Million square foot warehouses: a port in a storm?

Distribution centres have steadily increased in size over the past couple of decades so it’s almost inevitable that we will soon see a number of million square foot warehouses. In their favour are the economies of scale, their ability to hold a wider range of goods for bulk movements, cross docking and order picking, and the fact that more goods are being imported and exported than ever before.
The traditional distribution pattern, where containers were shipped to an NDC by road or rail, stripped and individual pallets and orders were taken by road to RDCs or stores, served the industry well. But current distribution methods are facing a number of pinch points that may well upset the balance.
Road freight is under siege from rising congestion, the effects of the Working Time Directive and ever-rising fuel costs. Ports and terminals too are facing congestion as container traffic is growing faster than the UK’s – and mainland Europe’s – port infrastructure can comfortably handle.
But the Port of Felixstowe is expanding and the government recently approved plans for London Gateway, although the latter will not come on stream for a number of years, so deep sea container traffic will increasingly be forced to unload in northern European ports for onward shipment to the UK by road.
According to Stephen Brodie of Hutchison Ports (UK), even a half million square foot warehouse located in a port and distributing directly to RDCs or larger stores can cut costs by saving the travel to a central NDC. He estimates savings of between £3.42 and £7.78 per pallet, depending on the size of container. Further savings can also be realised as any reworking or value-added services carried out are happening further up the supply chain. Neither is the user paying for a sea container to be hauled inland for unloading, then have the cost and inconvenience of taking the empty box back to the port of entry.
Warehouses designed to accommodate the volume of goods likely to arrive from ever larger vessels – now approaching 10,000 TEUs – with the facility to strip containers and store pallets – will almost certainly need to reach or exceed a million square feet, providing a single distribution point on a grand scale. And by eliminating a complete stage of distribution to a central point, there are potential savings in road transport and attendant costs.
However there are, as with any such major projects, significant risks. Having effectively all your corporate eggs in one basket makes it vulnerable in the case of an accident such as fire – although modern sprinkler and smoke ventilation systems have and are able to prevent major warehouse fires. In addition the rising cost of land in high demand areas – as well as a limited labour pool – may well make operating such large centres less attractive and straightforward than might appear. But these issues do not currently affect Felixstowe or Thamesport.
sbh.uk’s Laurie Sice concludes that in practice there will be little that companies who are already operating large NDC have not already faced. sbh.uk and Hutchison Ports have handled a number of projects over half a million square feet – as well as several rail connected premises – so they are well aware of all the issues involved in planning, locating, acquiring and building a modern distribution centre. A one million square foot facility will simply provide the same challenges, albeit on a larger scale.