Industry leaders examine the top ten issues that driving warehouse development in the future.
The conventional wisdom is that the Northampton-Rugby area is the best location for a national distribution centre, but it is increasingly expensive and difficult to get staff. Perhaps it’s time to think of other locations.
“Traditional wisdom states that it’s important to have a central DC in the Northampton /Rugby area but actually the location should not matter, provided you have a DC process that fulfils the e-commerce model and easy access to appropriate transport links,” says Eric Carter, solutions architect at Indigo Software. “The vast majority of DC partners will be using a pallet or parcel network anyway, which makes a central location less important. We’ve been working with a company that has a central DC in Fareham – it has proved an ideal location and they work with pallet networks and couriers to get UK wide coverage.”
Neil Adcock, consulting partner at Bis Henderson Consulting, argues that the big challenge for the future is going to be labour availability and finding ways to mitigate the impact of Brexit on the labour pool. Omni-channel retailers with heavy requirements for labour are now searching further afield for new locations with less competition for human resources, he says.
“To a great extent, this shift away from the traditional logistics heartland to locations further north, such as South Yorkshire, Staffordshire, Stoke and even further north has been facilitated by parcel carriers being able to offer improved services and later cut-offs for next-day services,” says Adcock.
He points out that some areas are better than others, “for instance, Warrington is becoming difficult as many more companies have moved in and are pulling on the same labour resource, whereas Stoke is a slightly easier option.”
Alex MacPherson, director of solution consultancy & account management at Manhattan Associates, points out that a major consideration is now becoming the proximity to the main parcel carriers hubs, especially for retailers with strong e-commerce volumes. “This has often lead to organisations that have deployed and grown in more provincial locations, and would have then matured into M1 corridor DC, are now remaining in their original location like the South West or North West.”
Brexit is bound to have an impact on where and how companies do logistics. But every business is different and the trick is understanding what Brexit will mean for your industry.
Tony Dobson chief executive of Snapfulfil is confident: “Although Brexit is a hot topic in warehousing, I’m still surprised by the forecasts. The perceived “doom” being foretold in reality has been totally wrong — our industry has never been busier, and I don’t anticipate it will slow down. The one issue we’ll need to watch: fewer immigrants from Eastern European countries could result in a deeper labour shortage.”
Both Eric Carter, of Indigo and Alex MacPherson of Manhattan have concerns about the impact on the workforce. Carter says: “Brexit is definitely having an impact on the logistics industry and the UK now has an ever-decreasing pool of skilled warehousing labour that no longer regards the UK as their preferred choice of a place to live and work. This has come about as a result of decreased currency values and all the negative publicity surrounding immigration. We are already seeing the impact of wage inflation as a result of the shrinking labour pool.”
MacPherson also points out that there are concerns over wage inflation as the challenges in recruitment could lead to a potential uplift costs for employers.
3: Urban logistics
There is growing demand for urban logistics sites, but what makes the perfect site?
Sally Duggleby, head of industrial and logistics occupier services at Savills, says: “This growth means an increased need for good sized yards for vans. This has meant that many traditional trade counter estates often aren’t suitable as the site densities aren’t low enough. In urban locations this could mean that multi storey development will start to take place. This will provide an increased number of van doors and parking over several floors.”
Graeme Munro, UK construction director at Gazeley, highlights the differences in requirement for different types of operation, for example, parcel carrier cross dock location, pick and Pack stockholding locations for same day delivery, and breakfast goods which need to be baked and delivered each day.
“Each will require specific requirements including appropriate mix of HGV docks and van docks, height for pick modules which might be disproportionately high (in institutional terms) when compared with floor area. For pick and pack the key question is where technology can be used or if there is a need for relatively high staffing levels with the need for proximity to good quality public transport or car parking and potentially a disproportionately high office content for both office use and amenity space.”
Progressive collaborative arrangements could also offer a solution to the problems surrounding urban deliveries,” says Martin O’Grady, director of the Unipart Supply Chain Consultancy.
