Building vertically: Increasing the capacity in existing city centre CEP distribution centres

By Bjarne Johansen

Following a nearly two-year period of stagnation that followed the e-commerce boom during the Pandemic lockdowns and restrictions, global e-commerce parcel volumes are now growing at a steady rate of 5 to 8 percent per annum.
However, e-commerce is not the only contributor, as more CEP operators are merging their parcel and letter deliveries, so small parcels and large letters previously delivered by posties are being treated like they are parcels. In some cases, volumes have grown at distribution centres by 40 to 60 percent in just one year.

With this increase in volumes comes a need to raise the capacity of the city centre distribution centres. But in many cases, not only is the distribution centre’s sortation solution, typically a loop sorter, already running at full pelt, but it inhabits every inch of the floorspace.

This leaves the city centre CEP distribution centre with three choices:

• Expand – this will depend on adjacent property being available, which is unlikely in a city centre
• Leave and relocate – a new city centre location will be very expensive; a move away from the centre will disrupt deliveries. Nevertheless there are benefits too.
• Make use of building vertically (using the building volume) – the focus of this article, which is a solution many distribution centres are exploring and favouring

Plenty of incentives to remain in the Perfect Location

A distribution centre in the heart of a major city is generally regarded as the ‘Perfect Location’ for a CEP operator to be based.
From businesses housed in skyscrapers to residents living in high-rises, the density of addresses is immense.
Heavy traffic and parking challenges make deliveries difficult, so it is a huge advantage for CEP operators to already be based there – with no major distances to travel, they are well placed to use a fleet of delivery vehichles (electric) and bicycles, thus circumventing all anti-pollution legislation.

Accessing a major city centre from the suburbs can add an hour a day to the delivery driver’s time behind the wheel.
These are all costly problems that CEP operators want to avoid, but it is becoming increasingly hard given the demand for extra capacity.

Might be room to expand, but what about the permission

The most obvious option is to expand the building.
Sortation solutions in distribution centres are constructed according to a 1:1:25 ratio in line with the building, so there is room to scale up the operation by as much as 25 percent.

But in the absence of space, CEP operators will need to look into the possibility of purchasing more land adjacent to the site of their distribution centre. And in city centres since the start of the century, this has become increasingly expensive.
This is not the only problem. In recent years, it has become almost virtually impossible to obtain planning permission to expand operations in a city centre.

CEP operators based in city centres are subject to heavy legislation to contain the size of their buildings, reduce the pollution and traffic of their vehicles, and not use heavy goods vehicles altogether, which most still depend on for long-haul deliveries – clear signs that local governments want to discourage their presence.
Once encouraged to set up in city centres, local governance has been steadily withdrawing their privileges.

Do benefits of moving outweigh delivery disruption?

Another obvious solution is to leave the premises and relocate.
While this will disrupt deliveries in the immediate locality, there are many benefits too:

• Capital gain – there’s never been a better time to sell city centre property. The real estate inhabited by a distribution centre is worth tens of millions of dollars
• Suburb savings – property in the suburbs costs a fraction of what it does in the city centre, and it’s often a sound investment
• Fewer restrictions – CEP operators face less pressure to contain their size, reduce pollution and use fewer or no heavy goods vehicles
• Larger premises – the cheap prices and minimal restrictions mean the distribution centres can be as big and busy as they like
• Improved access to motorways and airports – a suburb located close to the motorway is the ‘perfect location’ for long-haul routes
• Improved working conditions – reduced pollution, noise and stress levels for all employees
• Greenfield site – new beginnings will enable the CEP operator to choose the optimum system for its requirements. The core business might have changed since it set up shop, meaning the old system was highly inefficient and costly

Mezzanines: finding more floorspace within

CEP operators with advantageous locations can increase the capacity, and life-span, of their existing sites by building vertically to make more use of the building’s volume.

In the cases of many distribution centres, the ceilings are at least nine metres in height – and often higher.
The average sortation system, meanwhile, is no higher than five metres, meaning there is often at least four or five metres of unused vertical space.

One solution that makes excellent use of this space is a mezzanine.
In some cases, distribution centres have installed mezzanines to create entire new floors to accommodate sortation systems – so in effect doubling their floorspace to double their capacity.

Finding more capacity by optimising their own processes

But distribution centres need to be cautious before investing in a mezzanine and new solution. Are they sure the new solution will increase capacity to an optimal level?
Distribution centuries can only answer this question by carrying out an assessment of their processes and requirements – preferably with the help of outside expertise.

Such an assessment might draw attention to how and for what they need to find extra capacity within their own processes. Examples include:

• Cross-border items and returns – parcels that do not pass quickly through the distribution centre will quickly eat into the capacity, along with other resources.
• Small items – tiny and non conform (odd shape) parcels are more likely to be missorted or lose their labels than average-sized parcels, meaning they more often require more manual intervention during sortation, slowing down the throughput and eating into capacity
• Parcel sequencing – CEP delivery van drivers spend an average 45-60 minutes route sequencig their 200 parcels, which eats into their last mile capacity to quickly deliver and is a huge drain on resources

The vertical solution that overcomes reduced capacity challenges

All three of these challenges can be overcome by using a pouch system.
Not only are they perfectly suited to handling small items, tiny parcels and odd shapes, able to retain parcels until they can be conveniently inspected without eating into storage capacity, and capable of sequencing delivery routes, but they can be conveniently installed from ceilings, so there is less need to construct a mezzanine.

This means the pouch system could be hung over the sortation system it is increasing the capacity of.
Only CEP operators with a good handle of their operational processes will be able to assess whether a pouch system will help increase their capacity to the desired level.

And only CEP distribution centres with unused vertical space will be able to capitalise.
But fortunately, heading into these challenging times, this includes the majority of distribution centres that need to increase their capacity.

CONCLUSION

City centre distribution centres must build vertically and increase their capacity if they want to remain at their current location – because expansion is pretty much impossible due to astronomical property prices and strict local legislation. Fortunately there is a solution that can utilise existing vertical space to double the capacity, whilst additionally optimising processes and overcoming challenges in the areas of sequencing and storage to offer up huge savings to CEP operators.