Three Steps to Optimize a Distribution Center

Every business wants to see growth, however, sometimes too much too quickly can put the DC (Distribution Center) under a lot of pressure. Sometimes, this occurs to the point where the DC becomes obsolete. Companies should look into ways to avoid this, by prepping their DC optimally for the long run, especially if they are stretched, or at least expect to grow in the future.

The best approach according to many industry consultants and experts is to follow the three step method to optimize your DC, and to gain the capacity to face up to any level of future demand.

Step 1. Data Optimization.
During this step, it is vital that KPI’s (Key Performance Indicators) are established by a consultancy, in order to establish goals in relation to the supply chain. These will serve as a benchmark for any progress. These can be orientated around four main KPI’s:

1. Required Storage Space
2. Capacities of Equipment and Facilities
3. Labor Cost Forecasting
4. Estimates of Productivity per Functional Department

Once the consultancy has produced solid KPI’s and everyone is in agreement over them, the next positive step is to perform a deep analysis of the operational data, in order to define how the optimized product flow should look. When breaking it down into each functional department, in combination with order and product characteristics, the distribution requirements of the future should become apparent.

This process will have a positive effect on both short and long term efficiencies in functional departments including; put away, receiving, replenishment, reserve storage, value added and picking. It will also help with decisions relating to 3PL (Third Party Logistics) services.

Step 2. Detailed Design.
This is where the three main concepts for facility layout can be refined, allowing for growth projections for the future. Here are some important scenarios that may arise during this process:
• Consider potential acquisitions that may affect how you grow in the future and also handling capabilities.
• Plans for introducing new products or online offers that will effect requirements for fulfillment.
• Extra operational or business changes which have occurred and which may have an effect on the final design concept.

Step 3. Implementation.
This step sees the new facilities take shape, with finalized installation drawings, new equipment as well as computer hardware and software.
During this phase it is important to oversee the seamless integration of the new systems, and once these are installed they should be thoroughly tested.

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