Challenge
A mid-market industrial manufacturer was looking at closing its standalone distribution center to consolidate operations onto its headquarters campus. The existing DC was a 210,000-square-foot rectangle. The largest building they could construct alongside their headquarters was a 170,000-square-foot triangle.
The DC handled high volume, receiving hundreds of inbound containers each year. Each month it pushed out hundreds of LTL and FTL outbound shipments, plus daily parcel volume. The facility also ran a service returns desk and a high-throughput material rework area.
Storage included 17,000 pallet locations and 9,000 small parts bins held in vertical carousels, pick-to-light flow racking, and basic shelving.
The client asked us a deceptively simple question: Can it all fit? And if so, can automation make the operation meaningfully more efficient?
Project Objectives
Together, we framed four objectives:
- A feasibility study to confirm everything from the existing facility could fit into the new footprint.
- Automation options that increase storage capacity, improve order processing efficiency, or reduce labor pressure — independently or in combination.
- A rough order-of-magnitude budget for the new facility and the automation investments.
- Projected labor and operational impacts for each option.
We structured the engagement in two phases with a go/no-go decision gate after Phase 1.
Our Approach
Phase 1 — Feasibility
We built a working model of the client’s inventory and bin utilization. Inputs included quarterly inventory snapshots, item master data, ERP bin and pallet configuration, and a full year of sales order data.
With the model in place, we partnered with a pallet racking vendor to design a layout. The design used minimal automation but fully supported existing operations, inventory, and pallet locations in the smaller, triangular footprint.
Phase 2 — Automation Options
Using the Phase 1 model, we worked with several automation vendors to identify where technology made sense. We developed multiple layout options — combining automated racking, robotic systems, and conveyors — at varying price points and varying levels of efficiency, capacity, and labor impact.
We sat down with the local DC management team to estimate operational savings for each option and pressure-test the assumptions.
What We Found
The existing DC was leaving capacity on the floor. Roughly a third of the footprint did not use vertical space above 10 feet. More than half of the pallet spots used drive-in racking — cost-effective for density, but slow for picking and labor-intensive.
A small handful of high-runner SKUs accounted for an outsized share of pallet positions. The majority of active SKUs occupied only a single pallet each. The vertical carousels were also at the end of their useful life and needed replacement regardless of the project outcome.
Phase 1: Design
Inside the smaller, triangular footprint, we designed a layout with more pallet capacity than the original facility held — including ample floor stock. Switching to narrow-aisle forklifts them to condense aisle width by more than half across most locations.
A basic pallet shuttle system stored high-runner SKUs and made full use of the building’s height. The design preserved open floor for order staging, shipping, service, and rework. To keep costs down, we reused the existing vertical carousels, flow racking, and shelving.
This baseline design became the lowest-price option in Phase 2 — meeting the feasibility requirement, but not the broader efficiency goals.
Phase 2: Automation Opportunities
We developed three modular automation opportunities that could be implemented independently or combined into different layout options:
- Container unloading. A palletizing robot picks boxes off a conveyor and palletizes them according to pre-programmed layouts. The rate sustains or improves the current baseline while reducing reliance on temporary labor.
- Small parts storage. A tote-based AS/RS from Pio (by AutoStore) replaces the aging carousels, flow racking, and shelving. Pio uses an unusual pricing structure: capital expense for the frame and totes, monthly subscription for the robots and software. Storage density and pick rates both improved over baseline.
- Pallet storage. An advanced AS/RS pallet shuttle from Eurofork uses fully autonomous shuttles that move in all directions and between levels. That freedom of movement let us design a non-rectangular, L-shaped storage cube that fully used the triangular building. Locating pick-up and drop-off stations next to order staging effectively eliminated the long internal travel that defined the existing operation.
Both the Pio and Eurofork systems dynamically re-slot inventory based on pick frequency. The more frequently picked items move closer to the picking stations over time, and the systems make more efficient use of every bin and pallet location.
The Result
We delivered four layout options at the end of Phase 2 — each with different price points and different projected gains in labor efficiency, ranging from modest to substantial.
The client now has a roadmap that can be implemented in stages as capital allows. The next step: deepen the inventory model, refine assumptions, and run NPV or IRR to rank the options.
Takeaways
- Automation often costs less than expected. Layering automation onto otherwise conventional racking added less capital than the client anticipated. In most cases, the increased cost was outweighed by gains in space utilization and labor productivity.
- Subscription-based AS/RS changes the math. Splitting automation between capital (frame and totes) and operating expense (robots and software) puts modern AS/RS within reach of operators who would otherwise be priced out.
- Footprint shape is no longer a barrier. Multi-directional shuttle systems make non-rectangular storage layouts viable. Designs that traditional racking cannot match are now on the table — and the freed-up floor space pays for itself.