The pace and scale of acquisitions, divestitures, and product launches is greater and faster than ever. Large 2016 deals such as Shire-Baxalta for $32B, Abbott Laboratories-St. Jude for $30B, and Microsoft-LinkedIn for $26B all created significant disruptions in their supply chains. So how does one strategically position a company to handle acquisitions, divestitures and product launches without creating complete chaos in their warehouse operations? Flexibility is the key—in space, labor and systems.
"With a stand-alone, single building, an employee has a more limited career path as there are most likely fewer management opportunities and less job diversity"
Campus-based warehousing unlocks flexibility for warehousing and also drives improvements in areas like systems, labor, and equipment utilization. Essentially campus-based warehousing involves the co-location of warehouse operations within either the same large facility or in nearby facilities, usually within 10 miles of each other. One warehouse of 1 million square feet, with five 200k square foot operations, has a very different flexibility profile than a single 200k square foot warehouse by itself. Five different, one million square feet warehouses operated by a single company in a ten square mile radius has even greater flexibility.
To allow for flexibility, a logistics provider offering a campus-based warehousing structure needs to balance available space for growth with the cost of empty space. Providers navigate this balance with a combination of small portable accounts that can be moved if necessary, flexible warehouse design configurations, and empty space.
Clear communication of needs and changes from their customers helps the providers plan future space needs. For example, if events like product launches are on the horizon, the customer and provider can work together to plan the space impact and design any anticipated extra space into the overall campus plan. Larger changes such as acquisitions or divestitures are harder to plan, but warehouse providers can review longer term space plans if a long enough transition plan is developed.
Labor sharing is another significant benefit of a campus environment. For example, if one account has greater needs for labor (perhaps for a peak or high seasonality) another account can provide labor support as long as their staffing needs run counter-cyclic. In this type of scenario, both accounts benefit from keeping the workforce engaged, while also decreasing downtime for their highly-trained workforce. This drives a value of higher speed to market, better quality, and greater competitive advantage for both parties. The additional labor force may also be available in the event of non-forecasted workload needs, allowing for reaction to unseen business changes. Of course having a common warehouse-management system (WMS) is important to allow the sharing of labor without significant training downtime.
Another less obvious benefit for the shared labor environment is higher employee retention. With a stand-alone, single building, an employee has a more limited career path as there are most likely fewer management opportunities and less job diversity. However, a campus environment creates more career opportunities, via roles across all of the accounts, buildings, and support functions. This growth potential for employees, coupled with the system simplicity and balanced work hours, leads to a higher employee retention rate in campus labor environments.
As work is consolidated in a campus warehouse environment, systems play a significant role. In order to allow employee balancing and shifting, there needs to be greater consistency in warehouse management systems. While multiple systems can be supported, they introduce the need for additional training, reduce the ability to share labor, and increase the need for infrastructure. The IT support functions on the campus need to be able to handle the needs of the local system, and having multiple systems complicates that. The IT infrastructure of the campus needs to support the full load of the campus, and multiple systems increase that challenge, and any risk of outage due to IT infrastructure challenges needs to be mitigated.
RF devices help increase the speed of job performance, but require consistency across the various accounts on a campus. Standardizing on a limited set of handheld devices helps the labor force and support teams learn the devices and ensure higher quality and less downtime. Having a limited set of handheld devices also allows accounts to share across the campus, redeploying them as needed when and where the workload shifts.
In addition to the efficiencies of sharing handheld devices on a campus operation, other material handling equipment can be shared and balanced as well. Forktrucks, pallet jacks, accordion conveyor lines and much more can be stored in a central location in the building, and shared to the necessary accounts based on demand. Rather than having additional levels of expensive handling equipment within the facility to handle peaksand therefore increasing costs, the sharing of equipment allows the flexibility to effectively manage peaks while driving down cost.
By having multiple accounts in the same geography the potential to share freight increases significantly. If the customer base of the accounts is the same, such as major retailers, then shipments can be aligned onto the same outbound shipping schedule and travel together. Of course, the more freight that is shipped together, the lower the cost realized by the shipper. And with advanced Transportation Management Systems (TMS), shippers can still give each account the same visibility to their own freight on a consolidated load, thus maintaining the integrity of account-based reporting. Parcel loads can be aggregated into LTL and LTL into full trailer, depending on the number of shippers and the commonality of the customer base. By simply aligning the schedules, significant savings can be realized with greater quality, all while maintaining visibility.
As a user of campus-based logistics, there are some suggestions for getting the greatest benefit from your provider. First, communicate any changes as far in advance as possible will help ensure that clients can fully leverage the benefits of the campus-based approach. Although the program is designed to be flexible, the reaction of the campus is only as good as the leadership team, systems, and reporting capabilities that support them. If forecasts show changes in business performance, then be sure to share them as part of your partnership.
Overall, campus-based warehouse operations brings a plethora of advantages including space flexibility, labor flexibility, increased retention, system and equipment utilization, and freight savings. It’s inevitable that the landscape of your business will change over time. Fortunately with a campus-based approach, your logistics infrastructure will be able to flex to cost-effectively accommodate your business needs.