“Initiatives have been undertaken on city perimeter consolidation centres to minimise the number of lorries and deliveries into shopping centres, but there is a huge opportunity to collaborate more widely by running multi-user facilities and organising ‘milk runs’ into dense urban areas using environmentally friendly and possibly, intelligent vehicles. We cannot continue sending vans and lorries, only 50 per cent full or less, into city centres – we need to collaborate to meet this challenge.
“If we are trying to get different commercial entities to work closely together to deliver their goods to a city location, then we are going to need pin-point cost and data security, through using IT resources and more intelligent means of tracking, monitoring and communicating between partners,” says O’Grady.
Manhattan’s Alex MacPherson says there have been recent discussions on how unused, out of town shopping locations could be used as fulfilment DCs or even Click & Collect points. “With the increasing trend to next day delivery becoming standard and the shift to offering same day delivery, these urban locations could fulfil that need and also help deal with the labour shortage previously mentioned above as there would be no long commute to warehouse parks. I think Argos is a very interesting example of how they have used urban locations like Sainsbury’s stores to fulfil click and collect orders. This has had a positive impact on not only their ability to fulfil more orders, but also sales in the grocery stores customers are collecting from.”
Warehouses have been getting bigger, higher and with more doors. Will Cooper, director in the building & project consultancy team at Savills, points to the height of warehouses going from 12.5 m to 15-18 m clear for units over 150,000 sq ft. “This gives flexibility to increase racking heights and additional mezzanine levels. This flexibility of course can only be realised with the appropriate changes to the floor specification of not only the uninform loads but also the racking leg loads. This trend is undoubtedly going to continue to meet occupier demands, but is going to cause stresses with planning where height is very often the reason for objections. On projects we are currently working on the size and flexibility of doors has been more of a consideration than how many.”
Gazeley’s Graeme Munro argues that with lack of land availability in the UK, alternatives have to be thought of outside the box. “Multi-level and subterranean DCs will have to be considered the future for better uses of land efficiency.
“The market needs to understand what a spec build for e-commerce should comprise. E-commerce hubs require fewer doors/more height but the market needs to decide if it is content to include this within what it considers to be an institutional norm.”
Eric Carter agrees that the trend towards larger, taller warehouse buildings will continue as property costs increase “and for larger operators where centralisation is important, this brings operational advantages. However, most SMEs don’t need a DC on that scale.
“For lots of e-commerce businesses, inventory is being pushed back up the supply chain and if you are a distributor, it’s good business practice to avoid holding large amounts of stock. It is estimated that holding £1m in stock over a year creates over £150K in servicing costs -inventory is the biggest single cost for a business, so holding greater volumes simply because there is available space isn’t commercially sensible. Having a taller DC able to hold more stock contradicts the wisdom of minimising the amount of stock being held to be as efficient as possible,” says Carter.
Snapfulfil’s Tony Dobson points to constraints with the big box model. “For instance, today’s larger warehouses have no choice but to rely more on automation. Large DCs typically require more workers, but our current business climate shows a downward trend in labour availability. In general, customers demand quicker fulfilment, and larger out-of-town DCs may not be the answer.”
Unipart’s Martin O’Grady says: “Never before has there been such a marked difference between the requirements for a warehouse and the needs of a fulfilment centre. Demand for fulfilment is rising rapidly, however, developers are still building big footprint structures that are very tall. That’s fine for traditional warehousing needs, dealing with pallets and cases, but when we look at a fulfilment operation where the emphasis is on picking operations, and where the high bay bulk store may only occupy 30 per cent of the overall space requirement, then we are having to maximise the cube of the building by putting in costly mezzanine floors.
“A future vision may be to have a campus development where there is a central, shared multi-user automated high-bay warehouse serving a community of low to medium height buildings which are geared to the needs of singles or few order fulfilment,” says O’Grady.
E-commerce is changing the way distribution centres are designed and companies need to think ahead to ensure that buildings will meet future needs.
