A Practical Guide to Establishing a Logistic Center

Are you building a new logistic center? This guide will help you organize the establishment and project management stages, prepare for everything you need to consider, and offer four essential “Dos and Don’ts” for success.

Are you facing logistical challenges in organization and supply and considering building a logistic center? In recent years, logistic centers in Israel have experienced significant growth. They streamline workflows, save money, and provide better monitoring and service.

The transition from scattered warehouses to centralized logistic centers is driven by population growth, global trends of increased consumption and online trade, the surge in goods movement, and technological advancements. These developments have transformed simple warehouses into smart logistic centers capable of managing vast inventory volumes. Additional factors include urban planning trends that relocate logistics spaces from city centers to free up office building land, generating higher tax revenue and employment opportunities for municipalities. Centralizing storage into a single large center also reduces intermediate stops on the way to branches or customers, increasing storage density and volume while cutting daily truck trips.

Logistic centers are continually expanding and becoming more sophisticated, incorporating vertical storage systems to accommodate larger forklifts. They are increasingly computerized and robotic, with automated systems, temperature-controlled cooling facilities, humidity control, and storage for hazardous materials. They serve multiple purposes beyond storage and distribution, offering office space for logistics management and areas for vehicle and industrial equipment maintenance, tailored to the company’s needs

The First and Most Important Step in Establishing a Logistic Center

Whether building a logistic center from scratch or adapting an existing site, every project begins with a programmatic plan. Planning is critical, and before you “build upward,” you must “dig deep”: understand your company’s needs, workflows, and logistics systems while considering future requirements. Make room for growth and the integration of technological innovation. At this stage, you will need to decide on the ideal location and size of the logistic center. Consider factors such as road and on-site vehicle and truck traffic, avoiding cross-traffic between forklifts and trucks in the same area, operational outside space, storage types and volumes, and inventory turnover rates. Determine the necessary storage capacity, operational yard size, and shipping and distribution areas. Additional considerations might include environmental and sustainability practices such as green building, energy efficiency, recycling, and waste reduction.

The programmatic phase involves evaluating current work methods and identifying modern technologies suited to your company’s needs and growth. The goal is to incorporate the potential for innovation, even if it is implemented later. Examples include automated warehouses, computerized management systems, robotic solutions, advanced picking and dispatching methods, double-drawer storage systems, cranes and conveyors, vertical shelving to save space, volume and load measurement sensors, and other technological tools.

With a Program in Hand, Move Forward

Once the program is prepared, the next step is to either find an existing building that meets your needs or construct a new logistic center based on the program. With rising land prices in populated areas, the ROI for advanced logistic centers with automated systems and modern storage technologies has shortened. Although these systems are costly, the gap relative to land prices has decreased.

After securing a building or deciding to construct a new one, initial functional planning begins. This involves allocating key areas such as storage, offices, ramps, and entrances according to the program. At this stage, cost estimates are reviewed, and compliance with municipal zoning regulations is checked.

Following approval, detailed planning begins. This stage includes engaging relevant planners and addressing storage methods, logistics, transportation systems, and required utilities such as HVAC, cooling systems, electricity, lighting, fire suppression, and other regulatory requirements. For new buildings, you’ll need to obtain the relevant permits before proceeding with bills of quantities and contractor tenders. Once construction or adaptations are complete, the site is prepared for occupancy, and the transition is managed to minimize disruptions to the company’s operations.

The entire process, from program development to construction completion, typically takes 2.5 to 3 years, depending on the building size, required spaces, and whether the facility is an existing structure or a custom-built project requiring permits.

Four “Dos and Don’ts” for Success

Establishing a logistic center is a specialized process requiring deep understanding of each stage, attention to detail, and alignment with your specific needs. It is a lengthy and costly process with no room for error. To ensure success, follow these four essential rules:

1. Do: Choose a reliable management company to lead the project.

Establishing a logistics center is a highly specialized field, and you need experienced professionals by your side. The process involves 8-12 months of planning and 18-24 months of construction—a lengthy collaboration with an external supplier. Choose a management company you trust, one that understands your requirements and can offer tailored methods, processes, and technologies to meet your needs.

2. Don’t: Compromise on quality and professionalism.

While establishing a logistic center involves significant time and budget, this is not the place for shortcuts or cutting corners. Obtain all necessary permits from the outset and appoint a project manager, supervisor, and PMO to monitor budget, quality, and timelines. Hold regular management meetings, track budgets, and ensure coordination between suppliers. Supervisory staff should be integrated into the project management team to maintain high standards. Be vigilant about addressing changes or new demands during the project and adjust plans as needed.

3. Do: Carefully decide between hiring a general contractor or multiple subcontractors.

This decision often arises during the tender phase. A general contractor is usually more expensive but simplifies coordination and reduces conflicts between contractors, saving time. Multiple subcontractors may lower costs but can extend the project timeline. Before making a decision, evaluate both options carefully based on your budget and schedule.

4. Don’t: Rely solely on a “preferred list” of professionals.

Management companies often have a “preferred list” of contractors and suppliers. While convenient, it is better to hire planners and contractors with proven experience in projects similar to yours. Not all projects are alike—requirements for a lightweight structure differ significantly from those for a reinforced concrete building. Review the credentials of architects, contractors, and other professionals, visit their completed projects, and base your decision on thorough evaluations.

Good luck!