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What Goes Into Building Your Own Warehouse?

Estimated reading time: 7 mins

Whether you’re looking to meet the growth needs of your business, expanding to new markets, improving efficiency or looking to replace old and outdated equipment of premises, building or expanding a warehouse is a considerable project. Since, for most businesses, they do not generate revenue but are a cost center, building them as efficiently as possible is key. To do that, you need to lay your plans down early and make sure that you’re prepared for a project of this scale.

Be prepared for a time-consuming project

When you start approaching construction and engineering teams, it’s important to have some sense of a timeframe for them to work within. It can help you identify which teams are going to be able to develop or build the premises in the most efficient manner possible. However, make sure that your own understanding of the timeframe is a little loose. New construction projects always tend to expand in schedule rather than shrink as new engineering challenges are likely to come first. As such, it’s important you don’t rush into any decisions better left until down the line, such as making contracts with suppliers or investing in new equipment just yet.

The budget comes first

Before you make any decisions on which civil engineering or construction team to work with, ensure that you have identified your budget with an aim on an internal rate of return. Calculate the costs of the location, including taxes, ownership costs, construction, engineering, potential building lifespan, utilities and more. Not only do you want to ensure that your budget can meet the costs from now until the completion of the warehouse, but you want to make sure that the investment will inevitably pay off. With that in mind, you should be able to identify the return of return on each investment and figure out how long it would take you for the savings of the warehouse to fully compensate for those costs.

Understand the different types of costs

An essential part of creating the perfect budget is understanding the different costs that you’re going to have to account for. There are four major types of costs you have to keep in mind when making an estimate which we will address one at a time. The hard costs are the easiest to create an estimate for, accounting for the construction work itself as well as the materials involved. However, material costs can be decreased a lot by making sure that you’re scanning the market and finding the most cost-effective providers. Soft costs can be harder to estimate, so it’s best to make sure that your budget works on a range rather than a hard and fast figure. These costs account for permits, insurance, taxes, engineering and design services. These are where most projects tend to go over-budget, so making room for them is essential, done primary through approaching the involved teams direct for estimates rather than trying an online estimation tool.

Create a life cycle cost analysis

The other costs that can end up making a warehouse more expensive over time are the energy and operation costs, but these tend to affect you in the long-term, not during the construction process. You can get a handle on some of these costs with an energy efficiency analysis once you have the design complete. Your overall life cycle cost analysis will likely include this and is designed to help you calculate the internal rate of return over time. Figuring out the ROR for each decision can take a lot of time and working with utility providers but working with a qualified estimator can help you simplify the process somewhat.

Know which factors will impact your costs over time

Different owners need different warehouses to meet different needs. As such, you need to make sure that you’re accounting for extra costs you might need beyond the initial construction, as well. For instance, is your building going to have to provide refrigerated storage space and if so, have you found the warehouse refrigeration providers that you need? You also need to consider the costs of any automated systems, such as conveyors that you have to install, and factor them into the budget before construction begins.

How are you going to finance the build?

In the vast majority of cases, business owners are going to borrow money to build, so finding the right source of funding is crucial. Banks tend to be the most reliable lenders of loans large enough to cover all your costs, but they can take longer to arrange loans with compared to peer-to-peer lending platforms. In either case, you have to make sure that you are financially prepared for seeking the funding that you need. This means having the estimated costs and values of the project ready and any other information needed to help lenders make a decision.

Choosing the perfect location

Rarely does a business build a warehouse on the first location that it looks at. Rather, it’s a good idea to survey available land and pick several candidate locations from the places that you have found. There are a range of different criteria by which you should judge those candidate locations. Infrastructure and location are the most important of all, as being closer to transportation links, such as roads and freight trains, as well as your suppliers and customers is going to cut your operational costs in the long-term. However, you also need to look at the varying costs of locations, including local and state taxes as well as the local cost of living, which you will have to account for through the wages for the location’s staff.

Designing your warehouse

The warehouse design is the most important of decisions you’ll make. To some degree, your location is going to dictate the bounds of your design. After all, it shows you how much land you have available to build on, for one. From there, you have to consider how your warehouse is going to look. What equipment are you going to invest in? Does the equipment available mean you’re able to build taller thanks to things like pallet racking, optimizing the square footage of the building? You also need to organize the building and understand the process of getting from A to B, ensuring that distance from inventory to shipping is as short as possible, as you should with all travel distances. From your design, you should have a much better understanding on how many stock and pallet units you will be able to fit, as well.

Laying the groundwork of the building

Also to be accounted for in your budget and timeline is the potential costs of any engineering work to be done on the ground once the design is complete and before the construction begins. Soil may have to be removed, plans may have to be adjusted due to a need for utility access in the location, and plumbing and electrical lines may have to be laid before the physical foundation is built. For that reason, besides a construction team, you should be looking qualified engineering teams and a licensed land surveyor. Without fully understanding and preparing the land you intend to build on, it’s all too easy for the construction itself to run into a host of problems.

Choosing the right construction team

When you have the budget, the design, the funding, and the groundwork all laid, the rest of the work is effectively up to the construction team that you work with. As such, you need to ensure you choose your construction team very carefully indeed. First of all, references and proof that they have worked on warehouses is essential. The more similar their past work to your project the better. If, for instance, you are building refrigerated storage space, then they should have helped with a similar project in the past. Having a good rapport with the contractor, ensuring they’re effective communicators and able to answer all of your questions is important for maintaining confidence in their work, as well.

Implementing the essential systems

Once the core construction work is finished, it’s all about fitting in the essential systems that keep the warehouse operational. This includes planning for offices, buying furniture, creating restrooms, fitting sprinkler systems, heating units, and air conditioning units. Walkways and travel aisles need to be marked after the racking systems are chosen and installed. Make sure you have a warehouse systems checklist and that you have incorporated every kind that you need before you sign off on a design. Starting work without having considered the need for equipment maintenance areas, for instance, can cause you to run into some problems when the construction is in later stages and you realize you’re missing a crucial system.

Depending on your location, industry, and supplier/customer links, your warehouse is likely not going to end up exactly the same as any other business’s. Hopefully, the tips give you an idea of what questions you will have to address, but it’s up to you to discover the priorities of your own premises’ construction or development.

 

About the author /


Simon is a creative and passionate business leader dedicated to having fun in the pursuit of high performance and personal development. He is co-founder of Applied Change, a Business Change consultancy based in the UK. Simon is also an Ambassador for Gloucestershire business. Simon is an Associate Member of the Chartered Institute of Professional Development.

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