Rethinking warehouse design could save $60 million in costs

Peter Jones

Managing Director, Founder

Australian Property Journal recently reported on some of the key findings from Prological’s latest white paper: ๐˜™๐˜ฆ๐˜ต๐˜ฉ๐˜ช๐˜ฏ๐˜ฌ๐˜ช๐˜ฏ๐˜จ ๐˜ธ๐˜ข๐˜ณ๐˜ฆ๐˜ฉ๐˜ฐ๐˜ถ๐˜ด๐˜ฆ ๐˜ฅ๐˜ฆ๐˜ด๐˜ช๐˜จ๐˜ฏ: ๐˜๐˜ฏ๐˜ต๐˜ฆ๐˜จ๐˜ณ๐˜ข๐˜ต๐˜ช๐˜ฏ๐˜จ ๐˜ช๐˜ฏ๐˜ฏ๐˜ฐ๐˜ท๐˜ข๐˜ต๐˜ช๐˜ฐ๐˜ฏ, ๐˜ง๐˜ณ๐˜ฐ๐˜ฎ ๐˜ค๐˜ฐ๐˜ฏ๐˜ค๐˜ฆ๐˜ฑ๐˜ต ๐˜ต๐˜ฐ ๐˜ฅ๐˜ฆ๐˜ญ๐˜ช๐˜ท๐˜ฆ๐˜ณ๐˜บ.

The full story is printed below.

DESIGNING internal components of a warehouse before an organisation commits to a site or building design could save $60 million in land costs, according to supply chain consultancy Prological.

Prologicalโ€™s white paper, Rethinking warehouse design: Integrating innovation, from concept to delivery, suggests that as land prices continue to increase in Australia, materials handling designers are recognising that there is an opportunity to design vertically rather than horizontally.

โ€œThis is not just about going higher, but also value engineering the building and its more complex elements to support volumetric utilisation, optimisation of automation integration, shorter walking distances, and creating a more people-centric work environment all while lowering both capex (and subsequent rents) as well as the overall opex (operational expenditure).โ€

According to CBRE, the total value of investment-grade industrial property in Australia is set to surpass the office sector by 2026, by which time the industrial and logistics industry is forecast to reach $424 billion. Occupier costs have reached record highs, as have rents for both super prime and prime grade assets.

โ€œThe logistics property market is struggling to cater for the growth in e-commerce as well as other business sectors. To address these issues, the way in which facilities are designed, built, and operated must change,โ€ Prologicalโ€™s report said.

โ€œUntil now, the most common process for site development begins with estimating the footprint of the facility, choosing an adequate size property site, with consideration of the internal workflows and fit-out last. However, with the rapid pace of innovation, scarcity of available land and the proliferation of agile automation, this approach is no longer optima. Indeed, it has always been flawed, but now the consequences of this flawed approach are more profound.”

โ€œToday, traditional warehouse layouts are no longer fit for purpose and rents are driving costs in the wrong direction, while innovative architecture and engineering are introduced too late in the current development process, if they are introduced at all.โ€

Prological gave the example of a traditional approach to an 11 to 13-metre-high warehouse of 64,000 sqm floor area. The application of Prologicalโ€™s design methodology and the engagement of architects along with material handling equipment (MHE) and warehouse designers developed a design with a 30,800 sqm footprint. The land requirement was reduced from about 128,000 sqm to just 67,760 sqm.

In Sydney, this would lead to a $60 million reduction in land costs, while in Melbourne that difference translates to a $42 million reduction, the report said.

The design principles translate down and for a 6,400 sqm warehouse the land reduction will have a value of circa $4 million. After additional investment in engineering the building, this will translate into a reduction in rent of between $12 to $16 per sqm.

Land and building costs varied by $235 million across four MHE options given by Prological, which included a 49,000 sqm automated mobile robot (AMR), goods to person (GTP) and autostore on 68,000 sqm of land, a 64,000 sqm AMR and GTP warehouse also on 68,000 sqm, 122,000 sqm multi-level pick towers on 99,000 sqm, and 90,000 multi-level pick towers on 85,000 sqm.

MHE capital expenditure options varied from $62 million for the multi-level pick towers to $223 million for the AMR, GTP and autostore. Inverse to the MHE capital expenditure, labour ranged from 466 heads to 844, representing operational expenditure of about $30 million every year of operation. In this instance, the two highest cost MHE options โ€“ the AMR plus GTP options โ€“ also delivered the lowest ongoing operational expenditure outcomes including rent, labour, maintenance, and depreciation over 10 years, at 38% below the baseline compared to 17% for the multi-level pick towers and 33% for the multi-level pick towers plus AMR.

Rethinking warehouse design

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