Before you dig: 11 questions to ask before breaking ground on a new DC
With complex DC design and construction projects, small oversights can lead to big holdups and delays. Asking the right questions beforehand can help keep your project on track.
Susan Lacefield has been working for supply chain publications since 1999. Before joining DC VELOCITY, she was an associate editor for Supply Chain Management Review and wrote for Logistics Management magazine. She holds a master's degree in English.
Opening a new distribution center (DC) is a major event for any company, but—unless you're Amazon—it's typically not something that you do every month. So it's all too easy to overlook some issues or concerns that could affect the success of the facility (and your entire supply chain) for years to come.
One key to avoiding that trap is to ask the right questions. For example, at the start of the process, when you're considering general locations, these questions would be ones regarding the site's suitability from a distribution network perspective, such as how close you'll be to your customers and suppliers, how good the existing logistics infrastructure is, and how easy or hard it will be to find the right type of employees.
But what about when you have narrowed your search to a few specific sites within your target region? What information do you need to make sure you pick the best possible spot and end up with the best possible DC layout? After talking to a few experts, we have compiled some examples of the kinds of questions companies should ask themselves before breaking ground or signing the lease.
1.Are you sure you have executive buy-in? It may seem obvious that you need executive approval before embarking on a capital project like building a new DC. Yet time and time again, site selection projects are put on hold or delayed because project leaders did not get approval from high enough up the food chain, according to John Morris, who leads the industrial services group for the real estate firm Cushman & Wakefield. For example, Morris remembers one client that had to stop and make its pitch for a new DC three different times—first regionally, then to the company's headquarters in North America, and then again to the world headquarters in Europe. To make sure this doesn't happen to you, get the support and approval of someone at the C-level from the start.
2.Is everyone on the same page? When it comes to designing the building itself, you need not just an architect and a general contractor but also a team of specialists to plot out the work processes and determine the facility's layout. The facility design team should work closely with the operations, finance, and IT (information technology) or systems group to make sure it is accurately capturing the company's existing processes and business. It may also want to consult with your systems integrator and/or equipment suppliers to make sure it has up-to-date info on the equipment's specs and power requirements.
Similarly, it's critical that the design team work hand in hand with the architect, says Mike Kasperski, who leads consulting company enVista's design build team. Otherwise, you might end up having to settle for suboptimal processes or equipment simply because that's what will fit in the building. For example, the type of racking that you'd like to use might work better in a building that's designed with columns that are spaced 52.25 feet apart rather than 50 feet apart. Or the equipment that you're using may require concrete flooring of a certain thickness to ensure that it can support the machines' weight. These things can be changed relatively easily at the design phase but not after the concrete has been poured.
3.Do you have all the data you need? To determine the size and shape of the building, the design team will need access to a vast amount of data, such as annual sales, whether there are seasonal variations or spikes in demand, what your receipts are, and what types of product you have on hand and how much of it. (Some advice on the information that is needed can be found in an enVista white paper titled "Optimum Facility Design.")
4.What are the current processes in your distribution center? It's unlikely that your new facility will be an exact replica of an existing DC. However, it is still crucial to know exactly what processes are followed in the current facility and how product flows through it, says Kasperski. Otherwise, you risk leaving something critical out of the new design.
Furthermore, the information on the current processes should come directly from the employees on the warehouse floor, says Kasperski. Management, he says, is often unaware of exactly how the work is actually done. For example, employees on the floor may know that orders for a particular customer require a special process, but that information might never have been formally documented.
5.Do you expect your business to change in the next five to 10 years? We've all heard of newly constructed facilities that were out of date or at capacity the moment they opened. To lessen the likelihood of that happening to you, find out everything you can about your company's business plan for the next five to 10 years, advises Kasperski. Before you break ground on a new DC, you'll need to know what products you may be selling in the future that you're not selling now and whether they'll have different space or handling requirements. You also should know what markets you may be entering; what types of stores, channels, or businesses you will be serving; and where you expect growth to come from. For example, do you expect a greater percentage of your sales to come from e-commerce five years from now? How could the DC accommodate that? What space or equipment will you need to handle this growth?
