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Design-Build Questions And Answers

Q.  How many warehouse employees per shift do you employ in your distribution operation, how many shifts do you use per day, what is the number of days per week you operate and what is your average burdened cost per warehouse employee?

A.  Since warehouse labor typically comprises 60% to 70% of the facility’s total operating costs while a majority of the rest of the operating expenses are associated with the occupancy costs (lease, electric, water, etc), then the area where we can best impact our customer’s business from a financial sense is in labor reduction through process improvement.   Our engineers and account managers understand that that in order to make an operational improvement utilizing capital equipment, it must be financially justifiable.  Otherwise, everyone is simply wasting their time.  So as a process, when we start learning about companies, we always find out approximately how much labor is costing the company.  Usually, the more labor in an operation, the more likelihood that we can provide a financial benefit through a efficient process design incorporating storage systems, picking systems, conveyors, sorters and software to track and control movement of products. 

Q.  Is overtime for your warehouse employees a growing concern that is draining your cost of operations?

A.  We have found that companies that struggle with managing overtime are companies that have grown faster than their ability to adapt and change their processes.   The first sign that companies are growing and having a hard time keeping up with demand is by adding more bodies to their first shift. Then they move to multiple shifts. Then they authorize overtime.  Typically we have found that by the point that overtime is being used so much so that it is having a significant impact on the cost of operations, a process improvement by using a thoroughly designed material handling system is very justifiable and should be highly considered.  By eliminating overtime and also reducing head count on each shift, the Return on Investment becomes extremely attractive.

Q. Do you experience customer dissatisfaction because of shipping errors including mis-picks or short orders?

A.  Whether there are real costs such as charge backs or unquantifiable costs such as rising customer complaints, one thing is certain and that is customer service needs to be at the highest feasible level. Otherwise, customers leave in search of a more reliable partner, and that is not part of any business’s strategic plan. Therefore, if a company is struggling with shipping orders complete, on time and extremely accurately, then there might exist an opportunity to improve any or all of the picking, replenishment, inventory control and auditing processes through material handling equipment and software. 

Q.  What are the requirements for the proper justification of a material handling project?

A.  Sometimes our customers or potential customers do not feel the need to answer this question as they feel that it might expose their leverage to us. However, the purpose of understanding justification is because we have found that every company treats capital improvement projects and the purpose for undergoing projects differently.  Often times, the justifications are strictly financial. They must have a certain payback or internal rate of return.  This is good to know and understand since it helps put a boundary on the level of complexity and automation that the company would consider for future projects.  For example, a company that feels that their growth will maintain constant over a considerable amount of time and a highly automated system would operational for many years to come might accept a longer payback or lower rate of return.  On the other hand, a company that does a lot of changing because their customers or markets fluctuate would only consider a short payback since they don’t want to risk spending a lot of money on equipment that might not be applicable in a couple years when the business model has changed.  Our engineers need to understand these requirements so that they can design an appropriate material handling system that matches the required justification. Otherwise, there would be a lot of time wasted designing a system that would not be approved because it did not meet the justification requirements. 

Q.  If your customers would want you to improve in one or two areas, what do you think those areas would be?

A.  This is one of my favorite questions to answer because it always spurs an interesting reaction.  Either it is answered quickly because they hear complaints or feedback routinely from their customers or they stare at the ceiling in wonder saying, “That’s a great question, I should know that answer but I don’t!” Whether you know the answer or you don’t, you should.  And providing that information to a material handling engineer that has experience working in multiple facilities across multiple industries might result in considering a possible change in process or system that can achieve those desires from your customers.

