How Big Should I Build My Distribution Center? Successful Implementation

By Steve Johnson, Johnson Stephens Consulting, Inc.

The client project team is excited, the detailed design of the material handling equipment (MHE) systems has been accepted for implementation and now the Vice President of Distribution is eager to get the system up and running. Nevertheless, you are not quite done with your “detailing” before you start implementing. Successful Implementation means bringing the “design to life!” Critical steps need to be followed to successfully implement what you have designed and to ensure that you obtain the intended specified performance from your MHE systems:

Specify – The detailed design layout may be the “heart” of the MHE system on paper, but the MHE Detailed Specifications function as the “brain.” Detailed Specifications need to be prepared that specify how each piece of MHE should operate. This not only includes physical characteristics for each item, but how the item is to operate within the total system. It is imperative to develop specifications such that when proposals and quotations are solicited, an “apples to apples” comparison process can result.

Many well intended systems have great looking layouts, but no specifications to actually bring the layout to its intended “life” and to ensure success! Key components of an MHE Specifications document includes a concept of operations (to indicate how the entire system is to function), detailed layouts/drawings, project schedule, technical specifications (physical, controls, flow rate requirements), and purchasing requirements specific to your client.

Each Request for proposal (RFP) should contain a requirement for submission of spare parts recommendations and MHE systems warranty descriptions (materials and labor!). This document is issued as an RFP with uniform pricing sheets contained within (a great way to be able to compare proposals as “apples to apples!”). You should think of the RFP document as the defining, living representation of your proposed MHE system.

Bid & Select – The RFP document is then issued to the MHE supplier community for pricing and bids to be developed and submitted. Utilizing a competitive bid process in this step has proven to save clients typically 15% to 20% in capital investment vs. no-bid MHE system acquisition. The MHE suppliers should be pre-qualified and can be MHE systems integrators or MHE manufacturers or a combination of both. A consultant can help you decide what your bid list should look like based on the complexity and other factors regarding your system.
Bids are received in sealed packages and opened for comparison. Resist the temptation to go right to the pricing page of each bid and stop there! There is substantial work left to review the bids in detail and ensure that they are equivalent in what they provide before you let the pricing influence you. In addition to the base system comparison, “Value Engineering” options developed by suppliers are also compared.

A scoring matrix should be utilized to compare not only price, but adherence to specifications, quality, schedule compliance, MHE brand quality, past performance/experience, warehouse control systems (WCS), and other factors. Weight each of these factors and score the bids before you make a decision. Plan to narrow the field to two finalists, have vendor presentations, and visit previous installations and references. It is important in this step to “kick the tires” thoroughly before you make your decision.

Once your decision is made, follow-up with your specific contract to best ensure that all parties understand the terms and conditions. Now it’s time to make this reality!

Implement – Implementation must be navigated carefully to make sure that your MHE systems function as designed. This is best accomplished by utilizing the consultant to review shop/installation drawings from each supplier, provide periodic or full time project oversight/visits (making sure what you purchased is implemented as intended, and happens according to the project schedule), and ensure coordination with the architect and building contractors.

Rely on your consulting professional to develop formal, written acceptance testing procedures and plans for each MHE subsystem. A punch list is developed through this process as you reach project conclusion (if you adopt a “Zero Punch” approach with your supplier, then at the end of the project, all items have been resolved and do not require extra time).

Conduct thorough acceptance testing before you sign off on the installation. This includes “volume testing” your system to ensure that the MHE system throughput objectives are not only met, but are truly sustained for extended time periods at peak design levels.

The MHE supplier should provide you with “As-Built” drawings shortly after the end of your project. You may also decide to transition to the new layout (depending upon whether this is a “Greenfield” new building or retrofit/renovation) using a jointly developed consultant/client plan.

Remember that your consultant likely implements MHE designs frequently, most clients only get to do this once and it better be right. Use the experienced resources available to you to avoid pitfalls and transition mistakes.

The final step (which is often overlooked) after move-in is to recognize and celebrate the achievements of your project team, both internal and external. Remember that your consultant and suppliers are interested in a relationship with your company, not just projects, and that will serve you well into your future as your needs change.

Steve Johnson is a founding Principal of Johnson Stephens Consulting, Inc. and a frequent contributor to publications from top supply chain operations trade organizations such as the Material Handling Industry of America. He is the 2009-2010 President of the Association of Professional Material Handling Consultants (APMHC), a Professional Society of the Material Handling Industry of America.

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