Running Out of Storage Space?

Consider the Pros & Cons of New Construction vs. A Retrofit

Derek Rickard, Contributor

With the growing popularity of e-commerce and consumer demands for greater variety, many warehouses and distribution centers now have to store more products in their inventory than ever before. Such SKU proliferation means some facilities that once housed a few hundred units are dealing with several thousand. Within traditional, manual warehouses, they need to find space to accommodate everything, as well as coordinate the efficient flow of products across scrambling, overworked employees.

A warehouse can only house so much within its four walls. Facilities will often reach a tipping point where their current building and processes can no longer support their inventory levels, let alone accommodate future growth. It is at this point that many start seriously looking at not only automating, but also moving and building a new, larger facility to improve storage capacity and efficiency. But, automated systems can also integrate with existing operations as working “islands of automation.” Organizations need to weigh the pros and cons of new construction vs. a retrofit prior to making any investment.

New Construction Provides a Fresh Start

When companies opt to build a whole new distribution center, they have the opportunity to design from square one. They can add as much floor space as needed within the desired plot of land. Moreover, they can design for the future, based on anticipated storage capacity and current growth trajectories. If they are introducing automation for the first time, they can automate the entire, end-to-end process, from receiving through storage, picking and shipping.

New construction is what American supermarket chain Kroger decided to do when it built its award-winning liquid milk plant, dubbed Mountain View Foods. Designed with a low reliance on human involvement in mind, the Mountain View Foods facility has a comprehensive automated warehouse solution centered around a robotic system for picking stacks of plastic dairy cases. Individual crates come directly from the manufacturing side of the facility to be stored and picked from the distribution side. Orders are picked in sequence and then palletized for truck loading, automating the process from one end of the building to the other. The end-to-end system can store up to 36,000 cases and pick 32,000 cases per day. A warehouse control system (WCS) controls all order processing and robot movements. The WCS also collects data to support operations analysis and traceability for food safety.

New Construction Requires Large Investments

As expected, new construction is very expensive, requiring significant investment between the land and actual construction of the warehouse—not to mention time. The costs can vary, depending on geographic location; the type of warehouse (e.g., refrigerated facilities will be more expensive); and construction method (e.g., concrete construction tends to be more expensive than steel).

With construction projects getting larger, the costs only grow as well. According to a report by Dodge Data & Analytics, total square footage of warehouse construction starts has grown from 49 million sq ft in 2010 to nearly 300 million sq ft today. Once construction is complete, then comes the challenge of uprooting operations. Unless planned properly, companies can face business interruptions in the move from the old facility to the new one.

Retrofit Makes the Best Use of Existing Space

By retrofitting an existing facility with a high-density robotic material handling system, warehouses can better utilize their available space, while offsetting the costs of new construction. Many that choose to retrofit are able to use up to 50% less space than traditional storage methods, leaving room for continued growth.

For example, warehouses can utilize a floor-based storage system, in which goods are stacked on the warehouse floor and retrieved from overhead. This eliminates the need for space-wasting aisles. Moreover, by using a modular, phased implementation, facilities can gradually expand their levels of automation over time, keeping costs down for a faster return on investment.

Olvi, a 140-year-old, traditional brewery in Finland, previously struggled with the diversification of both its packaging and products. In response to consumer demand, Olvi’s product range grew from 200 to 350 SKUs—with continued growth expected ahead. By bringing in an automated order picking system, Olvi was able to optimize its existing warehouse capacity and boost picking efficiency. Using a combination of robotics and a WCS, the system rapidly picks products stored in stacked pallets on the warehouse floor. Through this space-saving design, Olvi can now store up to 13,800 pallets—doubling its previously available space. Additional updates were made to automate the handling of full trays of Olvi’s beverages and to accommodate an increase in annual capacity from 100 million to 178 million liters of product.

Retrofitting Means Staying Put

When installing automation, warehouses and distribution centers have to work with their solution provider to determine how the new systems will integrate with the manual operations. So, while a huge benefit, these islands of automation take considerable thought. And, by staying in their current location, facilities struggling with labor shortage are left with the very same workforce pool. Because even with automation taking over the majority of material handling operations, there are still warehouse jobs where human intervention is required, such as in supervising automation or planning operations. In highly competitive areas, it can be difficult finding people to fill these positions.

In the end, if cost is a primary concern, then the modular, space-saving design of a retrofitted solution is ideal and can deliver rapid benefits in a short time. But, if your organization is already planning on investing in a new warehouse or distribution center, state-of-the-art automation can provide an innovative way to optimize end-to-end operations and help your facility run at its best for years to come. WMHS