Spotlight On: Distribution Centre Design

Many logisticians are keen to understand the basics behind effective distribution centre design. This is a complex area as there are scores of variables that have to be considered. So to help you along, without getting into tedious details, here are some proven rules of thumb that you can apply if you are designing a new warehouse or making changes to an existing facility.

Critical design template options

I-shaped design

Warehouses that receive at one end and dispatch from the opposite end are flow-through or ‘I’ shaped layouts. These are commonly used for high-volume operations, or where complete separation of receiving and dispatch operations is required. While I designs are widely used, these designs required greater hardstand areas than the alternative ‘L’ or ‘U’ shape designs.

U-shaped design

Receiving and dispatch operations that are adjacent, on the same side of a warehouse, are known as ‘U’ shape designs, which are a common warehouse type. This is because they offer the best ratio of building-to-land use and minimise the amount of hardstand required for receiving and dispatch vehicle movements.

L-shaped design

‘L’ shaped designed warehouses typically receive on one side and dispatch on an adjacent side at 90 degrees from the receiving side. Many cross-docking operations employ an L-shaped design, along with organisations that receive goods in large trailers but dispatch in smaller vehicles.

In some cases, modern distributions may include two or three of I, U and L designs. Particularly where a number of methods to market are required, e.g. direct to store deliveries, business to distributor, business to consumer, and business to route. They may also be used where facilities need multiple chambers to store temperature sensitive or dangerous goods. In all cases the key design drivers are spatial planning, vehicle types accessing the site, flow, and volume.

Racking orientation

Racking orientation needs to match your facility’s automation level and material handling systems. In automated warehouses using AGVs or AMRs, the orientation matters less since these systems can navigate any layout efficiently.

For manual operations with forklifts, running racks parallel to receiving docks still makes sense – it gives operators clear paths and reduces travel time. In mixed operations, we’re seeing success with zone-based layouts where automated sections can run perpendicular while manual areas maintain traditional parallel orientation. The key is avoiding bottlenecks at transition points between automated and manual zones.

90-degree orientations still create problems in manual areas – forklifts end up queuing in main aisles, especially during peak periods. But if you’re running a fully automated facility with AS/RS or goods-to-person systems, orientation becomes more about maximizing storage density and optimizing robot travel paths than traditional forklift access patterns.

What level of mechanisation should be applied?

The simple answer is that spending a little more capital may actually reduce ongoing operational cost, but spending far too much may send you broke. Conversely, spending too little on capital equipment may cause high operating costs in ensuring years of operation. So what is the right mix of mechanisation? While there are a number of factors that drive mechanisation decisions, there are two common drivers:

1. Number of stock keeping units (SKU) or products handled.
2. Volume of picks per day, week or month.

You may ask why picking is a point of focus. While picking once consumed up to 80% of DC resources, today’s operations look very different. Modern facilities using automated picking systems typically see picking take 40-50% of resources, with the rest split between system maintenance (15-20%), returns processing (15-20%), value-added services (10-15%), and receiving operations (10-15%).

This shift comes from widespread adoption of goods-to-person systems, robotic picking, and AS/RS, though these technologies require different types of resources like maintenance techs and IT support. When planning mechanization now, we’re looking beyond just SKU counts and volumes to factor in labor markets, automation ROI, and system flexibility across multiple fulfillment channels.

Dock and loading bay design

Providing the right docks and loading bays in a distribution centre should be straightforward, but sadly it’s not, as many warehouse operators can testify. Consider the variety of vehicles that may visit your warehouse, and the numbers of each. E.g. pantechnicons, rigid vehicles, temperature controlled end-loading trailers and B-Doubles, ground delivery side- or end-loaded vehicles, utilities, side-loaded trailers and B-Doubles and rigids, courier vans, motor bikes and push bikes. Ignoring or overlooking any one or more of these groups, can cause deficiency in dock, loading bay and hard stand design.

Building Height: Modern Standards and Trends

Warehouse heights have evolved dramatically over the past decade. While older facilities typically maxed out at 11-12m, today’s automated distribution centers routinely reach 30-40m. This shift is driven by three key factors:

First, Automated Storage and Retrieval Systems (AS/RS) have made tall buildings significantly more efficient. These systems can operate at heights of 40+ meters while maintaining quick retrieval times. Second, rising land costs in urban areas have pushed developers vertical – we’re seeing more multi-story warehouses around major cities. Third, advances in automated picking technology have made it practical to utilize the full building height for daily operations.

The old concerns about leasing specialized high-bay facilities have largely disappeared. Major developers now regularly build 30m+ facilities on spec, knowing there’s strong demand from e-commerce and retail operators. Even traditional retailers are upgrading to taller facilities to accommodate automated shuttle systems and multi-level mezzanines.

For new builds in 2025, I typically recommend:

• Standard distribution: 15-18m clear height
• E-commerce fulfillment: 20-25m clear height
• Automated facilities: 30-40m clear height
• Urban fulfillment centers: Multiple stories, 12-15m per level

These heights maximize cubic storage while staying within practical limits for fire suppression and building codes in most jurisdictions.

