16 Ways to Increase Distribution Center Capacity

As a basic principle, companies need to ensure that the operations are as efficient as possible, increasing throughput as much as possible while maximizing the capacity and utilization of the space before opting to move to a new facility.  It is critical that the operations have truly taken advantage of the existing facility, due to the high cost of relocating distribution center operations.  

Relocating a facility can, at times, be inevitable, but the disruption of business and impacts on labor mean that you must at first be sure that you have maximized the existing facility. In addition, most major markets are at record levels of warehouse occupancy rates, and lease costs are at all-time highs.  New warehouses being built on speculation are large centers that may not be suitable for small to moderate-sized businesses. 

To be certain that you are maximizing your facility’s potential for throughput and capacity, an assessment must be performed.  There are significant benefits to identifying opportunities for improving the operations, including:

  • Avoiding a warehouse search and move.  
  • Opening fulfillment operations in another facility can often take 6 to 12 months from contract signing depending on the material handling equipment and automation required;
  • Reduced risk to the company.  Warehouse moves distract management and hourly workers from order fulfillment and customer service goals.  
  • Remaining in an existing facility saves operating costs from not moving product; lost time and overtime; hiring expenses; and capital costs to outfit the new facility;
  • Undergoing an assessment and process improvement will provide ideas for reducing order turnaround time; lower cost per order; and improve customer service.


Read this Whitepaper: Warehouse Assessment


Here are 16 considerations for this assessment.

Enlist Your Fulfillment Staff

Recognize that employees often have good ideas for process improvement.  People that are doing the work day in and day out - often see how they could do it more efficiently.  There may not be the opportunity or encouragement to bring up changes because time isn’t available to make changes. Involve them in the discovery and decision-making process.  While they may not have the answers to how to improve fulfillment, by working with a consultant, the team can achieve effective results and get early employee buy-in to the change.

Flow Chart Processes

Flowchart all the process steps for inbound receiving through putaway and replenishment; and outbound processes of order picking, packing, shipping; returns processing; and inventory management, etc.

The flowcharting process will show:

  • where time is lost; 
  • where errors occur; 
  • where processes can be changed and process time reduced;
  • where “touches” can be eliminated along with costs.

It’s a great way to update everyone, including management, as to how the work is processed.

Use “Cubic” Space Effectively

Many older fulfillment centers have lower ceiling levels under 22 ft. clear span. Today many centers have high bay storage above 32 feet.  Look at how you are using the cube and footprint in your existing center.  Can you make use of “open space” and get more storage?  For example, are there areas of your center where a mezzanine could be installed?  Can you add more levels of pallet racking if you replaced existing uprights?  Can you put racking along walls without causing forklift turning problems or over doorways to increase capacity?  Are there ways your warehousing systems can help you manage space through combining partially used locations?

Focus on Slotting and Replenishment

These two activities form the backbone of the distribution operations because they deal with critical aspects of inventory management.  

Slotting procedures are critical. Try to provide primary pick space for at least one week’s average unit sales for each SKU. Focus on the top 20% of fast-selling SKUs to ensure that they are properly slotted. Make sure the slotting process is maintained as a dynamic, ongoing process.  Determine if you can create a dynamic “hot pick” zone for the fastest sellers. Improved slotting reduces the travel time of pickers too. Learn more in our slotting strategies article.

Replenishment of forward pick locations in advance of the order pick.  How often replenishments need to occur is directly related to how many days of supply are in the pick location.  Determining how many days of supply during the slotting process must be balanced with how much labor you want to invest in replenishments. Just remember that the larger the pick slots are, the larger the total pick footprint will become. For more on this read our efficient replenishment article.

Maintain Flexibility in the Operation and Layout

Even though most distribution centers utilize various combinations of pallet rack, steel shelving, mezzanines, and conveyor systems, operations must still be flexible to adjust to the changes in volumes and/or product lines.  Do not be afraid to reconfigure pallet racks, including tearing some down, etc.  Distribution environments must be dynamic and adjust to changing business conditions. 

Minimize Congestion That Interferes with the Flow

Avoid unnecessary congestion or overcrowding in the warehouse. The time lost due to overcrowding or congestion is significant.  Slotting will come into play again, if you slot all your fast items together, you will create significant picking congestions that will affect order turnaround time and picker productivity.  Another example is not having enough aisle and travel space between receiving and storage racks to efficiently handle product putaway.    