6.Is your facility designed to be flexible? Even with all that documentation and planning, your business is bound to encounter unforeseen challenges and opportunities. Will your new facility be flexible enough to meet them? For example, Kasperski recommends making sure that your facility is designed with some free operating space. "If you fill up your DC with a whole bunch of material handling equipment," he says, "then there's no space for special projects or seasonal spikes or promotions that you may have."
Similarly, think carefully before committing to a highly automated DC, he says. While the automated equipment may save you labor costs, it may make it harder to adapt to business changes such as new products or an increase in e-commerce sales.
7.Can your existing IT system handle the new facility design? As you design your facility, it's important to know what your systems—whether they're warehouse management systems (WMS), enterprise resource planning systems, or order management systems—can and cannot do, Kasperski says.
"If you are not planning on spending a couple million on a new WMS, you'd better understand the capabilities of the current one," he warns. "Because you can design the most beautiful left-handed flapjack turner ever, but if your WMS doesn't support it, it doesn't do you any good."
8.What risks is the site vulnerable to? If companies were not already concerned about their facilities' risk of flooding, hurricanes Harvey and Irma certainly put the issue top of mind. Similarly, companies should know about the risk of earthquakes, fire, high winds, and other natural and human-caused disasters in the area.
"It's not so much that these factors get overlooked, as companies try to cut it too close," warns Carl Solly, vice president and chief engineer of the insurance company FM Global. "Sometimes, companies see that they are six inches in elevation outside of the 100-year flood zone and declare victory. But flood zones are an approximation, and flooding can get much more severe."
For this reason, FM Global currently recommends to its clients that any new facility be at least a foot outside of the 500-year flood zone.
If it's not possible to locate your facility outside of a risk area, consider what alterations can be made to the site or building to minimize the risk. In areas at high risk of flooding, for example, companies could bring in fill to raise the building up two or three feet, use flood barriers or gates, or even just make sure that product is not stored on the floor.
9.What kind of infrastructure and resources does the community have in place? Local infrastructure and resources can make a big difference in how quickly a DC rebounds from a disaster or event, Solly says. For example, what are the roads into and out of the facility like? Are they prone to flooding? What is the local fire department like; could it handle a high-challenge fire? How would firefighters access the site? If you're outside the flood zone, are you protected by a levy? If so, is that levy adequately maintained?
According to Solly, it is good practice to consult with your insurance company on possible risks and hazards once you have narrowed down your search to two to three sites.
In addition to evaluating the quality of local infrastructure and resources, companies need to find out what ordinances or regulations may apply to their new DC. For example, is there a height restriction due to a nearby airport or other local ordinances? Are there limitations on road access? What are the fire regulations in the community?
10.Who are the people in your neighborhood? Companies need to look not only at what is on the land they plan to acquire or rent, but also at what is happening on adjacent properties, says Solly. For example, are you next to a chemical plant that could release hazardous materials? Does your neighbor store highly combustible materials—such as big stacks of empty pallets—in its yard?
"There is likely no way to clearly understand the neighbors' risk or risk management plan, but it makes good sense to consider the potential based on publicly available information and make an informed choice," Solly says.
11.Have you given yourself enough time? According to Morris of Cushman & Wakefield, this is one of the most important questions companies should ask themselves before they start the site selection process. "[Not giving yourself enough time] is one of the most common mistakes, and it is certainly the most impactful," he says.
For a typical warehouse or distribution facility, Morris recommends giving yourself three months after you've selected the building site to properly vet the location and property before you sign the certificate of occupancy or the initial lease. For more complicated facilities that involve manufacturing, that timeframe can extend to as much as two years.
