Access to major highways is crucial, of course, as is deciding whether to outsource trucks and vehicles or buy a fleet. Materials are then delivered to the facility, bar-coded and stocked appropriately.

Voila: the warehouse is up and running. Well, that wasn't so hard, was it? One owner turns to the other and says something like, “Our work is done here, Tonto….”

Wrong, Kemosabe. For all intents and purposes, the work is just beginning. When distributors talk about “setting up” their warehouse facility, it's obvious that the “setting up” phase really never stops.

Building or renting the space? Stocking the materials? That's one thing. What goes into making the warehouse profitable is a task that is never really finished.

Paul Gill has been with Hisco, Inc., a specialty distributor working primarily with the electronic MRO industry, for 22 years. Hisco also offers specialized warehousing for chemical management, cold storage and logistic services. A look at the Hisco branch warehouses provides several examples of setting up and sustaining profitable operations. While there are some common denominators at each location, the branch warehouses Hisco runs are unique in their own way.

Gill is Hisco's vice president of sales and marketing. Until February of this year, he was vice president of operations working out of the Houston headquarters. So he is familiar with all of Hisco's 19 branch warehouses in the United States, and the six in Mexico operated by the HiscoMex subsidiary.

As VP of operations, Gill supervised the Houston branch operations as well as its outside sales force.

All in all, Gill's background gives him, “a broad brush experience, in basically every aspect of [Hisco's] business,” he says.

Each Hisco location has common characteristics, but at the same time, they are decentralized and autonomous facilities—depending on what products and materials they concentrate on. In addition, many of these materials (chemicals and adhesives, for example) require unique and strict storage and warehousing guidelines.

“Hisco's warehouses are not like the large distribution centers,” Gill says. “Each has its own unique characteristics, depending on the local customer base.”

As an example, Hisco sells a variety of chemical products, requiring bulk storage of fluxes and thinners used in circuit board assembly and the semi-conductor manufacturing process.

Storing these properly, especially in warehouses located in the southwestern part of the country, Gill explains, can be a challenge.

“The integrity of some items can be compromised by high temperatures,” he explains. “We want to be sure that when customers receive product from us that it is clean, has the most usable shelf life, and that the integrity of the product is in good shape.”

Many companies stock their most popular and important items in the easiest to find and ship locations in their warehouses.

Gill says that while Hisco generally takes this approach as well, they also consider the inventory they define as “mission critical” for Hisco customers, and fine tune each warehouse operation accordingly.

“Mission critical items, for example, might require a JIT (just in time) delivery,” he explains. “Within each warehouse, we have special storage conditions. This can be because of cold storage or flammability issues, for example. We'll also have items that are heavy, or cumbersome deliveries that don't easily lend themselves to overnight parcel deliveries. So we want to put those items close to customers located near our warehouses.”

While autonomous, Hisco warehouses tend to fall into three areas of classification:

• General warehousing, which is “basically ambient,” Gill says, referring to buildings with no specific heat or air conditioning outside of the office areas.
• Cold storage, “primarily maintained at 60 degrees, and a 50 percent humidity type of storage environment. Plus, we have additional cold storage which is basically freezer space,” he explains.
• Flammable storage, which Gill describes as, “a local, regulatory fire code-approved method of storing flammables and combustible items.”

The technology that a warehouse needs is as crucial as ever. Most distributors seem to know this, and are spending, or planning to spend, accordingly.

According to results from Industrial Distribution's 60th Annual Survey of Distributor Operations, warehouse management systems (WMS) are being used more than ever before.

More than half of distributors surveyed (57 percent) say they have, or will likely invest in, a system for their warehouses.

Twenty-six percent have already done so, and 31 percent will likely invest in a WMS within the next two or three years.

These days, companies have a great deal to evaluate when looking at warehouse technology, such as push-to-talk service, wireless local area network (WLAN), and bar-code scanning, and trying to gauge the potential return on their investment, as well as what competitive advantage these technologies hold.

Newly constructed warehouses are often designed from the ground up, with an eye on the latest technology. This can be too costly for small- to medium-sized companies, however.

But going all out financially for the most sophisticated, state-of-the-art WMS may not necessarily be the best investment route to take. Knowing what your warehouse will not need can be as crucial as knowing what it will need.

Gill agrees that a warehouse needs fast and accurate bar-coding technology when taking in new inventory. But that doesn't necessarily mandate going too far in terms of the technology budget.

“We'll bar code inbound deliveries, and those bar codes allow us traceability for line-item product detail once it is on the shelf. Then, we'll inventory throughout the facility through bin locations,” he says. “The individual labeling of the product allows for accurate picking by the warehouse staff.”

During a recent Web cast hosted by ID, Nikki Baird, senior analyst at Forrester research, said that, “WMS platforms have been 'under attack' recently. We have some warehouses that are beginning to look like manufacturing sites,” referring to what she described as, “more complex value-added services [that are] pushing manufacturing requirements into these warehouse management systems.”

When it comes to technology then, education and knowing what you really need for your facility is vital. A large tech budget will not guarantee success.

For all the advice and feedback about best practices in warehousing, the most important element of a well-run warehouse is often overshadowed.

In the long run, the make or break characteristic of a profitable warehouse is the employees. Knowledge—both customer as well as product knowledge—is essential, Gill says. All the efficiencies in warehouse construction and design, technology and logistics can be undermined without knowledgeable warehouse staff.

“We have a strong tribal knowledge of our business,” says Gill, in describing Hisco's approach. “Each employee is required to complete 50 hours of training per year. With that knowledge, you have a good understanding of your suppliers, their products and their packaging; customer demands, their labeling requirements, unit of measure requirements; packaging and delivery requirements.”

Gill adds that being an employee-owned company is an advantage that works in Hisco's favor, making employee retention more manageable than for many companies.

“Very few people leave Hisco,” says Gill. “In the world of ESOP, [owner] is not a gratuitous title. Every employee, from day one, becomes an owner of the company, and through their tenure, a more significant owner. And nobody cares as much as the owner.”

If a company is not employee-owned, it is important to tap into employees' instincts, Gill advises. A warehouse with creative staffers whose ideas do not get heard or considered is a warehouse that is most likely to fail. Employees who are there each day are in a better position to know what's what than an executive in an office, especially an office that may be several hundred miles away.

“We try to reinforce that at every level. If we have warehouse personnel who can find a more efficient way of doing something…we play that to the hilt and empower them to do that,” Gill says in summing up his company's warehouse philosophy.

In the successful and profitable long run, a well-run warehouse has to be greater than the sum of its parts.

“We use our warehouse as a tool and an extension of our selling effort, and as a way to ensure our customers value in what we provide to them,” Gill says.