Right-size Storage Media Use and Sizes  

Use a variety of location storage media for slotting and reserve as dictated by item cube and velocity.  The one-size-fits-all approach rarely works to maximize efficiency in space and labor performance.  Many consumer companies have at least 3 to 4 various sizes for storing product in eaches or inner pack quantities, and additional 2 to 3 sizes for storing quarter pallets, half pallets, and full pallet quantities. With wholesale distribution, it’s not uncommon to have 1 or 2 case flow lanes and full pallet positions.  The size of the locations must be driven by cubic data, weight, and velocity. 

Utilize Automation to Minimize Picking Walk Time

As we discussed slotting above, more than half of picking time is walking. Goods to worker systems, pick and put to light keep the employee stationary or in a small footprint by bringing a product to them. Any efforts to reduce time spent walking reduces costs and employee fatigue and increases throughput.  

Utilize Conveyors and Robotics to Transport Product

Consider utilizing conveyor systems or robotics to transport inventory to be put away as well as picking of orders to improve efficiency by reducing product handling and walk time. Always be sure to do your return-on-investment studies to be sure of the payback. Conveyor selection will be based on the size and weight of the product, the throughput volume, and goals. Accumulation has to be planned for in any conveyor design and it can be a good use of overhead cubic space. 

Provide Adequate Accumulation and Storage Space on Docks

Many inbound and outbound docks are undersized from the beginning, creating congestion and double handling.  As the business grows, and as operations begin to need more space, most companies begin to encroach on the dock and reduce dock space considerably in order to provide more room for storage.  

Cross Dock to Save Time and Cost

Cross-docking eliminates steps for putting away new receipts, followed by a replenishment process, and then picking products to fill orders.   This will also reduce operating costs and increase order turnaround times.  For companies that take backorders, once the inventory arrives, it can be received, and cross-docked to a packing line for efficient processing.  If your warehouse management solution doesn’t offer this level of functionality, it may be time to consider a system that offers more flexibility. 

Measure and Report Productivity to Employees. 

Most employees want to know what’s expected of them and how they are measuring up to those productivity expectations.  This is also critical to understanding how workers are performing and controlling costs. Implement critical KPIs for each department that monitor employee performance and costs, identify ways to remove touchpoints and additional processes that reduce efficiencies.  This will allow you to always have the pulse of your operations and reduce costs.  To learn more about key departmental KPIs download the workbook.

Keep Storage Locations Open to Move Product

Generally, a distribution center is considered at full capacity when 80% of the available stock locations are fully utilized for extended periods of time.  At peak times you may cross this threshold and then come back down as inventory is sold through.  The greater concern is when the utilization of these stock locations crosses this threshold and remains above it for more than at least three to four months at a time.  At these high levels, workers end up double handling products as they continually move inventory around while trying to make space or get at the inventory that is needed.  

Move More Products in One Step

Picking, put away, replenishment can all benefit from moving more products in a single move. Less handling means less cost, less potential damage to cartons and products, and often less elapsed time too. An example of this is moving away from discreet order picking in conventional warehouses and consider zone batch picking or cart bin picking – with some automation discreet order picking is the preferred method. The same is true with replenishment, you may be pulling case quantities or eaches in some cases but aggregate as many replenishment pulls as possible to minimize excessive travel and lost time.  

Utilize Ergonomic Pack Stations

From a labor perspective, packing is typically one of the highest labor cost functions, especially true for companies shipping consumer orders.  Having ergonomic workstations will assist with improving efficiencies and reducing worker fatigue.  Check to ensure that the pack stations are ergonomically designed for people of varying heights.  Are work surfaces large enough for cartons and supplies?  Are all the packing materials available so time isn’t lost walking to get the necessary materials? 

Utilize an Appropriate Amount of Automation

Provide for the level of automation that can be cost-justified based on your particular operation and cost structure. What is your company’s situation with hourly labor quality and availability? 

Does it make sense to implement automation now and not struggle with hiring, absenteeism, and turnover costs in the future trying to file the employee positions?

Read our article to learn more about assessing and applying the proper level of automation.


These 16 principles will help you reduce costs, improve throughput and storage capacity in your existing distribution center.


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