Many of the other problems that crop up can be resolved as long as you've allowed enough time in the schedule. If you start the process and then discover you don't have all the information you need to design a facility, you can stop and conduct a more thorough analysis ... as long as you have enough time. Likewise, if you find that you haven't gotten buy-in from all the appropriate parties, you can stop and "resell" the project ... but again, only if you have enough time. A much more difficult obstacle is adding more time to a project timeline, Morris says.
Economic activity in the logistics industry expanded in January, growing at its fastest clip in more than two years, according to the latest Logistics Managers’ Index (LMI) report, released this week.
The LMI jumped nearly five points from December to a reading of 62, reflecting continued steady growth in the U.S. economy along with faster-than-expected inventory growth across the sector as retailers, wholesalers, and manufacturers attempted to manage the uncertainty of tariffs and a changing regulatory environment. The January reading represented the fastest rate of expansion since June 2022, the LMI researchers said.
An LMI reading above 50 indicates growth across warehousing and transportation markets, and a reading below 50 indicates contraction. The LMI has remained in the mid- to high 50s range for most of the past year, indicating moderate, consistent growth in logistics markets.
Inventory levels rose 8.5 points from December, driven by downstream retailers stocking up ahead of the Trump administration’s potential tariffs on imports from Mexico, Canada, and China. Those increases led to higher costs throughout the industry: inventory costs, warehousing prices, and transportation prices all expanded to readings above 70, indicating strong growth. This occurred alongside slowing growth in warehousing and transportation capacity, suggesting that prices are up due to demand rather than other factors, such as inflation, according to the LMI researchers.
The LMI is a monthly survey of logistics managers from across the country. It tracks industry growth overall and across eight areas: inventory levels and costs; warehousing capacity, utilization, and prices; and transportation capacity, utilization, and prices. The report is released monthly by researchers from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, in conjunction with the Council of Supply Chain Management Professionals (CSCMP).
As commodities go, furniture presents its share of manufacturing and distribution challenges. For one thing, it's bulky. Second, its main components—wood and cloth—are easily damaged in transit. Third, much of it is manufactured overseas, making for some very long supply chains with all the associated risks. And finally, completed pieces can sit on the showroom floor for weeks or months, tying up inventory dollars and valuable retail space.
In other words, the furniture market is ripe for disruption. And John "Jay" Rogers wants to be the catalyst. In 2022, he cofounded a company that takes a whole new approach to furniture manufacturing—one that leverages the power of 3D printing and robotics. Rogers serves as CEO of that company, Haddy, which essentially aims to transform how furniture—and all elements of the "built environment"—are designed, manufactured, distributed, and, ultimately, recycled.
Rogers graduated from Princeton University and went to work for a medical device startup in China before moving to a hedge fund company, where he became a Chartered Financial Analyst (CFA). After that, he joined the U.S. Marine Corps, serving eight years in the infantry. Following two combat tours, he earned an MBA from the Harvard Business School and became a consultant for McKinsey & Co.
During this time, he founded Local Motors, a next-generation vehicle manufacturer that launched the world's first 3D-printed car, the Strati, in 2014. In 2021, he brought the technology to the furniture industry to launch Haddy. The father of four boys, Rogers is also a director of the RBR Foundation, a philanthropic organization focused on education and health care.
Rogers spoke recently with DC Velocity Group Editorial Director David Maloney on an episode of the "Logistics Matters" podcast.
Q: Could you tell us about Haddy and how this unique company came to be?
A: Absolutely. We have believed in the future of distributed digital manufacturing for a long time. The world has gone from being heavily globalized to one where lengthy supply chains are a liability—thanks to factors like the growing risk of terrorist attacks and the threat of tariffs. At the same time, there are more capabilities to produce things locally. Haddy is an outgrowth of those general trends.
Adoption of the technologies used in 3D printing has been decidedly uneven, although we do hear about applications like tissue bioprinting and food printing as well as the printing of trays for dental aligners. At Haddy, we saw an opportunity to take advantage of large-scale structural printing to approach the furniture and furnishings industry. The technology and software that make this possible are already here.
