basictraining
BY ART VAN BODEGRAVEN AND
KENNETH B. ACKERMAN

gearing up for growth

IT MAY SEEM OUT OF TOUCH TO TALK ABOUT growth and expansion when cable news assures us daily that the economy will likely remain in the doldrums for some time to come. Truth is, some— maybe many—companies and industries are doing just fine, thank you, in this difficult period. So they’ve got to face up to planning for growth—even big, fast growth.

Then, there’s the prospect of what CSCMP’s Rick
Blasgen calls the “post-recession rally,” where the
economy comes roaring back, unleashing months’

worth of pent-up demand. One way or another, distribution operations are going to have to gear up to meet that demand, without missing a beat in their daily customer service operations.

Soaring demand may make the CFO’s pulse quicken, but for DC managers, it can be a nightmare. We’ve all seen what happens when facilities are pushed beyond the limits of their capacity—the inventory piled up in the aisles, the equipment breakdowns, the long lines at the loading dock. But these problems are avoidable; all it takes is vision, forward planning, and the courage to invest in extra space.

You can go through whatever facility sizing and design process you choose if you’re working in a no- or low-growth world. But the stakes are higher if you’re looking at double- or even triple-digit growth. Worse yet, the pace and extent of growth may not lend itself to conventional planning. So how are you to plan facilities in such an environment? What follows is some advice.

Plan for the peaks
Establishing a design capacity for the new building
is a critical first step, and two elements are “musts”
in the process. One is to put as many stakes in the
ground as possible for overall growth, even though
the future is unknowable. The other is to size the
peaks—not weekly peaks, but daily, maybe even
hourly, peaks.

You’ve got to establish assumptions that everyone can buy into for growth rates that look at a reasonable time horizon. Five years is probably not enough. A two-year build would leave only a three-year useful life, so a seven-year horizon ought to be the minimum.

Establishing peak capacity is also critical. Sensible planning requires factoring in the impact of additional solutions—e.g., added shifts, overtime, or 3PL support—to estimate a practical peak planning capacity.

This is not an academic exercise. Real life will intrude, usually at the worst possible time. So in the course of executing an orderly growth plan, you’ve got to be prepared to do more than build the facility of the future. There are a number of tactics that can help limit the damage from the eruptions that characterize a fast-growth enterprise. Handling the unexpected becomes enormously easier when the probability of significant growth and expansion is factored into the facility plan.

One possibility is to acquire land early, possibly more than you’ll need even if ultimate use is decades down the road. Land is rarely less expensive in the future than it is in the present. In the United States, the tax consequences of the acquisition can be reduced significantly by converting the land to agricultural use until it is needed.

A basic facility in a fast-growth enterprise should include empty space reserved for the installation of advanced technology, which permits the parallel installation of the technology while maintaining “normal” operations. While designing for excess space may seem counterintuitive, the payback can be enormous. Also, the space investment permits you to postpone major technology or material han-