[01:00:03.160] All right. Awesome. Hey, Tony. How’s it going?

[01:00:06.370] Hey, Mark. Pretty good, man. I’m Tony Henderson. I’m project manager with North American Steel. On a direct sales team, I work directly with end users for Turntube projects and storage systems.

[01:00:17.410] Awesome. So Mark Monard, Director of Lids Atlanta office. Lids obviously focuses on a lot of different components. I focus specifically on infrastructure and design through implementation. So we’re We’re here to walk through the different building factors that impact racking within whether it’s an expansion or greenfield design. So I want to kick that off and see how we want to mitigate or go through that story. Interesting way to begin, I think, talking through the customers that may approach North American Steel slightly too soon and understanding what this uneducated customer may come to you with with demands. So just curious to know when that falls through. What are these types of conversations that you may have?

[01:01:07.490] I actually have a great example of what happened just recently this year. I was called into a client site and they were looking for an increased density. They wanted more pallet positions out of the space. So I showed up to site, go through a walkthrough, and they’ve got just pallets, 12, 15 deep, double-stacked on the ground. And I’ve got about enough clear space at the top of these pallets to maybe fit one more. But there’s no aisles. So if any system I would have implemented into that space, likely would have led to a reduction in density unless we were able to go with a high density system. So I started asking questions about what type of inventory system they had, how many SKUs they had, how many pallets of each SKU they had. And that’s where we started to see some blanks. They didn’t have the information readily available. They weren’t even really sure what was on the floor at at a given time. They just had it in their head. And that was where a big red flag lit up. I just didn’t see an easy way to implement a system without more information.

[01:02:11.730] That was actually a big part of connecting with it and bringing you guys into that conversation to see what we could do. It’s a theme is that customers look for more without understanding their current state.

[01:02:28.320] Yeah, I definitely think that It’s an important piece to understand. And to your point, data tells a story. And understanding what that story gets to or the final result of it is super important even prior to coming into North American Steel. Now, I’m assuming that you guys do do some data analysis, but at the end of the day, if I’m coming to get more density, you’re thinking, hey, how many pallets positions can I fit for you? And what’s the benefit of doing that without necessarily raising a flag? Because I’d assume thoughts are when you’re coming to me, you have an idea, you have a plan, you have a decision that you want to be made, and you want me to put that into life, get it to fruition. When in fact, a lot of the times they’ll come to you not truly understanding what they need, but more thinking, Hey, I have 15,000 power positions in my facility. I’m close to that number now. I need to go get more power positions. How do I get more? And often the answer to that is, go multi-deep, go bulk on the ground, go try to get some height if you can.

[01:03:35.940] But obviously, current facilities don’t necessarily do that. Telling the story of data and to your point, how this collaboration started is Coming to lid first and early. I think early is an important aspect here of, Hey, if you want to rush a decision, you’re not going to make the right one. But if you’re going to come in significantly early and be able to crunch that data and understand the different profiles from your fast movers to your slow movers, that will give North American Steel clarity on, okay, this makes sense operationally, but also for inventory and complete building throughput and flow. There’s more than one aspect to building design. Capacity is obviously an important one, but pick line and throughput capacity is also two major components that have a huge impact on the type of racking you’re going to put forward.

[01:04:34.050] I think you touched on a great point, really highlighting that area where clients historically have made very hasty decisions, looking at one specific metric. And as we transition into this post-COVID world where we have a little bit more time, where lead times have come down to a healthy place, where space opportunities and vacancy rates are increasing to the point where clients now have choices and they have that ability to put a more thorough investigation into their needs. Can we reevaluate the existing space? Is it a new system? Is it a new process? Is it moving to a bigger space? It comes down to really understanding that current state and then connecting it to that future goal, like you were saying.