What are the rules of thumb for planning and design?

Warehouse aspect ratio

Never design your building to be circular, triangular, or square! Avoid trapezoids and parallelograms if you can. Why? Despite whatever architectural licence is used to make warehouses look great, the best shape is the humble rectangle. Over the years, I’ve found it to be the most efficient shape for distribution centre design. Ideally at a ratio of length = 1.7 x width.

Usable land for buildings and hardstand

Rules differ across states and councils on the allowable building size as a proportion of land size. In many instances, 50% of the land space can be planned for buildings.

An additional consideration is the recent spatial rules applied by some councils to alleviate floods and to promote greater green space. In effect, they dictate a greater percentage of permeable land, which may in turn restrict the amount of non-porous hardstand that can be laid.

Amount of room planned for receiving and dispatch

The traditional 75/25 split between storage and receiving/dispatch space doesn’t work for modern DCs. Today’s facilities need 35-40% of floor space for inbound/outbound operations to handle returns processing (10-15%), last-mile staging (8-10%), and automated sortation.

The remaining 60-65% gets divided between value-add stations (3-5%), automated picking zones (15-20%), traditional storage (30-35%), and peak season buffer zones (5-10%). These percentages flex based on your operation – e-commerce needs more outbound space, B2B typically requires larger receiving areas. But the key is planning for automation and high-throughput demands from day one, not maximizing storage density like we did ten years ago.

Truck turning/reversing space

For semi-trailers’ movement, in and out of facility and reversing into docks, allow 37 to 40m. For B-Doubles, allow 50 to 55m. However, where B-Doubles drive through and do not reverse in, 37 to 40m is sufficient.

Vehicle flow around warehouse

It’s best, in Australia, for vehicles to flow in a clockwise direction, to allow for driver side reversing. While this is not always achievable, it’s preferable over anticlockwise operation, as driver visibility is better.

Sqm per pallet in a conventional warehouse (quick rule of thumb)

Allow for 1.2 sqm per pallet for conventional selective racking systems. Push up to 1.4 for narrow aisle or double deep systems.

More pallets or more forklift room to manoeuvre?

What is best? More pallet racking with narrower aisles, or less pallet racking and wider aisles for fork lifts to menoeuvre in?

In my view the priority should always be ‘operation’ over ‘capacity’. The building will be set up once, but operations will continue year after year, so wise planners give manoeuvrability the priority.

4 Tips to Help You Choose Distribution Centre Locations

Where should we locate our distribution centres and how many should we have? These are the types of queries I get all the time from company CEOs and supply chain managers.

Tip #1—Get closer to Where the Demand Is

I live in Sydney, Australia, which is where my managing consultancy businesses are based. So I will use Sydney as an example.

There are a couple of distribution centres about 30 kilometres north of Sydney, in an area near the picturesque Hawkesbury River.

But why would anyone put distribution centres so far away from the city centre? Well, it’s probably cheap land costs or cheaper labour costs. But there are many other costs to be considered when you think about such locations.

In fact, your distribution centres need to be close to the demand. So if you’ve got products that are used by the general population, most high-density population areas are going to draw your distribution centres towards them.

Tip #2—Access is the Key

In Sydney, most warehouses are in an area about 20 kilometres west of the central business district. In fact, all the major businesses in Sydney seem to have their warehouses there.

Why is that? This location is at the junction of two major motorways, the M4 and the M7, as per the picture above. On the M4, trucks can very easily drive straight into Sydney for deliveries.

On the M7, trucks can go around the north of Sydney or around the south of Sydney. So the access points are really good for resupply into the warehouses and also from there out to customers.

In the end, what really counts when choosing a location for your distribution centre is the available access to customers, roads and ports, and to warehouses (for resupply).

If a number of locations all meet these needs, then of course the comparative cost of land and buildings becomes important.

Tip #3—Weigh up Transport Costs

When you are looking at warehouse locations it’s tempting to think primarily about the cost of the land and the warehouse, and maybe the local labour cost. But you have to weigh it all up. In fact, inbound and outbound transport,  along with labour costs, swallow up a significantly higher proportion of the overall distribution costs.

Tip #4—Don’t Ignore the Ecommerce Factor

The dramatic shift by customers to ecommerce as a result of the Covid-19 pandemic has highlighted the urgent need for proximity to a company’s customer base.

Same-day delivery and resupply have become critical factors in the competition for market share. The extra hours needed for delivery from far-flung distribution centres could negatively affect customer satisfaction and burrow into bottom line profits.

Is this outcome worth scrimping on land and building costs for? I, for one, certainly wouldn’t site my warehouses in the Hawkesbury River area.

To Sum Up

The three most important factors to consider when choosing a location for your distribution centre are:

• Access to infrastructure
• Most optimal service
• Overall cost

Hopefully the rules of thumb will help you be effective in your design quest, and these location tips will help you find the right space, but please remember that there are many other aspects that are relevant. Perhaps you have learned from your own experience and have a few tips of your own. Drop me a line if you do, as I am always interested in hearing what others have faced during the design process.