As we evaluate multichannel warehouse operations, we are commonly asked one
question “when is a warehouse at capacity?”
We find when a warehouse is between 80% to 85% space utilization, warehouse efficiencies typically drop from a movement and storage perspective.
- Pallet movement becomes very restricted and each move and replenishment may take multiple actions to complete.
- Temporary floor pallet positions may restrict aisle movement too.
- Multiple moves increase costs, and slows down processing.
- Many businesses need to improve utilization or find new warehouse space earlier than expected.
Many businesses need to improve utilization or find new warehouse space earlier than expected.
One of the first, and toughest things to address is whether the merchants can reduce space used by focusing on the age of the inventory and liquidating overstock. Should this be the first step in your DC space study? Do you have inventory reporting that shows by SKU, the weeks of supply, and the inventory turnover? This will show the inventory and how many weeks of sales it will take to sell off the inventory. These are key reports to discussing space with management and the merchants.
After taking the initial step on addressing potential overstock, here are 15 ways to improve warehouse space utilization:
- Starting point. Quantify your storage profile in terms of capacity and utilization. Thoroughly understand the flow and utilization of the current layout, including rack configuration, slotting/pick philosophy, receiving, put away, replenishment, inventory management, and packing and shipping. Include peak seasonal trends and a thorough volume analysis of inbound and outbound product flow.
- Use vertical space. Look up, and make sure that you are using all of the vertical space available to you. Investigate storage media to take advantage of the warehouse clear span height. How much cubic feet are not used? Be sure to know how your design might impact your sprinkler design and fire code.
- Use of department space. Try to locate functions that do not require high ceilings in areas where lower stacking heights are dictated by the clear height of the warehouse. We often see unused overhead space where large departments like packing and shipping are performed.
- Consolidate locations. If you have multiple locations of the same item, consider combining them to better utilize the space. This can be done during the putaway process, and as a standalone function.
- Right size slots. Match the size and sales of the item to the right size pick slot to maximize the utilization of the picking slot cube. Having various sizes of picking slots can facilitate this process. The same logic applies to locations where you store reserve or overstocks. In forward picking, keep 4-7 days sales by SKU; this reduces replenishments.
- Off-site for over stock. If you find yourself storing a large quantity of excess inventory for a few items, consider some type of off site storage for the excess, thus freeing up space for supporting the fulfillment operation.
- Drop shipping as option. If you store and ship large items, consider utilizing some form of drop shipping to reduce your in-house inventory and inventory cost.
- Aisle widths. What are the widths of your warehouse aisles? Try to design the minimum width required to match the material handling equipment used without compromising operating efficiencies.
- Cross docking. If possible, consider cross docking large releases of back orders or single line orders to reduce the inventory requiring storage locations.
- Best utilization of building. Make sure you study your building to determine how it can best be utilized from a space standpoint. Consider clear stacking height, column spacing, building impediments, and overall process flow. Try to match vertical space needs with the building characteristics.
- Depth of storage. Review not only the effective use of the height of locations, but also the depth of storage (example double deep racking).
- Supply storage. If you have to store supplies or packing materials, try to manage the inventory to avoid overstocks. Investigate the possibility of your corrugated supplier keeping some inventory at their site for you, and take delivery every few days.
- Door use. If you have separate shipping and receiving docks, consider combining them to save space.
- Mezzanine installation. If your building permits, consider the use of a mezzanine to house functions that do not require high bay storage. These can be expensive, and are fairly permanent, but will maximize space use.
- Evaluate potential solutions. Where you have a choice between a complex and simple solution, choose the simple solution. Simple solution example: add pallet rack tier upwards. Complex example: moving rack to narrow aisles. Is there a return on investment for your solutions?
Warehouse space often is 15% to 20% of the cost per order. Moving to new space is expensive and takes a lot of time. Make sure you have assigned someone, or a position, to be responsible for the ongoing space planning and utilization analysis process.
At F. Curtis Barry & Co., we help multichannel retailers reduce costs, improve efficiency and increase productivity. Read more about our services here.