Richard Cawston, managing director, supply chain – Europe at XPO Logistics, says: “The e-commerce revolution has had a significant impact on building requirements and design, compared with more traditional usage. The height, layout, physical assets and footprint of the space all need to interact within the solution design process to create the maximum efficiency and flexibility at the optimum operating cost. Logistics providers and their customers need to consider future volume growth and service levels, which could mean evolving toward mechanisation or automation — these things have a further effect on building cube and power provision. In addition, e-commerce operations tend to require a higher headcount, for which additional welfare areas such as toilet facilities, car parking and office space become necessary. Labour provisions, especially during peak periods over Black Friday and in the run-up to Christmas, mean that proximity to a large labour pool has become as important as the distance to carrier hubs for outbound distribution.”
Martin O’Grady of Unipart believes the traditional models were fine in the 80s and 90s, “but I see those models failing now and will fail even more so in the future, because the infrastructure will not be able to support the growth of e-commerce. There needs to be much more collaboration with multi-user facilities, consolidation of deliveries – particularly with parcels – and the industry will have to think more holistically, perhaps more as a supply chain for UK plc,” says O’Grady.
The big question is ‘how large a fulfilment centre is needed?’, says Neil Adcock of Bis Henderson. “It requires a business to plan in flexibility so as to cope with possible changes in order or product profiles. The key is to think about phases of growth. Perhaps, considering islands of automation or looking to get additional revenue from taking in someone else’s stock to make a newly acquired warehouse more cost efficient.”
Gazeley’s Graeme Munro points out that e-commerce is driving the complete design of the DCs today to work around the system being installed. “This requires significant forward planning in design and a number of considerations to be taken into play for the number of people working in these buildings to ensure the customers remain employer of choice to all employees.
Sally Duggleby of Savills, says: “In terms of locations, e-tailers are more flexible but still need to be close to population hubs and this opens up more of the country, particularly the north west and north east. London and the midlands continue to be important hubs for next day delivery service but e-tailers need to consider a nationwide network to aide faster delivery. E-commerce has also impacted the size of distribution hubs, double height dock doors are more usual, and some developers are starting to look at battery technology as well. Higher eaves have also become more popular to allow mezzanine development for garment hanging or small inventory.”
Steve Richmond, director – logistics systems at Jungheinrich, says: ““Significant improvements in efficiency and cost reduction will only be achieved by process and technology combined. In today’s distribution centre, everything interacts. There may be small incremental gains to be had from specific new systems or solutions but by linking everything together holistically, considering systems and processes, those small gains are multiplied – enabling organisations to meet the new customer service driven business model.
“While, in many cases, organisations may have similar business challenges and objectives, every organisation will have its own idiosyncrasies – from product range and service delivery, to customer expectation and company vision. As a result, there is no one-size-fits-all logistics model – and, as such, no one-size-fits-all automation solution. What is required is an intelligent consideration of business objectives combined with an end-to-end intralogistics solution – from trucks to racking, warehouse design and process change to software, systems integration to customer service.
“Business demands can change significantly within the life cycle of a standard product and it is therefore critical to look at every aspect of the logistics model, from ergonomics to productivity, serviceability, scalability and flexibility. In today’s ultra competitive e-commerce climate, businesses that do not consider solutions in the context of their end-to-end operations run the risk of perpetuating inefficiencies that they are running out of time to address,” says Richmond.
6: Automation and robotics
Richard Cawston, managing director, supply chain – Europe at XPO Logistics, highlights the trend toward more complex automated solutions, which is having an impact on the design of warehouses.
“Automation is aimed at minimising operating costs through improved productivity and customer service; it typically allows for much better utilisation of the available building cube, often with a smaller ground footprint and denser storage in higher structures. Future needs for automated solutions can be accommodated with a phased installation plan that extends the role of the equipment over time. Careful consideration must be made for the interaction between people and machinery during the design phase, allowing for operational continuity in a safe environment as automation is built out.”
Graeme Munro of Gazeley says: “Power is a key factor here. Do they have enough to power everything within and where else can power be generated from in the DC to assist providing the additional power whether it be through PV or battery storage etc. Floor loading and electrics have to be considered. Buildings will need higher max demand for electricity and they will increase in height. A building tailored for Automation will be at least 21m clear internal height,” says Munro.
