Is My Warehouse Maxed Out? Low Cost Ways to Maximize Warehouse Space
Never confuse sales growth as a definitive sign that a fast-growing e-commerce company is running out of warehouse space. It might be a sign of growth, but it may be indicative of storage mismanagement. Before renting another warehouse or planning a larger warehouse location, it is wise to engage warehouse planning experts to determine the real reason that space is in short supply.
Over the past quarter (or past sales year) there has been an increase in sales revenue for many companies. To ensure the right inventory is available to meet customers’ demands, too many e-commerce firms, especially those moving from a “garage” warehouse jump to the assumption that increased inventory volume automatically translates to needing more storage space. HOJ Innovations has found that through modern materials handling and use of warehouse software, the increase in virtual space by an additional 50 percent is common. “Virtual space” is the effective additional space that is achieved by a variety of warehouse efficiencies.
With the online consumer insisting on 2-day, next-day, even same-day delivery, business growth may require additional distribution centers to efficiently meet rapid delivery demands. Companies based on the West Coast can’t afford to lose sales and revenue from the East Coast. That is a shipping logistics issue which has less to do with determining if warehouse capacity has been reached.
There are situational and temporary storage needs which often lead to misguided perceptions of space constraints in the warehouse. If during a busy season there is more inventory than normal or if purchasing was able to secure a deep discount through bulk inventory, these events would trigger a space shortage. These short-term problems may only require a temporary storage solution rather than searching for a new warehouse.
Bringing in warehouse experts can reveal current warehouse structures that are not working efficiently. It might be time to have a logistics and material handling team create a unique storage plan for your needs. For example most e-commerce businesses know the 80/20 rule: twenty percent of the total SKUs represent 80 percent of the revenue. One solution is keeping fast-moving inventory (the 20 percent) in reach in a primary warehouse, while storing slower-moving or excess inventory in a nearby secondary warehouse.
Sadly, newer businesses often run out of space because they are holding too much unwanted inventory. Once determining the rationale of the limited space, viable solutions can be suggested allowing best-practice custom solutions to meet current and future storage needs.
While the first instinct is to get a larger warehouse, the reality is that almost every warehouse goes through a stage where there is insufficient room to store everything. Moving to a new facility is costly.
Warehouse is “full” when storage density reaches 85 percent
When more than 85 percent of the available storage locations are occupied, it means there are no locations available for new arrivals. When pallets, boxes, or products are in the aisles or blocking the receiving and shipping areas, safety requires the situation be addressed immediately.
Perhaps SKU quantities can be reduced, since many warehouses are overloaded with too much of the same SKU. Eliminating obsolete inventory can create more space. Many distribution centers or warehouses have order picking taking place directly from a storage location. Smaller storage locations can re-slot, or move these products and free up some valuable storage space.
Use Your Vertical Space Better
Few owners look up. Taking advantage of all the available vertical space often drives huge increases in storage within an existing warehouse. Decreasing aisle widths often frees up space especially if counterbalanced fork trucks to store products are not being used. Traditional aisle widths are 15 feet wide, but often companies can operate in 9 feet aisles freeing up more space.
E-commerce companies with large quantities of small-sized items picked for customer orders, are often better served creating four to five feet wide aisles.
With experience, materials handling experts who have seen what does (and does not) work can find, tremendous gains in efficiency. Tricks like double-deep storage may increase the productive use of floor space by about 60 percent.
In these days of thin margins and faster deliveries, It is not enough to pick a location and buy racking. To determine if a warehouse is truly outgrown, it requires experts who consult, design, engineer, sell, and implement material handling solutions which will best meet the needs the fast-growing e-commerce companies.