[01:05:20.380] I’ve listened to a few of the recordings prior and just circling back to something that Raph had mentioned in his I guess, segment. Touching on the true requirements of bringing the teams together early is significantly a very important aspect, but you don’t want to bring them to the table too soon. And I don’t know if that’s a true concern, but you don’t want to have 10,000 chefs in the kitchen to make a decision. You need to figure out who that core value who those right people are, and then move forward. And obviously, value engineering is a huge component of it. And I think that may bring us into a lot of the overlooked components within a building that North American Steel as engineers and designers of that true system may bring over top of what lid already can offer as that call it conceptual design versus a final detailed two-spec plan. I’m thinking here of building column layouts and making sure that we have the right distance between racks and that we have the right sprinkler requirement. And we’re looking at the different types of loads. We never really calculate load that is point load, somewhat easy to evaluate, but then you get seismic loading depending on the areas that you’re going to be in.

[01:06:49.940] You’re going to get anything looking at the slab and the slab thickness that are truly components that come in fairly early on in a construction project when the racking team is probably at this point under RFPs and trying to get results and trying to get that information. So how do you navigate that flexibility or that uncertainty when you’re doing and putting a bit together when often that information may not be available right away?

[01:07:22.460] It’s a great question. Thinking through the dynamics, in the earlier video, Jeremy mentioned Creating a box to play inside of it. Essentially, the RFP is an important component in helping us really Excel in our way. Throw it into that building context that there is some merit to having those conversations early on and making it a part of that proposal stage. Right now with customers, you’ve got brand new spec buildings to choose from, and you’ve got older legacy builds that are different sizes. Understanding that current knowing what you’re looking for from an outside-end perspective really helps on the decision-making side. Column grids have varied, heights have varied, slab thicknesses have varied. I’ve had customers move into existing spaces that gained them an extra 10 feet of clear-hiding to find out that the slab was in a weaker position. Now, luckily, we were able to engineer around that, but the compromise resulted in extra large bearing plates, which does have some impact from a functionality perspective on the way that a customer interacts with the racking and the way it impacts the vial side of things. Another customer, for example, had moved into a space with a pre-assumption of what the sprinkler conditions would need to be.

[01:08:44.810] Without doing Having done the due diligence, and this is actually a complex one that I’m interested to hear your take on. Without having done the due diligence early on, they ended up coming to a position where the building not only was able to… The building sprinklers were not capable of supporting what they were looking to put in there from an operational perspective. But the building also didn’t have the ability to be retrofitted because it didn’t have the pressure coming in from the mains to be able to hit the levels that were required. So the entire building essentially was misplaced. And that level of due diligence, it’s a challenge if you think about it based on the conversation we’re having, how do you go to that depth and prevent that problem at that RFP stage? When maybe we’re just working through the bid, you guys are in there. What would you suggest approaching that with?

[01:09:33.090] It’s interesting because as we’re going through different greenfield designs, the builder or the design builder often has the responsibility of anything that’s construction. I’d even assume that North American Steel, although you need to be aware of sprinkler requirements, I don’t think you guys are on the hook for making sure that we meet that demand, right? Yes, you’re going to bring your expertise, you’re going to bring it in. So to the notion that we have, it’s any design builder that would have that experience. Fire Marshall is always part of the review and the permitting process and making sure that we get the papers in front of them at a very early stage and make sure that we do get the approvals before moving forward, I think it’s important. But the one thing I would assume is a spec building can be designed for any which type of materials. If you’re dealing with paper and more flammable materials, well, maybe Maybe the fire suppression that they have will not meet the specs that are required for those type of components. Or if you have frying oil that gets put in there, it’ll have a lot different specs than if you go and you put in, I don’t know, hockey equipment.

[01:10:44.330] The building is probably viable for other components. Now, assuming that the building got built, I’m no expert in terms of fire suppression. So I walk in there and it’s not going to flag anybody that this makes total sense and that, Hey, the building is built, therefore it must be to code. I think doing all of those due diligence and making sure even moving into an existing spec building, validating your product types and categories with the fire marshal going in and saying, Hey, these are the specs. Here are the buildings that we’re looking at. Do we meet code to ensure? Because everybody’s going to take it anyone’s word for granted, depending, especially if it’s experienced builder as you’re walking through it. I know the components for you guys comes into, Hey, if we have in-rack sprinklers, that has an impact on the racking layout, that has an impact on making sure the flexibility of the layout. If we’re dealing with those type of products and those type of components, you need to have an even sturdier layout determined because it’ll be a little harder to make ramifications. I want to understand when you guys deal with those interact sprinklers or those sprinkler systems, how complicated or more complicated does that make the facility?

