Brookmeade Hardware and Supply Co., Nashville, Tenn., is rapidly outgrowing its warehouse, and president Bill Nourse knows it’s just a matter of time before the company has to move to a bigger building.

“I have four doors to load eight trucks out of,” he says. “It presents a logistics problem in the morning.”

Nourse would like the new facility to have an additional 20,000 square feet and 10 doors instead of four. His priority: “We need more staging area,” he says. But until the lease is up, Brookmeade is doing what it can to make the existing space more workable.

“We’ve added more staff in the warehouse to facilitate a smooth transition from shelf to truck in the morning,” explains Nourse.

Like Nourse, many distributors continue to run warehouses that are bursting at the seams, which can negatively impact day-to-day operations. New customers and product lines are often responsible for the increase in inventory; many distributors say they underestimated their company’s growth potential. When distributors finally transition to a larger warehouse, the move is often long overdue.

Reading The Signs

For Nourse, the first sign that Brookmeade had outgrown its warehouse was the logistical nightmare of pulling and preparing orders and loading them onto trucks. But often the first sign that a company has outgrown its warehouse is even more obvious: No space. Every square inch is filled with product from floor to ceiling. Maneuvering equipment inside the warehouse also becomes inhibited — another sure sign that it’s time to move.

Dade Paper Co. in Atlanta found itself out of warehouse space seven years after acquiring Atlanta Broom. The company relocated from a 90,000-square-foot building to a 125,000-square-foot facility in December 2007.

“When we outgrew the building, we had no more room for inventory,” says Chuck Howard, branch manager. “In fact, at some point we were storing some of our inventory on storage trailers because we didn’t have anywhere to put it on the warehouse floor.”

Howard estimates that the use of trailers allowed the company to delay moving by another two years.

Storing inventory outside the primary warehouse can help clear up space. However, it can also cause new logistical problems. Edward Corr, vice president of Corr Distributors Inc., Tonawanda, N.Y., learned this lesson when he started leasing satellite space to hold additional inventory.

“I was transferring inventory from the satellite warehouse into the main warehouse and then sending it out for delivery,” he says. “It was doubling and tripling handling inventory before we even sent it to the customer.”

In addition, Corr couldn’t buy merchandise in large quantities because he didn’t have the room to store it.

“It bought me time,” he says, “but in reality it was costing me money.”

The decision to stay in a warehouse that no longer fits the company’s needs can lead to inefficient warehouse management and hinder further growth. However, distributors sometimes have no choice but to stay in a warehouse they’ve outgrown for several years before they are in a position to buy, lease, or build a new one. Fortunately, there are steps they can take to make their existing warehouse more workable.

Creating Space

One of the most cost-effective solutions to increase storage space is to switch to a narrow aisle system, say distributors. Tahoe Supply Co. in Carson City, Nev., has moved a dozen times in the last decade, and the company is already outgrowing its present facility only after a couple of years. Nick Spallone, general manager and owner, upgraded the company’s racking last year to buy more time.

“We invested in tight-aisle racking where our aisles are less than five feet away from one another,” he says. “It added 500 or 600 additional pallet bays for us without adding any square footage.”

Spallone bought used racking and lift equipment to access upper racks in the smaller aisles. He estimates the company spent $60,000 and saw a return on investment within nine months.

“It bought us a couple of years to look for the right piece of land and build another facility,” he says.

The Miami branch of Dade Paper also invested in a narrow aisle system to buy more time.

“We were bursting at the seams,” says Andy Baltzell, branch manager. “The narrow aisle system bought us about six or seven years.”

Finally, about four-and-a-half years ago, the Miami facility relocated to a 220,000-square-foot building, doubling its space.

Another effective way to maximize existing warehouse space is to move out dead inventory, suggests Corr.

“Our lack of space forced us not to sit on inventory that was slow moving,” he says. “We were forced to liquidate that as soon as possible to make room for stuff that was moving faster.”

For new inventory, distributors can partner with vendors to get just-in-time delivery to ensure new merchandise doesn’t arrive before the old products are gone.

“Those vendors allowed me to stay in that building longer than I could have without them,” says Corr.

In addition to juggling inventory, distributors might want to consider restructuring their warehouse to create more space. Corr moved his service shop from the building’s first floor to the second floor to free up room for storing commodities.

“That gave me breathing room for a couple of years,” he says.

Similarly, Dade Paper’s Atlanta branch removed an employee area from the warehouse to free up space and opened the inside office employee area for all employees to access.

Making A Move

Often, out of desperation, distributors get creative when it comes to maximizing warehouse space. But they find that this is usually a stop-gap measure, and after a few years, inefficient warehouse management forces them to make a change. For some, that means leasing a building. For others it’s buying, adding on, or building from scratch.

Fred Kfoury Jr., president of Central Paper Products, Manchester, N.H., never considered moving when the company outgrew its warehouse.

“We have a great location,” he says, “and we had the ability to increase our building by about 70 percent.”

Kfoury added another 35,000 square feet to the original 55,000-square-foot building and increased the number of docks from five to 11. The end result: “It not only gave us more room but increased our efficiency,” says Kfoury.

For other distributors, adding on to an existing building is not an option. When Corr Distributors started outgrowing its warehouse, Corr looked at adding on to the existing building but found there wasn’t enough land. After 12 months of searching, he purchased a building that fits the company’s needs perfectly — and this time he made sure he had enough land to build on for future growth.

“I didn’t want to make the same mistake I did in 1985 where I didn’t have land to expand onto,” he says. “This new facility is much more efficient, and because of that our business has grown since we’ve been here.”

Building new was too expensive for Corr. But for Tahoe Supply Co., it has proven to be a wise investment. The company has built several of its warehouses, and when it eventually outgrows them, it leases them out.

“Our last building we designed for us to eventually move out of and split into multiple units to rent to different companies,” says Spallone.

The downside to building new: “The last building took so long to build that by the time it was built we’d outgrown it,” he says. “We’ve only been in it a couple of years, and we’re bursting at the seams right now.”

In many instances, distributors admit they underestimated their company’s growth and outgrew their warehouse sooner than planned. One of the biggest challenges is deciding how big the new location should be. But more important than the size of the warehouse is how distributors run the business.

“You need to be in tune with customer needs so you’re not putting in products that you have a hard time selling,” says Howard. “By being smart about product offerings you can turn your inventory quicker; therefore, you can manage it better. And if you can manage it better you can do so in a smaller space.”

Kassandra Kania is a freelance writer based in Charlotte, N.C.




POSTED ON: 3/1/2008