Savills’s Sally Duggleby agrees. “More power will be required to run increased automation and robotics in warehouses. This will may mean some traditional warehouse locations become unattractive and non-traditional locations may increase in popularity due to their availability to provide the levels of power needed.”
And Will Cooper of Savills, says: “From a construction perspective, automation is going to have an impact on the required height of buildings as well as slab design. It is also going to have a significant effect on the electrical supplies the occupiers will require. There are however potential benefits to the increase in automation where there can be savings on heating, lighting and sprinkler systems (where installed for life safety).”
But Manhattan’s Alex MacPherson warns that while automation seems to be dominating discussions in most industries, there is still uncertainty when it comes to how the fulfilment landscape will look in three to five years. And Eric Carter of Indigo highlights the problems of retrofitting automation into an existing infrastructure and legacy equipment. Nevertheless, says Snapfulfil’s Tony Dobson: “Low cost robotics could actually increase productivity significantly, and the more we streamline warehouse processes, the smaller our DCs can become without negatively affecting operations.”
Steve Richmond of Jungheinrich highlights the fact that advancements in technology are very much underpinning the opportunity to build racking higher and unlock even more vertical space, with lift ability of very Narrow Aisle trucks continuing to rise. More organisations are also introducing Automated Guided Vehicles to their warehouses. AGVs allow loads to be safely transported on pre-determined routes and with complete accuracy due to recent innovation in guidance technology. AGVs provide numerous benefits to organisations; saving significant time and money when incorporated within routine operations, as well as improving warehouse efficiencies, reliability and safety.
“Another of the key drivers for automation is flexibility. Automated systems are being implemented to not only optimise operations, but as a way to allow for flexible solutions that are scalable. During uncertain economic climates, it is important that businesses are able to scale accordingly without having to overhaul the entire legacy infrastructure,” says Richmond.
The increase in the use of electric and battery powered equipment, both in the warehouse and on the road means the power requirements are increasing.
It’s one of the biggest challenges for the future, says Gazeley’s Graeme Munro. “Developers need to be creative in terms of generating more power on site through new innovation and technologies and plan in advance. This is definitely one of the biggest challenges for the future to be considered. Charging stations for vehicles will need to become more commonplace, with the possibility of installing charging stations at the doors for vehicles to speed-charge as they drop off.
“Automation and the emerging need for electrical charging for both HGVs and vans as well as provision for some charging for passenger vehicles in staff/visitor car parks will increase the average max demand for buildings. The system is likely to change, and the development of large parks may need to consider a combination of connected power and locally generated power. Institutional investors will need to understand and agree with a mix so that over time we move away from 100 per cent centrally generated power,” says Munro.
Will Cooper of Savills says: “At present, we are installing a significant number of car charging points over and above what is dictated by the local authorities. This is not only to attract occupiers, but to help future proof the buildings as this becomes more popular. We are not yet seeing the same level of demand for charging points in the yards for transport fleets, but this will soon be the norm. As a result, this is going to increase the electrical supplies that are going to be required on an already strained network. Early consideration into alternative supplies and generation/storage are a significant part of the due diligence we are undertaking on sites to provide for current and future occupier needs.”
Indigo’s Eric Carter believes the issue is not so much that there is a strain being placed on local systems, “because national suppliers have the capabilities, but that companies are actively trying to reduce their energy consumption. Most of our customers are using a mixture of efficient electrical devices and fossil fuel powered equipment e.g. counter balance trucks.”
And Snapfulfil’s Tony Dobson argues that battery power and recharging capabilities are improving dramatically, placing less of a burden on DC electricity. “Expect these electric capabilities to have a significant impact on vehicles both inside the warehouse and across the supply chain.”
8: IT systems
Warehouse management systems have been around for more than 30 years so it is easy to assume that everybody uses one. But, paper-based systems are more common than many people expect.
“In any new build warehouse, it would be a tragedy not to embrace the opportunity to introduce some form of data capture and WMS capability from the outset and yet the sad reality is a lot of companies will still do this, as I experienced very recently on a site visit,” says Eric Carter of Indigo. “IT needs to be at the centre of all the decision making in a business because this is the best way to identify a great process. Amazon is a classic example – they took years to make any profit but now, as a result of all that effort into IT and infrastructure 15 years ago, it’s gravy every month!”