[01:12:11.180] Because that also brings us into the question of, is your building height correct? Are you considering it for the right reasons when going from 40 feet to 45 or 48 feet may mean, hey, you get an extra level of product, but now you have all these other complications that come into it, not only with sprinkler systems, but forklifts, productivity at that top level, the wheels on a forklift, the slab requirements may be slightly different at that height. So there’s a lot of little components like that that may be overlooked. And just trying to see if you have a take on that clear height versus sprinkler versus flexibility. Because a lot of times they’re going to come and say, Hey, we want to be flexible to grow, and we’re not 100% sure on our future. So understanding what that looks like in your perspective when we’re trying to design something that has some of these rigidities.

[01:13:10.610] Connecting to that side of things, it really keeps coming back down to understanding your current state. Every product mix has such an impact on those requirements to adhere to what you were saying with the clear heights having impact. With the in-rack sprinklers, is it going to be in the flux space? Do you need it in the actual racks? Are you going to need smoke baffles? Are you going to have protection beams? These are components to change. Maybe you’re historically used to playing with… You got a 50-inch pallet, you like 56-inch clear height, but you’ve only ever gone three highs. You never need it in rack sprinklers. Now we go six high and all of a sudden you do need in rack sprinklers. Now that clear height that you need between beam levels grows by 8-12 inches because you need clearance for the sprinkler. How are you impacting that? Moving from three beams to three beam levels with maybe a counterbalance truck. Now you’re jumping up to a reach truck, and on top of that, you’ve got these additional tolerances you need to take into account because the sprinklers are there. They get damaged. It’s going to be a lot of inventory loss on that side.

[01:14:18.130] There’s a lot of factors. Then, like you said, 40 feet may sound like seven pallet positions, but then you factor in in-rack sprinklers and all of a sudden you’re only getting six pallet positions. Does the cost of that 40-foot building justify that loss in pallet position? In this case, knowing your product, knowing what, or at least having an idea of what you’re hoping in a store at height, that becomes a big part of that decision-making process. That’s where Lid can help with that analyst. Yeah, you’re not going to necessarily bring the building. You’d be the building expert, but you can at least flesh out the importance of that topic in doing that early diligence. From my experience, a lot of these customers with high-risk kids, generally speaking, have an idea. They’ve been down the game or the pathway before dealing with the fire marshals. I think it’s a little bit more important for those customers who are shifting from small legacy buildings to much higher steroids. I think that’s where they may be a lot more surprises coming into the mix. From that perspective, I think sprinklers are probably one of the biggest impacts, especially with the anticipation of a revised code coming out in the next year or two.

[01:15:37.120] Building columns, ceiling heights, from my understanding, the cost goes up quite a bit after that 40 foot point from a spec perspective that I think specs are going to sit around that 40 level for the next little while. Column spacing, that’s an interesting one. I’ve seen a lot of different grids. I think that being able to analyze the column spacing is going to really tie down into knowing, are you single selective? Are you double deep? Are you high density systems? Without having that early idea, it’s hard to determine what you need out of the building. To slap a lay down is quite a quick process when it comes to a building, especially if it’s just a greenfield. You throw a CAD, you throw it a couple of options, you see how things play. But it’s knowing that early state, knowing where you are where you’d like to be, and building a bit of a pathway. You mentioned it earlier that a lot of times people call with this idea of focusing on more power positions. They have an idea, they have a place they are today, But there’s no pathway. That no pathway is chaos, in a sense, for us to come into because we don’t dabble as deep into the data.

[01:16:55.600] We don’t have that time to create this analysis and study the current state to be able to make the right decisions. We can just throw things down. It’s great. Sell a bunch of racking. It’s a really great option. We put down as much density as possible, but does it work for them? And how do you know it’s going to work for them? It’s that operational question that really drives me to defer to you guys.