Q: Furniture is a very mature market. Why did you see this as a market that was ripe for disruption?
A:The furniture market has actually been disrupted many times in the last 200 years. The manufacturing of furniture for U.S. consumption originally took place in England. It then moved to Boston and from there to New Amsterdam, the Midwest, and North Carolina. Eventually, it went to Taiwan, then China, and now Vietnam, Indonesia, and Thailand. And each of those moves brought some type of disruption.
Other disruptions have been based on design. You can look at things like the advent of glue-laminated wood with Herman Miller, MillerKnoll, and the Eames [furniture design and manufacturing] movement. And you can look at changes in the way manufacturing is powered—the move from manual operations to machine-driven operations powered by steam and electricity. So the furniture industry has been continuously disrupted, sometimes by labor markets and sometimes by machines and methods.
What's happening now is that we're seeing changes in the way that labor is applied in furniture manufacturing. Furniture has traditionally been put together by human hands. But today, we have an opportunity to reassign those hands to processes that take place around the edges of furniture production. The hands are now directing robotics through programming and design; they're not actually making the furniture.
And so, we see this mature market as being one that's been continuously disrupted during the last 200 years. And this disruption now has a lot to do with changing the way that labor interacts with the making of furniture.
Q: How do your 3D printers actually create the furniture?
A:All 3D printing is not the same. The 3D printers we use are so-called "hybrid" systems. When we say hybrid, what we mean is that they're not just printers—they are holders, printers, polishers, and cutters, and they also do milling and things like that. We measure things and then print things, which is the additive portion. Then we can do subtractive and polishing work—re-measuring, moving, and printing parts again. And so, these hybrid systems are the actual makers of the furniture.
Q: What types of products are you making?
A: We've started with hardline or case goods, as they're sometimes known, for both residential and commercial use—cabinets, wall bookshelves, freestanding bookshelves, tables, rigid chairs, planters, and the like. Basically, we've been concentrating on products that don't have upholstery.
It's not that upholstery isn't necessary in furniture, as it is used in many pieces. But right now, we have found that digital furniture manufacturing becomes analog again when you have to factor in the sewing process. And so, to move quickly and fully leverage the advantages of digital manufacturing, we're sticking to the hardline groups, except for a couple of pieces that we have debuted that have 3D-printed cushions, which are super cool.
Q: Of course, 3D printers create objects in layers. What types of materials are you running through your 3D printers to create this furniture?
A: We use recycled materials, primarily polymer composites—a bio-compostable polymer or a synthetic polymer. We look for either recycled or bio-compostable [materials], which we then reinforce with fibers and fillers, and that's what makes them composites. To create the bio-compostables, we marry them with bio-fibers, such as hemp or bamboo. For synthetic materials, we marry them with things like glass or carbon fibers.
Q: Does producing goods via 3D printing allow you to customize products easily?
A: Absolutely. The real problem in the furniture and furnishings industries is that when you tool up to make something with a jig, a fixture, or a mold, you tend to be less creative because you now feel you have to make and sell a lot of that item to justify the investment.
One of the great promises of 3D printing is that it doesn't have a mold and doesn't require tooling. It exists in the digital realm before it becomes physical, and so customization is part and parcel of the process.
I would also add that people aren't necessarily looking for one-off furniture. Just because we can customize doesn't mean we're telling customers that once we've delivered a product, we break the digital mold, so to speak. We still feel that people like styles and trends created by designers, but the customization really allows enterprise clients—like businesses, retailers, and architects—to think more freely.
Customization is most useful in allowing people to "iterate" quickly. Our designers can do something digitally first without having to build a tool, which frees them to be more creative. Plus, because our material is fully recyclable, if we print something for the first time and find it doesn't work, we can just recycle it. So there's really no penalty for a failed first printing—in fact, those failures bring their own rewards in the form of lessons we can apply in future digital and physical iterations.