Q.  What level of service do your customers expect from you?

A.  It is important for us to understand the shipping requirements as it relates to the date of order placement along with the typical order profile. This drives the recommended processes and associated technology that should be applied in order to meet these requirements.  For example, it is common now that distributors that have an e-commerce fulfillment channel must be able to ship using parcel delivery within 24 hours of order placement and that the majority of those orders are single line items.  However, another channel that the distributor fulfills is to their retail stores and outlets.  The level of service for this channel might be 3 days and include multiple line items per order and shipping LTL.  So under one roof, there might be very different service level requirements.  Processes such as zone, batch or wave picking and technologies such as paper, light or voice picking might be applicable for one fulfillment channel and not for the other.   We would examine the application and determine what processes and technologies are best suited for each fulfillment channel and also if anything can be shared or streamlined. 

Q.  What is your budget?

A.  What a great question to ask in order to evoke an interesting reaction, especially when there has not been a long and established relationship.  However, the importance of this question should not be overlooked or met with skepticism.  Understanding the budget is crucial to system design.  Engineered material handling systems are designed by, you guessed it, engineers.  Anyone that is or has ever known an engineer realizes that if given a clean slate to design a system without any regard to budget, the result will be the Sistine Chapel of warehouse automation.  Unfortunately, the price to pay for that work of art is too high.   On the flip side, if there is a sales engineer involved in process and he does not know the budget, he will probably direct the design engineer to come up with the cheapest and most basic solution, which might not address all of the issues or preferences that the customer might have.  Many times, especially during bidding situations, customers evaluate vendors on price and take for granted that the deliverables are reasonably comparable (which they never are).  Wouldn’t it be better to have all bidders provide their best solution for the same price (the advertised budget) and evaluate based on deliverables? 

Q.  When do you expect to be operational with your new system?

A.  It is critical to understand when the expected beneficial use of the system is so that a reverse timeline can be generated and project feasibility determined.  Most companies that do not frequently undertake a large material handling project, such as a new distribution center or a facility expansion, do not understand the amount of engineering time that is needed on the front end in order to develop an effective design.  Also, there are many types of equipment such as sorters, palletizers, merges, etc. that have extremely long lead times that can eat into a project schedule.  So when considering a complex project, it is important to remember that the sooner the better to communicate your goals with your material handling partner.  It doesn’t hurt to have more time on the front end, but it would be devastating to long term success of the project if this front end work is bypassed for the sake of schedule. 

Q.  How do you expect to design the system?

A.  Every customer is different and so are the processes that they use to have their material handling system designed.  Some companies have internal resources that are dedicated to industrial engineering and material handling system layout who can also generate RFQs, evaluate bids and make vendor selection recommendations.  Others companies rely on consultants to perform high level analysis and generate bid specs or RFQs to send to systems integrators.  Also there are companies that pay systems integrators like us to provide detailed design services.  Finally there are those companies who simply say, “Give me your best solution at your best price.”  These companies rarely share budget or timeline information but are free to allow material handling engineers access to their current operations in order to try to understand their business and put together a design and a quote.  The latter situation has the highest probability for an improperly designed system since it is in no material handling company’s best interest to spend too many uncompensated engineering hours to develop a solution when the perceived decision criteria will be price.  In other words, you get what you pay for.  Although we would highly recommend companies to partner on the design with the material handling systems integrator that will fulfill the project, it is critical to project success to have seasoned, experienced professionals perform the engineering work and spend a great deal of time and effort analyzing and understanding the operations. 

Q.  Who is involved in your company in the major decisions of this project?

A.  Although every project has a project manager that acts as the coordinator and championing the cause, it is important to understand all of the personnel in the approval process so that their own specific requirements can be addressed.  We have found that there are typically at least three types of “approvers”.  They are the Technical Buyer, User Buyer and the Economic Buyer.  The Technical Buyer is one that oversees and accepts the system design.  Therefore, we would like to our engineers to have access to this person so that his needs are being addressed and there is good collaboration.   The User Buyer is typically the person managing the distribution operations who wants to ensure that the processes that the system is designed can meet the operational requirements for which he is responsible. Finally the Economic Buyer is commonly represented by the President, CEO, or CFO who is strictly is looking for an acceptable return on investment.  It is imperative for us to know who these people are and understand their requirements so that the proper system is designed with all stakeholder’s best interest in mind.