[01:17:21.270] Yeah. And I think right now we’re talking about new construction and new builds, which obviously you have a little bit more control over because you this blank slate. We’re talking about this spec building at 40 foot column spacing, great for single deep racking. But if I throw a double deep rack in there, all of a sudden my columns may fall within racks, within aisles. And that’s where that flexibility isn’t fully there, depending on that column spacing and depending on how you want to look at it. So if you’re looking at a 58 or 60 foot column spacing, now you have a flexibility where it can be three single deep aisles or two double deep aisles or potentially a mix. And it becomes interesting because as we’re walking through that column spacing an ideal rack layout, you don’t necessarily want to make your building fully customized. Obviously, in an ideal world, you want your column to always fall in a flu, right? Behind two racks. But the reality of it is if you think there’s going to be flexibility, if you’re not sure you’re going to be there for a long period of time or long term, do I want to be doing these custom spacings at 47 feet because I have a single deep and a double deep and I match it up so perfectly.

[01:18:38.440] But then my flexibility has been totally compromised. If ever I go for… You always want to think about reselling or releasing a site in the back of your mind. It’s not ideal. It’s not your wishlist to say you have to leave the facility. But I think that does come in play. And the same thing fully applies to moving into a current. I’m going to call it a brownfield, even though I know that brownfield could mean contaminated soil, but in this case, we do mean existing building. And we bring it back to this. I’m not going to call it an educated customer, but either customer that wants to go too quickly or doesn’t fully have a plan may go look for current spaces and think, Hey, I need 200,000 square feet. But that 200,000 square feet comes with a height, comes with a shape. The ratio of length to width of a facility, or if it has an L shape, or if it’s a perfect square, will make an impact on how you utilize the space and how the racking can fit within the space, which I think sometimes may go 10,000 feet over their heads and understand that if we can get the analysis done prior to your point, take the data, understand your ground level your positions required, understand your reserve positions requirement, the capacity of the facility, and then bridge those together.

[01:20:08.750] I’m going to talk throughput, which if you have packing stations or you have, obviously, your dock, which is your inbound, your outbound, dock doors and making sure that you can get product in and out. If not, there’s no point of having as much as you on the building, you’ll never get any product to your customers. It’s interesting to know that once that model is built, we collaborate and saying, Okay, well, the client comes. These are three potential options. Is there a preferred one? The answer is often, yes, there will definitely be a preferred one. Every single box is different. Every column spacing is different. Whether you need mezzanines or different components. It just has such a big impact. That bringing in experts just makes a lot of sense and bringing them in early. Again, I’m thinking back to the conversation between Raph and John, where a client may come and say, Hey, we have a building, we have 100,000 square feet. Let’s move into it. We may turn around and say, Why did you go with 100,000? You actually need 200,000. Now we need to make a miracle. It’s not always what they want to hear, but you got to be honest and you got to make sure you follow through with those right specs.

[01:21:25.880] I think putting all of that together, whether it’s a new build or an existing It may be even more important on that existing build because you have a lot more flexibility with the new build, and they’re there to build it for you, which means you’re going to be involved in every single step of the way and you can highlight components. But again, it goes to saying, what do I need to highlight and what do I take for granted? There’s just this landscape that you really need to navigate and know better than to get experts like Lid and North America Steel to help navigate them because there’s a lot that just if you don’t do it on a day-to-day basis, can go right over your head.

[01:22:06.460] Definitely. Tying into that, too, with the old versus new and the builders still being involved. Old buildings may, on the surface level, seem great. They meet the square footage. They’ve got the clear height. You can theoretically fit that density. But one of the things that we’re seeing time and time again is the surprises that come with permit. This push towards a racking permit and doing the due diligence for the sprinkler, for the slab, for the fire exits, for the emergency lighting, these components can oftentimes surprise the client with a lot of additional costs. More importantly, the challenge that we’ve been seeing is that the information available for these older buildings can oftentimes be a lot more sparse. In some situations, clients clients have even had to try and reach out to the city to see if there is any documentation on record, which on its own for most municipalities, at least in the GTA, is about a month turnaround. So going through the due diligence permits requiring can often take 2-3 months because documentation is paper, it’s non-existent. The original engineers, they’ve retired, they’re no longer in business. There’s all these variables. At this stage, It’s not been as important, or at least historically, it’s never been as important to go through these due diligence.

