In times of constrained capital spending, when it can be difficult to get new construction projects green-lighted, companies may actually face greater dangers from missed opportunities than of becoming over-extended.
But a good idea, executed by the right design and development team, can fit an opportunity so well that it starts paying dividends from day one.
Such is the case with a new distribution facility just completed by Oakwood, GA-based Wayne Farms LLC, one of the top five vertically-integrated chicken processors in the U.S., with annual sales over $1.3 billion.
The opportunity presented itself as the company was recently expanding a processing complex it has been developing in Decatur, AL, over the last 10 years.
Wayne Farms originally built one plant on a parcel there in the mid-'90s. Known today as Decatur East, it now runs six lines. In 2006 the manufacturer added a second plant with two initial lines, designed to be expanded up to six. The next year the new Decatur West plant already got a go-ahead to add an additional line. This expansion was completed in April 2008.
With Decatur West running three high-speed lines today, the larger capacity Decatur East plant is humming along with six lines. Eventually, when the third phase of Decatur West's expansion is complete, the joint operation will have 12 lines.
Until September, all this product was shipped out to several cold storage facilities within a hundred-mile radius of the two plants, explains Chander Narula, Wayne Farms director of engineering.
The company's brainstorm was to realize it could sandwich a cold storage facility on the same campus as the processing facilities, right between the two plants. This approach would not just consolidate shipping operations from the plants but also reduce transportation costs.
By incorporating automated material handling equipment to shuttle pallets from one plant to the DC, and tightly integrating operations between the three separate facilities, which are physically connected and located "cheek by jowl," Wayne Farms in Decatur was able to actually eliminate an entire shipping layer from its supply chain.
This meant saving not just transportation costs but also virtually all the labor involved in loading and shipping finished goods from the plants to distribution, plus the money that was spent on outside storage.
In addition, the arrangement would provide harder-to-quantify, but no less real benefits in terms of product quality and control, since all product would now move quickly from each processing line directly into the cold storage freezer, without ever exiting the facility into a non-temperature-controlled environment.
Narula's immediate challenge was to quantify how much Wayne Farms was spending on moving its product into third party storage, to determine what kind of investment it could justify in an on-site DC. He discovered there was a multimillion dollar difference between the plants' total annualized costs to transfer and store all of its product in outside facilities, vs. the cost of building a DC on site.
"That meant if we invested in a facility right now, we would get a payback within two years," he points out.
One decision the company made quickly, he adds, was to outsource operation of the proposed cold storage facility to a third party.
"We knew we didn't have the resources and capabilities to manage this warehouse. We were not going to learn on the job and add 40 to 50 new people who didn't know anything about operating cold storage," Narula comments.
After considering several candidates the company settled on Richmond Cold Storage, Richmond, VA. One reason it was critical to select a third-party logistics (3PL) partner right away, Narula adds, was that the processor wanted the warehouse operator involved in the project from day one, right from the design phase, since they would be the ones actually operating the proposed DC.