Executive Briefings

When the E-commerce Explosion Leads to Raising the Roof on Warehouses

For 130 years, Chicago and New York City have been locked in a battle of the skyscrapers. Nine of the tallest buildings in the U.S., as well as more than one-half of the nation's towers greater than 785 feet, were built in just those two cities.

When the E-commerce Explosion Leads to Raising the Roof on Warehouses

Researchers at Rutgers University have actually done studies that show when Chicago builds a new tall building, New York soon follows suit - and vice versa. The researchers determined two factors influenced the healthy rivalry: economics and a good old sense of competition. First, it makes good business sense to build taller. There's simply more space to rent, which translates to bigger revenues. Second, who doesn't want their city to be tops when it comes to soaring towers?

You could say the same scenario is playing out in warehouses across the U.S. as companies build taller warehouses. It's a many-faceted trend: Real estate needs are changing as companies move distribution centers closer to their customers. Thanks to the rise of e-commerce, the sheer quantity of SKUs that each warehouse must manage has exploded. And, as always, companies are striving to become more efficient as they serve a diverse customer base that demands their products faster, cheaper and more customized.

A growing number of companies are solving these problems by building warehouses that are 40 feet tall or more (compared to the typical 32 feet), giving them space to grow up when it doesn't necessarily make sense to grow out. The Wall Street Journal recently wrote an article about the movement, focusing on real estate firm Prologis's new one-million-square-foot warehouse in Tracy, Calif.

Of course, when you run an e-commerce business, as the article points out, you simply need more space than a traditional warehouse provides in order to stock the vast quantity of products your customers require.

And a 40-foot ceiling allows you to install three levels of pick module mezzanines versus the traditional two, tripling the amount of useable space in your warehouse. In other words, it's a very cost-efficient solution to the problem, especially when companies begin building distribution centers in major metropolitan areas where real estate is at a premium.

It makes much more sense to build up than out. But it's not just efficient in terms of real estate. It's also more efficient for your picking operations. As an ever-more rapid pick, pack and ship cycle becomes the norm, the strategy for storing and picking inventory becomes even more important. By building up, warehouses can accommodate more densely packed inventory, as opposed to products that sprawl across an expansive warehouse floor.

When you go taller, you need to install the appropriate equipment in your warehouse to take the fullest advantage of the new configuration. Automated storage and retrieval systems (AS/RS) are an invaluable asset in any warehouse, let alone when inventory is placed higher than in a traditional setup. They allow you to increase density not only by letting you pick from higher levels; they also function just fine in a narrow aisle, so you can place racks closer together. They're also quick and accurate, so you can trust that orders, no matter how complex, will be fulfilled in a timely manner and error-free. An AS/RS is also a safer way to pick product that's higher up because it is a “goods-to-person” method of order fulfillment.  Since the product is automatically brought to the order picker, you don't have to worry about an employee balancing as he attempts to retrieve the order from a high storage location. The AS/RS brings product to your employees, simplifying their jobs and speeding up the process.

So what does this look like in practice? Shoe manufacturer SKECHERS USA had five different distribution centers in California that it wanted to unify into a single facility. That facility, however, needed to be able to accommodate an inventory of nearly 70,000 SKUs – everything from boots to sandals to sneakers – to fulfill their robust e-commerce business. SKECHERS USA decided to build a 1.82-million-square-foot distribution center with a 40-foot roof in Moreno Valley, Calif. In that facility, SKECHERS USA installed a 12-aisle mini-load AS/RS system that includes 58,000-square-feet of storage space and almost 106,000 storage positions, as well as a 44-aisle mini-load AS/RS system with 150,000-square-feet of storage space and more than 257,000 storage positions. The building was outfitted with a 135,000-square-foot mezzanine, as well, that helped SKECHERS USA maximize use of the taller space.

With the denser, consolidated space, SKECHERS USA is now able to process 17,000 pairs of shoes every hour, which is twice its previous output – and it does so with 99.7 percent accuracy. What's more, it has the capacity to grow its operations by 25 percent as its business expands.

If, like SKECHERS USA, you decide you're going to transition to a taller warehouse, you'll want to find a partner who can help you do a thorough analysis of your environment, inventory and equipment needs so you end up with not just new tools, but an actual, workable solution. The right partner will help you review the available technology to apply the right combination to your warehouse.

While the trend toward taller warehouses is still a trickle rather than a full-on stampede (about 9.4 percent of warehouses are between 36- and 40-feet-tall, and 11 percent are taller than 40), it is gaining strength. The combination of a large SKU base with the need to drive down land costs (not to mention limited land availability) makes a taller warehouse a more economically viable option.

As e-commerce business grows – and by the U.S. Census Bureau's tally, it accounted for 6.7 percent of retail sales in the fourth quarter of 2014 – so too will warehouses to accommodate the expanding inventory. Who knows? The competitions in the future might not be between cities and their skyscrapers, but rather companies and their warehouses – monoliths filled with shoes, staplers and swimsuits ready to be shipped to eager customers throughout the country.