[01:23:35.290] Having the documentation has been fallen off by the wayside. Now, with these newer spec buildings, you got CAD files for everything. All the builders, the trades people, everybody’s still involved. Their business is still operating. They know what’s in there. They don’t have to go in and inspect it. They don’t need to review it. They don’t need to make any drawings. There’s a lot of cost saved on that planning side. It allows you to move faster than maybe you have the advantage of in these older buildings.

[01:24:03.590] That’s definitely a good point. The people involved in that initial build is definitely something to highlight because you mentioned it, and I don’t think it would have been something that I would have brought up had we not spoken about it now. So it’s an interesting perspective to know that the world has gone digital. So obviously, anything within the last 10 to 15 years, probably even more, has been digitized and also make it a lot easier to go and get public records and get records of the building to validate whether it’s accurate or not, versus making a full reset or a full inspection to validate those numbers. So I think that definitely makes a lot of sense as a, call it a, I don’t know, logical next step to looking through that process US. If we think through costing, obviously every single rack component, at the end of the day, it’s steel. And as we’re walking through it, I know that steel price has been slowly decreasing pretty steadily in the last little bit. But how does, I guess, the impact, obviously the COVID spike, and now it’s coming back down. Does that impact decisions that you’re seeing customers come to you with?

[01:25:32.880] Is the steel still a big component in the cost as we’re looking through it of make or break of a project or different types of racking? Does that make any sense?

[01:25:49.040] So COVID exploded steel, prices 2X and 3X in some situations. Since then, we have seen somewhat of a normalization. There is some fluctuation there and geopolitical stuff going on right now. It’s pretty difficult to predict what’s going to happen. But I think in the last while, we’ve seen a pretty balanced, healthy state. Tying into that, the big question we always ask ourselves here when we’re designing a system is, where should we put the steel? Where do we need the steel? And that comes down to understanding your current rack and knowing your operators, knowing where’s speed movement and not speed movement. One of the things that we’re working to overcome is this notion that racking is furniture. Racking may historically have been furniture. It was something you just threw an into it. But as we go taller, as we go heavier, it very much is an engineered system. And inside of that, an engineered system comes with a greater cost than what was historically present. And it becomes an It’s a living, breathing part of your business, and you want to be able to protect it. And with that adage, one of the big questions I always ask customers is, do you have a racking maintenance budget?

[01:27:11.250] Is that something that you factor into your bottom line to take care of the racking system that you have in your building. In a lot of cases, the answer is no. But in some situations, the answer is yes. Now, the yes typically comes in a lot of these really large organizations who have millions of pounds of steel just that’s floating in their facility, and they’re moving so much product through, the damage is just a part of their business. And what’s really fascinating about these teams is when we go into a design perspective from a racking side of things, oftentimes they’re bringing their maintenance team to the table to sit and talk about where they’re having problems, what’s getting damaged more frequently, where are we spending that maintenance budget on, what can we do to reinforce these specific situations? We’ve got a customer who has a double deep system. They started with having a recess frame in the entrance point, so a little bit of structural components on the bottom to minimize that straddle leg damage as operators come in and out of the system. Then they went with a bottom structural beam. Now, what ended up happening as they continued to use this system is they found that that next beam level was also getting some impact.

[01:28:22.390] So they transitioned to having a structural second beam in that entry point. In the backside, all roll form, back frame, all roll form, but in the front, they had a hybrid. So they created a system that was impact-resistant where it need to be and cost-efficient where it didn’t. I think that’s one of the beauties of what North American Steel offers in our product mix is that we do structural, we do roll form. We’re R-Mark certified in both structural and roll form, which means that we have as complete and safe a system when it comes to hybrid as any one specialty.