In recent years, Distribution Center magazine has presented several Golden Warehouse awards for companies that either expanded an existing facility or created a new one. We looked for creativity, functionality, and most importantly the business sense behind the expansion.

This year, we are offering some suggestions on how our wholesale readers can create their own Golden Warehouse if they are thinking about expanding or creating a new distribution center.

While most business tips that have a checklist approach can leave the reader with a sense of  “I knew that,” a bit of caution is in order. Going over the same details again provides you with reassurance and ensures that you don’t miss the obvious, even if you’ve done it many times. Just ask any airline pilot.

We asked Mark Bray, director of supply chain for Durham, North Carolina-based ACR Supply, for his insights. In addition to his position at ACR Supply, Bray chairs HARDI’s Distribution/Logistics Management committee. Bray understands logistics and distribution. He holds a bachelor of science degree in industrial distribution & logistics and a master of science degree in technology systems with a concentration in distribution and logistics.

When someone asks Bray when it’s time to expand or create a new warehouse, he says any competent owner or manager will know if he or she is mindful of the activity around them.

“It’s time to expand your warehouse when you start having capacity issues that result in being unable to fulfill your customer requirements,” Bray said. “If your warehouse is affecting the speed, accuracy and quality of your customer’s order, then it may be time to revisit your current operations and see what can be improved upon.”

Bray suggests that your eyes can do the walking and spot signs that point to trouble. These include:

• Little or no available rack space for inventory;
• Inventory sitting on the floor with nowhere to put it;
• Storing inventory outside of the warehouse that should be inside;
• A surge or repeated shipping and receiving delays; and
• Lost sales due to inadequate stocking availability.

If you want to avoid delay or timing problems, it’s important to provide enough realistic lead time to ensure that if an unexpected delay occurs, it will ameliorate any disruptive effects to your ongoing business.

Bray says six months is the starting point for assessing the time a wholesaler might need, but he also notes that depending on size and customization, it could easily be a year (or more). Some of this planning revolves around what’s in the warehouse. If you’re planning on adding automated systems or anything beyond basic rack and shelving, plan on needing more time.

The more sophisticated warehousing systems will usually require working with industrial engineers or other consultants that specialize in developing highly efficient operations,” he said.

Bray acknowledges that as you examine your options, one ultimately comes to that critical point of either moving forward or taking a pause on the idea. According to Bray, the following are fundamental questions that every wholesaler must answer before making that final decision.

These questions include:

• Are we making the best use of the space we already have?  If not, then how do we reconfigure our layout before we expand our current building or move into a new one?
• What are the constraints for doing a building expansion: land availability, building codes, and city or zoning ordinances?
• If it is a new warehouse, do we build our own or find a pre-existing building? 
• Where should the new warehouse be located? Is a new location convenient for our customers and the employees who work here?  

When asked whether it was important to create a team around an expansion or building a new warehouse, Bray said it’s a situational decision.

There are many pros and cons for either scenario,” he says.  “I think that expansion can be good because it keeps all of your people and inventory in the same place, but it can also be very disruptive to your day-to-day business during the actual construction phase. A new warehouse gives you a blank canvas and allows you to design optimal layouts for efficiency that might not be possible with an expansion. The downside to this is physically having to move inventory and people once it is ready – which can be a huge challenge.”

Pitfalls abound in expanding a warehouse operation. Racking is one of the most important factors to consider when trying to configure a warehouse, according to Bray. He insists that you should try to squeeze the maximum capacity from the new location.

“This was a mistake that I made when we moved into our current location,” Bray said. “I chose to remove a few rows of warehouse racking from the original plans to create some nice, wide aisles that would make life easier for our forklift drivers. It wasn’t long before I regretted that decision and wished that we had the additional storage space. It’s much more difficult to change the layout of your warehouse when it’s fully operational than it is to get it right when you first move into the building. My advice would be to use every inch of space that you can – even if you have a lot of extra storage capacity for a while. You’ll grow into that space eventually.”

Advice shouldn’t be set in concrete but rather guide one in the direction that you need to follow. Even well-run businesses lose their way, and sometimes it turns into a horror story.

And it’s still one that Bray recalls to this day. (He declined to identify the company.)

I remember buying products from a particular company who asked me to come back and pick up my order in a few hours,” Bray said. “After questioning why I couldn’t have my order now, they explained that the warehouse was so full of inventory on the floors that they literally had to rearrange the entire warehouse to pull my order off the shelf. They took me into the back, and I saw that my product was literally buried underneath stacks of inventory that didn’t have a place to go. Needless to say, their warehouse team looked less than thrilled about pulling my order. I couldn’t imagine having to work in that environment every day.”

Bray conceded that it was a perfect example of how not to operate a distribution center.