Q: You currently produce your furniture in an automated microfactory in Florida, with plans to set up several more. Could you talk a little about what your microfactory looks like and how you distribute the finished goods?
A: Our microfactory is a 30,000-square-foot box that mainly contains the robots that make our furniture along with shipping docks. But we don't intend for our microfactories to be storage warehouses and trans-shipment facilities like the kind you'd typically see in the furniture industry—all of the trappings of a global supply chain. Instead, a microfactory is meant to be a site where you print the product, put it on a dock, and then ship it out. So a microfactory is essentially an enabler of regional manufacturing and distribution.
Q: Do you manufacture your products on a print-to-order basis as opposed to a print-to-stock model?
A: No. We may someday get to the point where we receive an order digitally, print it, and then send it out on a truck the next day. But right now, we aren't set up to do a mini-delivery to one customer out of a microfactory.
We are an enterprise company that partners with architects, designers, builders, and retailers, who then distribute our furnishings to their customers. We are not trying to go direct-to-consumer at this stage. It's not the way a microfactory is set up to distribute goods.
Q: You've mentioned your company's use of recycled materials. Could you talk a little bit about other ways you're looking to reduce waste and help support a circular economy?
A: Yes. Sustainability and a circular economy are really something that you have to plan for. In our case, our plans call for moving toward a distributed digital manufacturing model, where we establish microfactories in various regions around the world to serve customers within a 10-hour driving radius of the factory. That is a pretty large area, so we could cover the United States with just four or five microfactories.
That also means that we can credibly build our recycling network as part of our microfactory setup. As I mentioned, we use recycled polymer stock in our production, so we're keeping that material out of a landfill. And then we tell our enterprise customers that while the furniture they're buying is extremely durable, when they're ready to run a special and offer customers a credit for turning in their used furniture, we'll buy back the material. Buying back that material actually reduces our costs because it's already been composited and created and recaptured. So our microfactory network is well designed for circularity in concert with our enterprise customers.
Generative AI (GenAI) is being deployed by 72% of supply chain organizations, but most are experiencing just middling results for productivity and ROI, according to a survey by Gartner, Inc.
That’s because productivity gains from the use of GenAI for individual, desk-based workers are not translating to greater team-level productivity. Additionally, the deployment of GenAI tools is increasing anxiety among many employees, providing a dampening effect on their productivity, Gartner found.
To solve those problems, chief supply chain officers (CSCOs) deploying GenAI need to shift from a sole focus on efficiency to a strategy that incorporates full organizational productivity. This strategy must better incorporate frontline workers, assuage growing employee anxieties from the use of GenAI tools, and focus on use-cases that promote creativity and innovation, rather than only on saving time.
"Early GenAI deployments within supply chain reveal a productivity paradox," Sam Berndt, Senior Director in Gartner’s Supply Chain practice, said in the report. "While its use has enhanced individual productivity for desk-based roles, these gains are not cascading through the rest of the function and are actually making the overall working environment worse for many employees. CSCOs need to retool their deployment strategies to address these negative outcomes.”
As part of the research, Gartner surveyed 265 global respondents in August 2024 to assess the impact of GenAI in supply chain organizations. In addition to the survey, Gartner conducted 75 qualitative interviews with supply chain leaders to gain deeper insights into the deployment and impact of GenAI on productivity, ROI, and employee experience, focusing on both desk-based and frontline workers.
Gartner’s data showed an increase in productivity from GenAI for desk-based workers, with GenAI tools saving 4.11 hours of time weekly for these employees. The time saved also correlated to increased output and higher quality work. However, these gains decreased when assessing team-level productivity. The amount of time saved declined to 1.5 hours per team member weekly, and there was no correlation to either improved output or higher quality of work.