Gazeley’s Graeme Munro focuses on the use of Q-Coding in DCs for operations of driverless forklifts, in particular where they are located to allow vehicles to safely drive around the DC.
And he says: “All new large format buildings and urban logistics buildings should consider carefully the delivery of resilient data supply. It should be a key part of technical DD prior to the purchase of a development site/park as without diverse and resilient data connection tenants are likely to look elsewhere,” says Munro.
Alex MacPherson of Manhattan highlights the move to hand held terminals using new display technologies based on Android or Windows that can simulate a simpler user experience akin to that you would find on a smartphone. “The movement from the traditional ‘green and black’ display screens will also enable a much richer interface that will reduce training times. Innovative new technologies like Google glasses or haptic controls, as well as drones to manage areas such as cycle counting are also on the horizon for the warehouse.”
Tony Dobson of Snapfulfil points out that most of the cutting-edge technologies currently available to warehouses won’t do much to streamline operations. “Before you invest in advanced tech, consider how you might benefit from an inexpensive, quick-to-implement cloud-based WMS. Warehouse management systems empower distribution centres to make data-driven decisions about their operations, fostering maximum efficiency.”
9. Materials handling
Innovations in materials handling equipment are going to impact the warehouse of the future. And the future is already here, says Graeme Munro of Gazeley. “Driverless trucks, Driverless Forklifts. The future is already here. A central stockholding allowing picking and despatching of product from a single source will enable traditional retailers to reduce inventory and increase their service across all channels. Therefore, Mini Loads/Shuttles/Pouch Sortation and the like is the current way of working. Those without this technology are not likely to survive. Those that cannot afford it need to plan carefully how they can acquire the technology on a basis that they can afford,” says Munro.
Jungheinrich’s Steve Richmond says: “One of the most important developments in the last ten years within the materials handling industry has been lithium-ion technology.
“With the demand for more flexible working and 24/7 shift operation, what makes lithium-ion technology so important is the potential it holds to change the way trucks are operated. In addition to high performance, the advantages of lithium-ion technology include faster charging times, zero maintenance and a particularly long product life. Faster charging times allow operatives the opportunity to charge during breaks, creating a more flexible working environment allowing for more commonly seen 24/7 operations to run smoothly.
“State-of-the-art lithium-ion technology has revolutionised not only the efficiency of materials handling equipment but also the safety of operators and pedestrians moving through the warehouse. The virtually maintenance free lithium-ion technology eliminates the need for a second battery in the majority of applications, which removes the need for battery changes and additional battery changing equipment that can leave operators open to a greater risk of injury.
“Battery performance can also be permanently monitored by innovative, integrated battery management systems. These systems allow operatives and managers to monitor usage and plan efficient charging times. They will also flag any potential errors and/ or servicing requirements, so any potential hazards can be responded to proactively,” says Richmond.
Companies are under pressure to improve environmental performance, but is the zero carbon DC achievable?
“Yes,” says Will Cooper of Savills. “It is achievable and it has been done. However, for a speculative development to be carbon neutral there needs to be significant investment from the developer. On an owner occupier or built-to-suit development where the lifecycle cost of the unit can be assessed it is more realistic, subject to how the operational carbon is considered.”
Graeme Munro of Gazeley, agrees: “Yes is achievable but the Dc has to be well designed in advance with all the latest technologies available to the market already introduced.
“Yes, but it will be a balance between the ability to generate and store power (affordable battery technology is key) and the energy demands of the high-tech warehouse. Packaging waste will also increase demands to manage that element of the low carbon economy.”
Indigo’s Eric Carter, highlights the scale of the challenge: “The amount of CO2 generated when creating a 1m2 area of concrete is nearly 160kg and many new warehouses will be 1km2 in area. Companies that have environmental credentials at the heart of their brand decision making will want to make the investments needed to swap steel for wood and have a living roof for example, but the vast majority won’t see the value in going to these lengths.”
This article first appeared in Logistics Manager, May 2018