transportation costs could be other factors affecting a
design. “That leads to a more in-depth conversation to
reach an understanding of the impact on operations,”
he says.
Giangrande is the author of a white paper for Fortna
titled “Profitable Distribution System Design” that out-
lines the steps involved in revamping a warehouse
operation. The first step is “Begin with the end in
mind.”
As Giangrande explains, that means asking questions
like what is the business case—is it to reduce redundant
inventory, consolidate processes, or improve customer
service response? “That’s really critical,” he says,
“because it helps develop the framework over what to
do. That’s where we start.”
Setting objectives also requires some level of fore-
sight into how business flowing through a DC is likely
to evolve. “What are the numbers of orders, the num-
ber of lines per order, and how is that likely to change
over time?” asks Giangrande.
It’s important to engage not just distribution, logis-
tics, and transportation in the discussion, but all the
parts of the business that will rely on the system’s suc-
cess. Jimmy Benefield, director of strategy and opera-
tions for enVista, another supply chain consulting spe-
cialist, says, “One of the first things we do is sit down at
a roundtable with different stakeholders within the
company—operations, but also sales and finance. We
talk about where they are heading. Are they looking for
acquisitions or will there be a change in the types of
product in the next three to five years? We want to
make sure we are not missing things.”
That’s particularly important if operations are likely
to change substantially. To make the point,
Giangrande cites the experience of two clients. One, a
sports cap distributor, is expanding its product line
from one sport to several. “What that means is that
while the legacy business is growing, the majority of
growth will be from a surge of orders for the new
lines,” he says. In contrast, another customer projects a
steady 3 percent annual growth rate, but wants to con-
solidate two DCs into a single existing facility. Both
companies needed complex material handling sys-
tems, but the designs were based on very different
business drivers.
DO LOOK BACK
While a detailed goal based on both tactical and strategic plans should be at the heart of the planning process,
knowing where you are going and how to get there
starts with understanding where you’ve been.
Designing an appropriate system requires a complete
understanding of current operations, and that
demands careful analysis of detailed data, preferably
for a full year of operations.
“We’re big proponents of focusing on a data-driven
design,” Giangrande says. It is not just hard numbers—
SKUs, order profiles, and such—but a feet-on-the-floor
look at current processes, which sometimes can yield
surprises.
Giangrande says the data gathering should include
interviews with operations personnel—supervisors
and line staff—who often have a different view of current processes than managers do. “Managers may be
out of touch with what is actually happening on the
floor,” he warns. That process, while perhaps time consuming, assures that the system plan is based on reality
rather than perception.
That does not necessarily mean that current process-
es provide the best model for a new system, say both
Giangrande and Benefield. After all, the very fact that a
new or upgraded system is in the works implies that
current operations cannot meet current or expected
business requirements. Further, improvements in
material handling equipment, controls, and software
may offer the potential for gains well beyond what
installed systems could provide. “We used to collect
data to try to understand order profiles, and we still do
that,” Benefield says. “But we take a hard look at the
processes from a lean standpoint. We look at the poten-
tial for eliminating touches.”
Giangrande recommends looking at order profiles
over at least a 12-month period, which will show sea-
sonal or other cyclical trends or unusual spikes. He
warns against relying too heavily on averages in design-
ing a system. In his white paper, he writes, “If your
business is seasonal and/or experiences cyclical trends,
planning to averages will most likely yield a design that
works very well except at the time you need it to per-
form the most.”
Benefield also advocates looking at a full year’s order