Additional negative organizational impacts of GenAI deployments include:
Frontline workers have failed to make similar productivity gains as their desk-based counterparts, despite recording a similar amount of time savings from the use of GenAI tools.
Employees report higher levels of anxiety as they are exposed to a growing number of GenAI tools at work, with the average supply chain employee now utilizing 3.6 GenAI tools on average.
Higher anxiety among employees correlates to lower levels of overall productivity.
“In their pursuit of efficiency and time savings, CSCOs may be inadvertently creating a productivity ‘doom loop,’ whereby they continuously pilot new GenAI tools, increasing employee anxiety, which leads to lower levels of productivity,” said Berndt. “Rather than introducing even more GenAI tools into the work environment, CSCOs need to reexamine their overall strategy.”
According to Gartner, three ways to better boost organizational productivity through GenAI are: find creativity-based GenAI use cases to unlock benefits beyond mere time savings; train employees how to make use of the time they are saving from the use GenAI tools; and shift the focus from measuring automation to measuring innovation.
According to Arvato, it made the move in order to better serve the U.S. e-commerce sector, which has experienced high growth rates in recent years and is expected to grow year-on-year by 5% within the next five years.
The two acquisitions follow Arvato’s purchase three months ago of ATC Computer Transport & Logistics, an Irish firm that specializes in high-security transport and technical services in the data center industry. Following the latest deals, Arvato will have a total U.S. network of 16 warehouses with about seven million square feet of space.
Terms of the deal were not disclosed.
Carbel is a Florida-based 3PL with a strong focus on fashion and retail. It offers custom warehousing, distribution, storage, and transportation services, operating out of six facilities in the U.S., with a footprint of 1.6 million square feet of warehouse space in Florida (2), Pennsylvania (2), California, and New York.
Florida-based United Customs Services offers import and export solutions, specializing in remote location filing across the U.S., customs clearance, and trade compliance. CTPAT-certified since 2007, United Customs Services says it is known for simplifying global trade processes that help streamline operations for clients in international markets.
“With deep expertise in retail and apparel logistics services, Carbel and United Customs Services are the perfect partners to strengthen our ability to provide even more tailored solutions to our clients. Our combined knowledge and our joint commitment to excellence will drive our growth within the US and open new opportunities,” Arvato CEO Frank Schirrmeister said in a release.
And many of them will have a budget to do it, since 51% of supply chain professionals with existing innovation budgets saw an increase earmarked for 2025, suggesting an even greater emphasis on investing in new technologies to meet rising demand, Kenco said in its “2025 Supply Chain Innovation” survey.
One of the biggest targets for innovation spending will artificial intelligence, as supply chain leaders look to use AI to automate time-consuming tasks. The survey showed that 41% are making AI a key part of their innovation strategy, with a third already leveraging it for data visibility, 29% for quality control, and 26% for labor optimization.
Still, lingering concerns around how to effectively and securely implement AI are leading some companies to sidestep the technology altogether. More than a third – 35% – said they’re largely prevented from using AI because of company policy, leaving an opportunity to streamline operations on the table.
“Avoiding AI entirely is no longer an option. Implementing it strategically can give supply chain-focused companies a serious competitive advantage,” Kristi Montgomery, Vice President, Innovation, Research & Development at Kenco, said in a release. “Now’s the time for organizations to explore and experiment with the tech, especially for automating data-heavy operations such as demand planning, shipping, and receiving to optimize your operations and unlock true efficiency.”
Among the survey’s other top findings:
there was essentially three-way tie for which physical automation tools professionals are looking to adopt in the coming year: robotics (43%), sensors and automatic identification (40%), and 3D printing (40%).
professionals tend to select a proven developer for providing supply chain innovation, but many also pick start-ups. Forty-five percent said they work with a mix of new and established developers, compared to 39% who work with established technologies only.
there’s room to grow in partnering with 3PLs for innovation: only 13% said their 3PL identified a need for innovation, and just 8% partnered with a 3PL to bring a technology to life.