The Aging Warehouse
Date: Wednesday, December 5, 2018
Source: Inbound Logistics
With the economy firing on all cylinders, it is not uncommon to find warehouses bursting at the seams. When the time arrives to consider investing in additional space, many distribution centers, retailers, and businesses dependent on warehouses face a dilemma: Should the organization move to a new facility, build an addition, or try to retrofit an older warehouse? And, in the case of a retrofit or addition, what can be done to make an aging or existing warehouse space more suitable?
A new facility is often the most glamorous choice. In addition to modern amenities and efficient spaces touted as embracing the needs of e-commerce and automation, a new facility often gives a business the opportunity to identify the right building to meet its unique needs.
Yes, it can be time-consuming and introduce undesirable capital costs, but a new warehouse also offers a clean slate for organizing the space to maximize inventory requirements.
In today’s market, however, this option can come with unanticipated constraints beyond just the cost and timeline associated with new construction.
According to real estate services firm CBRE, the availability of warehouse, distribution and other industrial property stands at just 7.1 percent as of October 2018, the lowest level since 2000. With CBRE’s data also showing demand exceeding supply by 34 million square feet during the past year, finding a new facility may be challenging – and costly, given current demand for space.
If a new facility is not in the cards, then perhaps an up or out retrofit or an expansion offers the best solution to address your organization’s current and future capacity needs.
One of the best ways to make an aging warehouse more suitable for today’s business needs is by incorporating technology to its design and operations. Choosing and deploying the right technology in the right environment at the right time, particularly when planning a retrofit or addition, can contribute almost as much to the success of a company as recruiting the best people to drive continuous improvement.
What steps should an organization take to modernize an aging warehouse from a technology perspective? After upgrading the company’s communications network (phones and internet), a warehouse management system (WMS) is usually considered the first step toward introducing useful technology to the warehouse. Implementing a WMS most often results in streamlining warehouse processes, finding efficiencies and reducing shipping errors. Without a WMS or WCS in place, the adoption of other technologies, especially automated materials handling equipment such as conveyors, carousels, vertical lifts and robotics, is premature.
A recent study conducted by the Warehousing Education and Research Council (WERC) illustrates the opportunity a WMS can play for many aging warehouses. According to the survey, and our internal data supports WERC’s findings, one-third of the companies participating in the survey have not implemented a WMS. Today’s supply chains are rapidly completing digital transformations to become more efficient and cost-effective, and to play a part in this process, warehouses and distribution centers must get on board the technology train.
While competition is fierce for new warehouse space, the approximately 1 billion square feet of modern facilities built in the past decade account for just 4 percent of what is available in the U.S.; aging warehouse buildings are much more plentiful.
In a separate study earlier this year, CBRE found the average age of a warehouse in this country is 34 years and more than 30 percent of buildings are more than 50 years old.
While age is certainly an issue to consider, warehouse location may equally impact a decision to retrofit. In densely populated metropolitan areas, close proximity to suppliers and customers is valuable but available land to build or expand is often scarce and comes at a premium.
This can make the decision to retrofit much more palatable. For example, there may be significant incentive to retrofit an aging facility in New Jersey, since the state is located with a day’s drive of more than 40 percent of the U.S. population.
In fact, CBRE’s research finds that warehouses in Northern New Jersey are, on average, the oldest in the U.S., at 57 years old. Pittsburgh is not far behind, with an average age of 56 years, followed by Boston and Philadelphia, at 44 years for each. Distributors in the mid-Atlantic and Northeastern region would be wise to consider retrofitting their space and incorporating cutting-edge technology, like a proper WMS, to make an aging space workable.
Based on my observations, retrofit and expansion are typically the preferred choices among a large number of distributors, especially those who own buildings. While the warehouses may be older, they provide distributors with an equity position that makes it more difficult to move on from an antiquated building they already own. A warehouse retrofit or addition is often much more effective in addressing current and future space constraints and is typically completed more quickly and at a fraction of the cost.
Proper space planning is a critical consideration, especially when exploring an expansion. Throughout my career I have witnessed some awkward warehouse building additions that resulted in labyrinthine designs. While these expansions may increase capacity and maximize existing space, they can all too often encumber the easy flow of stock, obstruct access, attract clutter, and impede efficiencies. If this scenario sounds familiar to you, especially if your business still relies on a paper-based system, then consider a WMS during expansion that embraces the flexibility unique to your warehouse space.
Evaluating WMS systems on the market today and understanding the required integrations and customizations can feel like a daunting task. The ideal WMS vendor will assess your business needs and growth goals, providing you with choices that can help streamline operations. This is crucial for ensuring you get the biggest bang for your buck from an expansion or retrofit that includes a new WMS. Admittedly, this will take time and effort, but the payoff in productivity, inventory visibility and control, and customer service will be well worth the effort when complete.
For those distributors facing the decision of whether to move to a new facility, build an addition, or consider a retrofit of an existing warehouse, investing in an older building may hold significant economic benefit in today’s red-hot market. Technology enhancements, such as upgrading communications networks, deploying a WMS solution, instituting spatial planning, and installing more efficient lighting systems can go a long way to modernize and maximize an older facility.