Shared Values Produce Repeat Business
By Tom Nicholson

With its 5,000th store set to open this fall and new stores opening at the rate of about 450 per year, Walgreen Co. is pushing the envelope when it comes to demanding rapid and efficient construction. The company’s blistering growth, averaging one new store about every 17 hours, is being fueled by design-builders that can rapidly deliver quality retail stores, distribution centers, packaging centers and offices for the retail giant.

In a market flush with drugstore chain competitors equally driven to get a piece of the action, efficient expansion is the name of the game. "Once we make a decision to build...we get it done," says Bruce Schmiedl, Walgreen’s manager of corporate planning. "It’s a fast schedule that allows design-build to shine." Deerfield, Ill.-based Walgreen’s expansion is continuing apace this fall in Anderson, S.C., where the mega-chain has teamed with a long-time partner, St. Louis-based design-build firm Korte Co., on a $180-million Southeast distribution center that will service about 250 drugstores throughout the region. Construction on the 670,000-sq-ft facility began in August and is scheduled for a February 2007 completion.

TODD KORTE President and CEO, Korte Co. Design-build firm Korte Co. has been honing integrated delivery for three decades. The St. Louis-based firm was a pioneer in design-build construction in the 1970s, offering clients integrated delivery years ahead of the current design-build boom. In partnering with Walgreen Co., the innovative firm’s expedient delivery ability is a driving force behind the drug store giant’s rapid expansion. To see a live Web cam view of Korte Co.’s Walgreen Southeast distribution center project in Anderson, S.C., go to www.korteco.com/Walgreens.htm

Equipped with full in-house design-build capabilities, Korte provides the fast, efficient delivery that Walgreen has come to expect in order to keep pace with its prolific construction agenda, Walgreen executives say. It is a working relationship that developed over the course of nearly two dozen jobs. The two companies began their profitable working relationship in 1990 after Korte wrapped up its first Walgreen distribution center project in Mt. Vernon, Ill. Shortly thereafter, when a construction firm on another Walgreen project began having financial problems, "we asked Korte to step in and take over and we’ve had a relationship with them ever since," says Dale Larson, Walgreen’s manager of construction. "We got comfortable with them." Korte Co. has since gone on to design-build 23 projects for Walgreen, including two retail stores, nine distribution centers, a pharmacy packag-ing center, an accounting office building and numerous additions. One of the biggest jobs Korte completed for Walgreen was a 687,357-sq-ft distribution center in Perrysburg, Ohio, in 2003. The most recent was a 14,560-sq-ft retail store in Las Vegas earlier this year. Click here to view pdf chart

The successful design-build relationship of Walgreen and Korte is built on common ground the two firms share as innovators in their fields. Founded in 1977, Korte Co. was a pioneer of integrated design-build project delivery, employing in-house architects to complement its construction team decades ahead of the current design-build boom. That willingness to innovate, a value laid out in the firm’s mission statement, matches up nicely with Walgreen’s own mission statement, which is to employ "the most innovative retail thinking."

"We are able to hone in on what they need" because of the ongoing relationship and the compatibility of values, says Todd Korte, company president and CEO. "Our value systems are really in line with each other and it makes good chemistry."

The team effort begins long before ground is broken on any project. "We help them to determine the most cost-effective site selection two or three years before construction begins," Korte says.

Schmiedl says the speed and efficiency on Korte’s jobs depends on "a collabora-tive relationship. We guide Walgreen’s portion of the job and determine design needs then bring Korte in and tell them what we are looking for in design." Once construction starts, "our own field personnel work hand-in-hand with Korte throughout the job. It is a huge collaborative effort," Schmiedl says.

Common Goal

The Southeast center project is a new prototype for Walgreen’s distribution centers. It will incorporate efficiency-enhancing features such as high-bay rack structures outfitted with remotely operated lifts to move inventory with minimal manpower. The prototype also sets a new "lean" building standard for Walgreen’s distribution centers. It is being constructed on a significantly smaller footprint than previous warehouses and streamlined interior workspaces are being defined by ergonomics. "We're really going on the leading edge here," says Walgreen CEO David Bernauer. "The technology is not cheap...but it’s going to be at least 20% more efficient than the ones we have out there today."

