Dot-Coms Are More Than a Memory

Here's how dot-coms have changed distribution warehousing.

In the January 2000 issue, Patrick Sedlak, vice president of Sedlak Management Consultants, talked about the e-commerce practitioners — the dot-coms — and how speed of competition was the only factor they considered in designing and building a warehouse. “Traditionally, this might take as long as 18 months,” Sedlak said. “The e-commerce practitioners — the dot-coms — want that done in three or four months. ... They’re willing to risk a percentage of margin in exchange for getting up and operational faster.”

The dot-com fever has subsided in the past two years, but its impact is still being felt. Patrick Sedlak explains how distribution warehousing has changed.

— Bernie Knill

BK: What is different in the way that warehouses are being designed and bought?

PS: It’s a direct reflection of what happened over the last two years. The pressure to design a warehouse in a few months is gone. And a lot of our work — it really kicked off in the fourth quarter of last year — is in the evaluation of the excess capacity out there.

The dot-coms built the facilities and when they went away, those facilities stood empty. They contained brand-new equipment and systems. We have old-world firms looking at them and asking, “How do I make the best use of them? Are they right for me?”

BK: What do you mean by “old-world firms?”

PS: We have a lot of “old-world” clients. Say you are a medical wholesaler who wasn’t part of the dot-com craze. You have an older facility and you’re asking questions like:

• Should I upgrade my facility and, if so, how should I do it?

• Should I add on to my 25-year-old facility?

• Or should I build a new facility?

Now there’s another option: Here’s a year-old facility; money wasn’t spared in building it. Should I buy that and retrofit it?

A lot of these firms are looking at excess capacity in the marketplace and saying, “I think that’s pretty close to what I need. How much would it cost to retrofit the facility to meet my needs?”

BK: Is there a downside to these bargains?

PS: The end user may be buying the equipment at 50 percent but may not understand the integration issue. This is especially true for the lower-level control systems of conveyors that divert or track cartons. It’s also true for the integration with the host system as well. Too many buyers are underestimating that factor when they’re looking at used equipment; they only see the low prices being quoted.

BK: Are any of your clients successful dot-coms, and how did they do it?

PS: We have a couple of them. One is Cooking.com, which is a competitor of Williams-Sonoma. Cooking.com is not a pure-play dot-com that relies solely on items being bought off the Web. Cooking.com has developed its own catalogs to support its Web channel. The company got started in the crazy days of the dot-coms, but they did it effectively. They followed the old model: borrow a little, get a business, grow the business, grow it correctly. They’re surviving and doing well.

BK: Are changes in the marketplace affecting the way that Sedlak Management Company does business as well?

PS: In the old days Sedlak Management Consultants was used very tactically: We reviewed projects, understood their scope, did the project and went away. Now we’ve become more of a coach to our clients, helping their organizations take the next step of improvement. We have found that by crafting services on a yearly basis we have become more a strategic partner; we come in as a third party and perform a check-up on their organization and coach them as to where they should be going next to improve.

Formerly, clients looked at us as an insurance policy when they were planning a warehouse and didn’t want to mess it up. Now they’re looking at us as a true strategic partner. Clients are asking us to focus on the future, as opposed to day-to-day operations.

Our core clients like Eddie Bauer, Land’s End, Spiegel and Crate & Barrel have strong internal staffs; those clients are synonymous with good operations. They look to us to complement their expertise.

Bernie Knill, contributing editor, [email protected]

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