Should you add a rock-climbing wall and other Silicon Valley-style amenities to your next distribution facility? Don’t rule it out completely. Distribution center design is undergoing a quiet revolution driven by the critical challenge of attracting and retaining good people, according to the global commercial real estate services giant JLL.
“Everyone in the labor force would likely prefer to work in an attractive, productive, comfortable and safe space,” says Rich Thompson, international director, supply chain & logistics solutions at JLL. “That being the case, why have those attributes and the supporting amenities typically found in an office environment not been incorporated into industrial distribution center designs?”
Ultimately, logistics decision makers need to wholeheartedly embrace more human-centric industrial building design, he says. “As everyone knows, the world of supply chain management has changed significantly with the rapid advances of both e-commerce and technology. This in turn is impacting the way companies look at their distribution networks, as well as industrial building design.”
In short, Thompson says, this is “no longer your grandfather’s distribution center.”
The way companies determine their distribution strategies—how many warehouses? Where should they be? How big?—begins by first understanding cost components along with customer service requirements, he says.
The total operating cost of a DC includes transportation, labor, inventory carrying costs and rent. Freight costs alone can be as high as 50% of total operating costs. Rent or lease expense typically represents just 3–5% of the total operating cost, but it is clearly important to make sure your building is located in the right place.
Inventory carrying costs are influenced by the number of facilities included in the network. “More facilities mean more inventory, not necessarily two times more, but you will be carrying additional safety stock, which has a cost associated with it,” Thompson explains.
Labor has become one of the biggest influencers on supply chain facility decisions. “Identifying markets with stronger labor pools, and how to attract and retain skilled employees, is what’s keeping supply chain professionals ‘up at night’ these days.”
The rapid growth of e-commerce has increased the demand for labor, Thompson says. In a traditional DC that replenishes retail stores, a 500,000 square-foot facility might employ 100–150 workers. However, the same size facility fulfilling individual customers’ online orders might employ three to 10 times as many people during peak seasons and require a higher skill set, ranging from maintaining and supervising automated and robotic systems, to computer programming and data analytics.
JLL interviewed corporate occupiers, investors and developers of industrial real estate to uncover some of the latest innovations and trends that are being adopted to meet it; many that are being borrowed from high-end office design.
Corporate occupiers have always understood and valued well-designed office buildings and floor space critical to recruiting and retaining employees, Thompson points out. Floor-to-ceiling windows, good ventilation/air conditioning and white noise, and attractive common areas have been in vogue for years.
“So why not for industrial real estate?” he asks. “Why not employ similar ideas when it comes to DCs?”
You don’t have to re-invent the wheel, he stresses. Much of the hard work has already been done by the International WELL Building Institute (IWBI), which is leading a global movement to transform buildings and communities in ways that help people thrive. To do so they developed the WELL Building Standard for buildings, interior spaces and communities seeking to implement, validate and measure features that support and advance human health and wellness.
“Their WELL Building Standards are revolutionizing the way people think about buildings,” Thompson says. IWBI suggests there are seven categories or features of a “well facility:” air, water, light, nourishment, fitness, comfort and mind. “The outcome is higher retention rates and more productive employees,” he declares.
While most improvements in working conditions are being driven by immediate economic considerations, JLL finds that various innovations are already finding favor among warehouse and DC operators. Here are the top 10:
1. You might not think of it this way, but more goods-to-person automation and advanced robotics make operations more worker-friendly. These material handling systems can significantly reduce the walking, bending and lifting required to fulfill orders and reduce human body stress and fatigue while increasing productivity.
2. Employers are finding that high-quality common areas, multiple breakrooms and cafeterias are a must. Subsidized food service along with simple things like plenty of refrigeration and microwave oven capacity also are well received by employees. This includes common areas outside, including patios, grilling areas and even firepits that add flare to special employee events, such as work anniversaries, birthday celebrations and employee-of-the month festivities.
3. Exercise amenities such as gyms, locker facilities, walking paths, jogging tracks and even more elaborate amenities such as rock-climbing walls are well received by employees, Thompson says, adding, “Yes, rock-climbing walls.”
4. Locating core warehousing elements (such as restrooms, breakrooms, battery-charging stations) in proximity to employee workflow areas to create the shortest travel times will improve employee efficiency, productivity and morale.
5. Ample and convenient parking should be situated in areas that minimize walking time into the building and avoid areas heavily trafficked by cars and trucks. “This seems like a basic idea,” he says, “but it’s more important than ever in facilities employing three to 10 times as many employees.”
6. Although proximity to public transportation is nothing new, it is especially critical in more urban environments where many potential workers don’t own cars or where, because of safety concerns, parking for employees needs to be widely separated from trailer and loading dock traffic. Industrial developers are working more closely with local jurisdictions to increase or add mass transportation services—like bus and train stops—to their facilities.
7. Millennials especially value more flexible scheduling, Thompson notes. Multiple scheduling choices are good, but 15 minutes of arrival/departure flexibility is most desirable. “As most households are now dual-income or single-parent (everybody works), additional flexibility for parenting is desired,” he says.
8. Thompson also urges deployment of improved connectivity inside the building to improve communication with employees. “The focus has long been on ensuring connectivity for warehousing systems/processes, but there is now an additional focus on the employee experience (via better human productivity) while in the workplace.”
9. Employers increasingly provide better lighting and more natural light by designing additional glass line and skylights at and above the dock window line, along with placing mounted lights on equipment. This means employees don’t need to strain their eyes while reading barcodes or order labels when picking products in densely stored areas, Thompson observes.
10. Improved ventilation and air circulation achieved through improved ridged insulation, fans mounted on various warehousing equipment and efficient HVAC where appropriate vastly improve the employee working environment. Excessive heat is a common complaint among warehouse workers, and in some cases leads to heat-related illnesses.
“Industrial facility design will need to evolve to address the critical need companies are challenged with today—attracting and retaining good people,” Thompson concludes. “Designing and building attractive, productive, healthy and comfortable industrial buildings incorporating similar amenities to those typically expected in office buildings is inevitable.”