Situated on 110 acres, the Southeast distribution center’s footprint is about 650,000 sq ft, which is 20,000 to 30,000 sq ft smaller than previous Walgreen facilities. Included is 400,000 sq ft of warehouse space with two 110-ft high-bay rack structures totaling 250,000 sq ft. The warehouse space will have 80,000 sq ft of mezzanines and 95 loading dock positions.

The exterior will be clad in precast wall panels and the high-bay rack structures will be covered with ribbed and smooth sheet-metal "skin." A two-story, 40,000-sq-ft administration area and 10,000-sq-ft receiving area are also included in the design.

With this building, Walgreen plans to "modify the handling of materials," says Todd Korte. "It’s the third generation of distribution center and it’s different from previous buildings," Existing distribution centers "used some rack-supported structures, but, in this building, there will be much more rack-supported structure. It will provide more rapid supply and retrieval and will be more mechanically operated than in previous buildings."

	Korte's in-house design-build capabilities has lead to 23 completed projects for Walgreen.

On the fast-track job, the design innovation and sheer size of the project could have posed schedule challenges in a traditional design-bid-build project delivery environment, Korte says. But design-build allows Walgreen to shorten the project‘s time frame by years, he notes. "Because of the time frame, we wanted to get started with construction before the design was done," says Dale Larson, Walgreen’s manager of construction. "Korte has in-house architects and that allows us to gain time."

Korte says construction began with only about 30 to 50% of the design completed. Working with a design-build firm, where all planning, logistics, communications, design and construction is handled in-house, is in keeping with Walgreen’s drive for efficiency. "It’s a one-stop organization," Schmiedl says. "If there’s an issue with the building, we don’t have to serve as a mediator between the designer and contractor."

Walgreen has 5,000 stores already in operation and is opening 450 new units annually.

While integrated teams are proven to deliver projects faster than firms working through traditional methods, a design-build firm with full resources and personnel under one roof is even more efficient, says Korte. "We have a common goal and we are all focusing on the same project," he explains. "We all live and die by the same project." An in-house design-build firm is able to streamline communications and logistics in ways teams comprised of separate firms cannot. "When it comes to communicating all we have to do it walk down the hall," Korte says.

About 25% of construction is expected to be completed this fall. The team currently has finished foundation work, has all structural steel erected and now is moving into interior drywall, electrical and plumbing work. "It’s a massive project," Korte says. "There are 300 to 500 employees on the job on any given day."

One tricky part of the job has been matching up the two distinctly different structural parts of the building where the rack-supported structure meets the conventional steel frame, Larson says. "Other retailers aren’t building as complicated a structure," he says. "It is nowhere near a standard warehouse-type building."

Being a prototype, there is a learning curve for everyone on this project. "We’re using different equipment and there have been some logistical challenges," but it’s a prototype that Walgreen can duplicate in the future, Larson notes.

	The bulk of Korte's Walgreen work has been large warehouses and distribution centers.

While the design of Walgreen’s structures can largely be duplicated on multi-ple projects because of the volume of construction, it also can be tweaked for local codes, regional climate and geographic features. It is not just cookie-cutter construction. "Design changes are made for different soil conditions and factors such as building in seismic zones," says Larson. "Then there are also different HVAC designs for hot, cold or moderate climates."

Walgreen says that one-third of the work force at the distribution center will be handicapped and many design features are being incorporated into the center to accommodate those 200 workers. "We are in a position to make a difference," says Randy Lewis, Walgreen’s senior vice president of logistics and distribution.

Lewis says the design aspects include atypical counter heights, wider doorways, installation of touch-screen computers, application of more pictures and less text in signage and a circular drive at the building’s entrance to facilitate access to public transportation. "When you go in on the front end of a project, you can make these changes pretty easily," Lewis says. "It’s really about ergonomics, and that just makes it better for everyone."

(All photos courtesy of Korte Co.)