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Maciej Szczepański: Green and cost-effective logistics

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Why are cross-dock warehouses so important in the transport process? What should they look like? Are there any on the Polish market?

High price competition and rising wages costs due to pressure on labour market in the transport sector are the main factors that distribution companies interest in cross-docking.

Cross-dock warehouses reduce last mile delivery costs. Last mile is a term used in logistics to describe the last leg of product transport from a local hub or warehouse to a final destination. A transport company combines goods from different origins in a local distribution hub into one vehicle going to a specific destination. Or, alternatively, goods from a number of various local origins are delivered by many vehicles to a hub where they are unloaded and consolidated into vehicles going in a particular direction. Cross-docking organisation is not an easy task and requires knowledge of warehouse logistics, but it helps generate considerable savings, among others, by streamlining delivery distance, reducing storage times and carbon dioxide emissions.

What makes different a cross-dock warehouse from a standard facility is its primary function: short-term storage of goods. With high rotation of shipments there is no need for racking, which, in turn, has an effect on the height of a building. Standard class A warehouses need to provide clear height for storage of at least ten metres while with cross-dock facilities six metres is enough. The lower the warehouse, the lower cubic volume and heating costs. In addition, it is much easier to ensure appropriate lighting, be it natural or artificial, at such schemes.

Natural light let in through skylights at typical warehouses accounts for 2% of lighting. At cross-docking areas it should be 5%, which is within a relatively easy reach as cross-dock warehouses have no storage racks.

Due to a high number of cross-docking operations, a cross-dock warehouse should have a sufficient number of gates and docks. A basic warehouse offers one gate per approximately 300 sq m, which is far too less for last mile logistics. An optimum cross-dock warehouse is expected to be approximately 48 metres in depth, meaning that with gates on both sides of a warehouse there is approximately 110 sq m per gate. Some logistics operations involve small vehicles, which should also be taken account of while planning building layouts. Urban logistics is expanding at a very rapid pace with small vehicles becoming increasingly common in transport services. Some gates should therefore be appropriately prepared.

The shape of a cross-dock facility is also quite important. An optimum warehouse should be approximately 48 metres in depth to ensure put-away zones on both sides of the warehouse and seamless circulation between such areas. Columns grid is the element which may hinder circulation, the fewer columns there are and the further away they are from gates, the better

Due to plot shapes, developers frequently offer cross-dock facilities designed in an “L” configuration. L-shaped warehouses have gates on neighbouring walls. This shape ensures an effective ratio of the number of doors to warehouse space, but organization of put-away zones and forklift traffic may be an issue then.

With a high number of cross-docking operations it is practically impossible to ensure in wintertime the minimum required operational temperature of 14oC. Theoretically, forced air heaters could be used, but in practice they never are as their cost to profit ratio is hard to estimate reliably. Therefore, an alternative approach could be adopted: reduce the number of heaters since ensuring the temperature of 14oC is not a mandatory requirement and some exceptions are allowed. This, however, will require an in-depth analysis and appropriate internal regulations.

Cross-docking is growing increasingly popular where efficient distribution of goods is required but provision of suitable space meeting the above criteria is very limited. While developers are keen to deliver L-shaped warehouses, they will build 48 metres depth warehouse only when a plot’s shape doesn’t allow for different configuration. Construction of narrow BTS warehouses is, of course, possible but potential tenants should be ready to accept leases for a minimum term of 7-10 years.

Cross-docking rents are approximately 60-70% higher than standard warehouse rents due to a higher land to building ratio and higher construction costs on account of increased numbers for gates, truck yards and parking spaces.

As regards the expected six-metre height, buildings meeting this requirement are not offered for lease on any basis. In some cases, BTO (Build-To-Own) contracts must be signed to ensure that a developer transfers ownership of a project to a client upon completion.

In summary, demand for modern cross-dock warehouses is set to rise. And it is hoped that developers will respond to market needs and deliver the type of space desired by potential tenants.

Author:

Maciej Szczepański, Business Development Manager, Industrial and Logistics Agency, Cushman & Wakefield