Source: Wynright Corporation

Researchers at Rutgers University have actually done studies that show when Chicago builds a new tall building, New York soon follows suit - and vice versa. The researchers determined two factors influenced the healthy rivalry: economics and a good old sense of competition. First, it makes good business sense to build taller. There's simply more space to rent, which translates to bigger revenues. Second, who doesn't want their city to be tops when it comes to soaring towers?

You could say the same scenario is playing out in warehouses across the U.S. as companies build taller warehouses. It's a many-faceted trend: Real estate needs are changing as companies move distribution centers closer to their customers. Thanks to the rise of e-commerce, the sheer quantity of SKUs that each warehouse must manage has exploded. And, as always, companies are striving to become more efficient as they serve a diverse customer base that demands their products faster, cheaper and more customized.

A growing number of companies are solving these problems by building warehouses that are 40 feet tall or more (compared to the typical 32 feet), giving them space to grow up when it doesn't necessarily make sense to grow out. The Wall Street Journal recently wrote an article about the movement, focusing on real estate firm Prologis's new one-million-square-foot warehouse in Tracy, Calif.

Of course, when you run an e-commerce business, as the article points out, you simply need more space than a traditional warehouse provides in order to stock the vast quantity of products your customers require.

And a 40-foot ceiling allows you to install three levels of pick module mezzanines versus the traditional two, tripling the amount of useable space in your warehouse. In other words, it's a very cost-efficient solution to the problem, especially when companies begin building distribution centers in major metropolitan areas where real estate is at a premium.

It makes much more sense to build up than out. But it's not just efficient in terms of real estate. It's also more efficient for your picking operations. As an ever-more rapid pick, pack and ship cycle becomes the norm, the strategy for storing and picking inventory becomes even more important. By building up, warehouses can accommodate more densely packed inventory, as opposed to products that sprawl across an expansive warehouse floor.

When you go taller, you need to install the appropriate equipment in your warehouse to take the fullest advantage of the new configuration. Automated storage and retrieval systems (AS/RS) are an invaluable asset in any warehouse, let alone when inventory is placed higher than in a traditional setup. They allow you to increase density not only by letting you pick from higher levels; they also function just fine in a narrow aisle, so you can place racks closer together. They're also quick and accurate, so you can trust that orders, no matter how complex, will be fulfilled in a timely manner and error-free. An AS/RS is also a safer way to pick product that's higher up because it is a “goods-to-person” method of order fulfillment.  Since the product is automatically brought to the order picker, you don't have to worry about an employee balancing as he attempts to retrieve the order from a high storage location. The AS/RS brings product to your employees, simplifying their jobs and speeding up the process.

So what does this look like in practice? Shoe manufacturer SKECHERS USA had five different distribution centers in California that it wanted to unify into a single facility. That facility, however, needed to be able to accommodate an inventory of nearly 70,000 SKUs – everything from boots to sandals to sneakers – to fulfill their robust e-commerce business. SKECHERS USA decided to build a 1.82-million-square-foot distribution center with a 40-foot roof in Moreno Valley, Calif. In that facility, SKECHERS USA installed a 12-aisle mini-load AS/RS system that includes 58,000-square-feet of storage space and almost 106,000 storage positions, as well as a 44-aisle mini-load AS/RS system with 150,000-square-feet of storage space and more than 257,000 storage positions. The building was outfitted with a 135,000-square-foot mezzanine, as well, that helped SKECHERS USA maximize use of the taller space.

With the denser, consolidated space, SKECHERS USA is now able to process 17,000 pairs of shoes every hour, which is twice its previous output – and it does so with 99.7 percent accuracy. What's more, it has the capacity to grow its operations by 25 percent as its business expands.

If, like SKECHERS USA, you decide you're going to transition to a taller warehouse, you'll want to find a partner who can help you do a thorough analysis of your environment, inventory and equipment needs so you end up with not just new tools, but an actual, workable solution. The right partner will help you review the available technology to apply the right combination to your warehouse.

While the trend toward taller warehouses is still a trickle rather than a full-on stampede (about 9.4 percent of warehouses are between 36- and 40-feet-tall, and 11 percent are taller than 40), it is gaining strength. The combination of a large SKU base with the need to drive down land costs (not to mention limited land availability) makes a taller warehouse a more economically viable option.

As e-commerce business grows – and by the U.S. Census Bureau's tally, it accounted for 6.7 percent of retail sales in the fourth quarter of 2014 – so too will warehouses to accommodate the expanding inventory. Who knows? The competitions in the future might not be between cities and their skyscrapers, but rather companies and their warehouses – monoliths filled with shoes, staplers and swimsuits ready to be shipped to eager customers throughout the country.

Source: Wynright Corporation

When the E-commerce Explosion Leads to Raising the Roof on Warehouses