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E-commerce drives shifts in warehousing model

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Jeffrey Hale, vice president, leasing, Sudler Cos. Hales is pictured inside one of two warehouses under construction in Corporate Park Cranbury, developed by Sudler Cos.
Jeffrey Hale, vice president, leasing, Sudler Cos. Hales is pictured inside one of two warehouses under construction in Corporate Park Cranbury, developed by Sudler Cos. - ()

When Chatham-based Sudler Cos. decided to build two warehouses in Cranbury on spec, the developer had e-commerce companies in mind as a possible tenant, according to Jeff Hale, its vice president, leasing.

“We tore down 500,000 square feet of office space to make room for these two buildings — one is 342,000 square feet and the other is 416,000 square feet — located just off Exit 8A of the New Jersey Turnpike,” Hale said. “Both warehouses, which are scheduled to be completed by this June, are suitable for traditional warehouse use, or third-party logistics, or e-commerce fulfillment.

“We built them with e-commerce fulfillment characteristics in mind. They both have high ceiling height of 38-foot clear, because e-commerce fulfillment centers want to be able to rack as high as possible, especially if they’ve got robotic or other high-tech retrieval systems.”

Speed, size matter

Around the close of the 20th century, a 24- to 28-foot clear ceiling was considered high, he added. But about 10 years ago the average went to about 32 feet, and then rose to 36 feet a few years later.

“Currently, we’re contemplating some new warehouse projects that will have 40-foot clear ceilings,” Hale reported. “The drive is on get as much product as you can in a space, especially since more e-commerce fulfillment centers look to mezzanine their structures and add robotics and [artificial intelligence] mechanisms to the process.”

A warehouse mezzanine floor system is an elevated floor or tiered platform — often freestanding so it can be dismantled and moved if necessary — that sits between the floor and the ceiling.

The size of the average new warehouse completed in the U.S. between 2012 and 2017 increased by 143 percent, or 108,665 square feet, and added 3.7 feet of height since the last development peak from 2002 and 2007, according to the recent report “Going Large: Warehouse Sizes Increase for Modern Logistics” by commercial real estate services and investment firm CBRE Group Inc.

“Rapidly growing e-commerce sales are the primary driver of this trend, and markets lacking sufficient modern logistics facilities have further expansion potential ahead to keep pace with this rising demand,” the report said.

To speed product movement, many new warehouses are “cross-docked,” offering loading on opposite sides of the structure.

“Trailer parking has always been a priority, but now ample car parking is emerging as a new critical need,” Hale said. “This is because many e-commerce fulfillment centers have a fairly significant labor force, especially around peak holiday seasons when they ramp up their temporary pickers and packers.”

The robots are coming

To drive efficiencies, autonomous robots are expected to see “strong growth over the next five years” particularly within manufacturing, final assembly and warehousing, according to the report “Using Autonomous Robots to Drive Supply Chain Innovation,” released by the global audit, consulting, tax and advisory services firm Deloitte. This trend could “allow people currently performing these tasks to shift to more strategic, less dangerous, and higher value work,” according to the paper.

A robo-warehouse crew could reduce long-term costs, providing labor and utilization stability, increasing worker productivity and reducing error rate, the report continued. A mechanized approach could also reduce the need for inventory checks, and cut time needed to pick, sort, and store goods while making it easier to gain access to difficult or dangerous locations.

But there is a caveat. Before implementing such a strategy, companies should conduct an “upfront feasibility assessment based on financial return, additional skill sets and training,” suggests Deloitte. They should also think about “balancing public perception when replacing traditionally manual labor with capitalized assets.”

Dropping the library model

E-commerce and accompanying robotics advances have also changed the way warehouse-distribution facilities are organized, according to Rutgers Mechanical & Aerospace Engineering Professor Hae Chang Gea.

“There’s much more efficiency today. In the old days, warehouses were organized like a library, where inventory was grouped by certain characteristics, and you would go to a specific section to find it,” he said. “But if you put inventory in a predefined space, you have to leave empty spots for new items that may be coming in. This can be very inefficient.”

Today, advanced e-tailers like Amazon generally place inventory in any spot that’s a best fit for the item’s measurement, according to Gea, the chair of the university’s packaging engineering program. It is the nation’s only such program operated within an engineering department, he said.

“So this way, when space opens up in a section as inventory gets reduced, another item can use that space instead of keeping it empty,” he said.

It would be “almost impossible” for a human to keep track of “random” inventory placement like this, especially when tens of thousands of items have to be tracked, but today’s computers can easily place and track the goods, Gea noted. “There’s even more efficiency, since algorithms can determine the most efficient path for a robotic arm or other machine to travel to retrieve the goods.”

Gea suggested warehouses will eventually have a small front-end office with humans to handle administrative affairs, and a “huge back-end space with no humans — only goods.

“The back-end space will need minimal amenities like lighting or air conditioning, and humans will rarely need to go back there.”

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