more complex, activity included in step 5 is to run a “conference room pilot.” You literally complete all the activities that occur inside your warehouse in the same sequence. It tests physical material flow, information flow through systems, safety aspects and more. This exercise will reveal potential bottlenecks, incorrect system input/output assumptions and other operational pitfalls.

These steps are inherently iterative, but the overall sequence must remain the same. Multiple stakeholder workshops throughout the five steps are also effective for change management. The layout wont 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 finalized the process and visualized the end-to-end movement of staff, material and vehicles. 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 in director Christopher Nolan’s film Memento, but we’re supply chain engineers. We want our processes to happen in the right sequence.

— By Vikas Argod & Bennet Nelson Panikacherry