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Modernizing Government Supply Chains, Distribution Centers and Warehouses

Agencies continue to be challenged to do more with less.  As a result, they must find ways to simplify and potentially automate processes to increase productivity, reduce costs, improve quality (accuracy) and reduce order cycle time.  Unfortunately for government agencies, the private sector has set consumer expectations for distribution performance very high through practices such as frequent communications from order placement through delivery, shorter order cycle times, and high order accuracy levels.  Government agencies will be expected to close their gap.

A reaction to this call to modernize may result in some common missteps.  Some examples of these missteps include implementing an automation technology in a piecemeal approach and not optimizing the processes before automating them.  Simplify and optimize processes holistically across the site and/or facility first, then automate, but only if it still makes sense.

Modernization is a long continuous improvement journey with no quick fixes and many challenges.  Often, agencies have aging infrastructure, which results in suboptimal processes that are enabled by outdated systems, equipment and facilities.  Government facilities are unlike modern private sector distribution centers that send eCommerce products to consumers’ homes.  Government facilities may be many decades old where building features are suboptimal:  low ceiling clear heights, small column spacings, few dock doors, small dock aprons for today’s equipment, inadequate car parking, and less than optimal building shapes.

How to start the modernization journey

Government agencies have unique roles in our society.  As a result, the order profile and inventory profiles can be very different from the private sector.  Their unique missions must be taken into consideration when defining requirements and designing the future state.  The following approach outlines the sequence of steps for a successful modernization effort:

  • Develop requirements & design criteria. Identifying the requirements is the most important step.  Review historical transactional data to define the requirements by building by site and potentially across the network.  Incorporate the anticipated changes to adjust the current profile to the future state.  Perform site observations to understand what is being done today and why.  Finally, the most important step is to seek alignment with stakeholders on the requirements.
  • Determine the best the operation can be with what it has.  Constrain the solution with limited capital investment.  Really focus on travel distances and storage density.  Identify where every item is stored and why.  A small investment in storage media modifications and re-warehousing labor can drive a significant material return.
  • Identify automation options. Think big.  To achieve large savings, one must think about what is needed to reduce the footprint, as well as labor.  Determine what can and should be automated.  Also, determine what should not be automated.  Focus the technology investments on key buildings with most of the volume at the site and or network.  Not every operation needs or should have automation.  For each option determine the total landed cost for the organization and the potential savings to quantify a return on investment.
  • Select the preferred solution. Partner with stakeholders to identify the best option for each process with an eye for detail on the process, but understanding how each process fits into the big picture flow for the building and site.  During the preferred option selection process, include stakeholders from appropriate departments to gain alignment and to improve the quality of the solution.
  • Seek funding. Modernization efforts may be required by government agencies, but funding may not be set aside in advance.  Providing briefs with compelling returns on investment is essential and this material can be generated from the design work completed previously.
  • Develop detailed technical requirements to define the desired solution.  Partner with the marketplace to build win-win situations for the integrators.  Ultimately, a strong pool of integrators will be required to build teams to deliver a full solution based on well-defined requirements.
  • Once the project is awarded, the work really starts.  The government agency must partner with the selected integrator to continue to refine and to define the detailed final solution.

Modernization Challenges

Modernization brings challenges for private companies, as well as, government agencies.  In the government space, modernizing a distribution center requires a complex system that requires many companies to partner together to offer an integrated solution.  Modernization components can include:  rack, shelving, conveyor, automated storage and retrieval systems, automated guided vehicles, lift trucks, facility changes, changes to legacy systems, new systems to implement (Warehouse Execution Systems / Warehouse Control Systems), cyber security experts, and a project management office.

Challenges a modernization effort can encounter include:

  1. Poor Return on Investment: This may mean the solution was over automated given its profile and the team should refine the solution.
  2. Contracting: This type of system is a unique buy that spreads across multiple disciplines within a government agency.
  3. Implementation impacts multiple departments: This is true of a modernization effort in the private sector or the government sector.  Due to the unique nature of this type of system, multiple departments will be impacted.  Developing a program office with clear roles and responsibilities defined for each department will be required.
  4. Sustainment: Developing the right organizational structure and allocating funding to maintain the investment year after year.  The government agency may need to hire new staff and new contractors to maintain the both the automation equipment and systems infrastructure.
  5. Policy: Optimizing and automating processes forces government agencies to review and to refine policies and procedures, which were developed when processes may have been more manual and paper based.
  6. Training: With new processes and technology, training must be developed to prepare the team members for the new way of working.  Training will be required beyond warehouse operators.  For example, maintenance staff may need to learn how to maintain and repair robots.
  7. Inventory: Government agencies’ unique missions often require carrying inventory with little to no movement.  Disposing of excess inventory can be challenging when incentives drive the agencies to not dispose of this inventory.  The inventory position determines the footprint and cost of the operation.  Carrying this excess inventory creates burdens for the operation in that it must be counted each year, a facility must be maintained to warehouse it, and operators must drive or walk by it.  Also, excess inventory can negatively impact the modernization ROI if it is stored in an automated solution.
  8. Expected lifespan for the solution: Government agencies are looking for solutions that will work for 20 years or 30 years.  Given the lifespan, robust and proven technologies should be selected.
  9. Solutions must be flexible: Given the expected lifespan and changing missions, the solution must be engineered for the current requirement, but be adaptable as mission may change in the future.
  10. Cyber Security: The government agency and the integrator must think about application and infrastructure security from the start.  A modernization solution often requires several different technologies and applications from multiple vendors, which must be brought together in a secure fashion.
  11. Enterprise Wide Solution: The agency must identify solutions that work across the network of facilities in a purposeful way.  Think enterprise wide from design through procurement.  Otherwise, piecemeal solutions might be implemented across the network that are unsustainable by the organization.


It is an exciting time to be a supply chain practitioner.  Commercial off-the-shelf technology is rapidly advancing and the options seem endless.  The time is ripe to modernize government supply chains, specifically in this case, distribution centers and warehouses.  Government agencies can do more with less, but significant change will be required.  Fortunately, there are many good supply chain practitioners out there ready to drive change.
—Scott Gaston, St. Onge Company

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