Warehouse Putaway Process: Optimizing Inventory Management
How to use warehouse putaway strategies to optimize your inventory management. Need help with receiving? Don’t miss this article!
Warehouse Capacity: How to Calculate & Maximize Storage Space
Learn how to calculate and optimize warehouse capacity with a basic formula. Plus, how to increase capacity without adding more space!
Warehouse capacity is a critical factor to consider when it comes to warehouse management. Accurate planning can help businesses to maximize their warehouse space utilization and minimize the cost of warehouse operations. But how do you know what the storage capacity of your warehouse is, and how do you optimize it?
Table of Contents
What is warehouse capacity?
Warehouse capacity is the amount of space available in a warehouse for storing goods and materials. It is a key factor that helps businesses maximize their warehouse space utilization and reduce costs associated with warehouse operations.
Why is warehouse capacity important?
An accurate warehouse capacity helps businesses maximize their warehouse space utilization and minimize the cost of warehouse operations. You need to know how much you can store for lots of reasons. One reason is to handle seasonal increases or decreases in storage capacity requirements. Knowing these numbers empowers warehouse managers and purchasers to order the right amount of inventory through these shifts.
Another example of why capacity in a warehouse is important is for a basic pallet storage business; If you don’t know what your total pallet space capacity is, how else will you know when to say “no” to more inventory?
Finally, if you don’t have enough materials to utilize what your warehouse is capable of storing, then you are leaving money on the table. Alternatively, if you have more storage capacity than you need, this makes it more expensive to store and service the same inventory in a smaller warehouse.
How do you calculate warehouse capacity?
You can calculate warehouse capacity by using our simple warehouse capacity calculator. This takes all the work out of the process for you.
Or, do it yourself with this 6-step process:
- Measure the total square feet of your warehouse space.
- Measure the total clearance height of your warehouse.
- Measure the total square feet of your unusable space (ex: office space, bathrooms, break rooms, etc.)
- Subtract the unusable square feet from the total square footage. This gives you the total usable square footage.
- Multiply the total usable square footage by the clearance height. This produces the total usable volume of your warehouse in cubic feet.
- Set your ideal warehouse utilization (optional). We recommend no more than 80% for the standard utilization cap. See below for more information on why we recommend 80%.
Congratulations! You have calculated the total volume of usable warehouse storage capacity in cubic feet.
What is the ideal warehouse capacity?
The ideal warehouse capacity might seem like it should be 100%. However, the ideal number is actually closer to 80%. In actuality, we don’t need to focus on a capacity number. Instead, let’s pay more attention to “warehouse capacity utilization”:
What is warehouse capacity utilization?
For this article, we refer to capacity in terms of the total amount of utilized space as a percent (%) of the total amount of available space.
In other words, the percentage of space that is used compared to what is available to use.
So, for our capacity value of 80% of the total available space in the warehouse, this value is the total warehouse capacity utilization. We recommend 80% because a warehouse that is is 100% of its space has zero space for expansion. You can think of it like an emergency fund. If demand or inventory requirements suddenly change, you can’t manage it without some cushion.
Additionally, a warehouse space with zero room for additional materials is more likely to suffer from operational issues. These may include warehouse design or layout problems resulting in difficulty for employees to maneuver through the space. A “cushion” space of about 20% allows for material handling to occur with some extra room to stage pallets in areas while sorting and organizing takes place.
As an added benefit, keeping your open capacity at about 20% also increases safety in a warehouse setting. This is because the amount of congestion in a warehouse directly contributes to a reduction in safety. As there is more overall free space to move and stage material in designated spaces, accidents are less likely to occur.
Strategies to Increase Your Warehouse Capacity
Sometimes your warehouse capacity may diminish due to a growing business or a change in inventory requirements. What do you do if this happens, but you have no way of increasing your total warehouse square footage? Let’s look at some steps to take to help increase your capacity without adding more space:
Plan Ahead of Time
Ok, this one is technically not a step to increase capacity, but it needs to be said. It is best to plan for any expansion requirements or anticipated growth, rather than waiting until it becomes a problem. Of course, this is not always possible. But generally speaking, a little bit of planning goes a really long way.
If the forecasting model predicts a 30% increase in the next 5 years, do not lease a warehouse that can only accommodate the first and second years. Unless of course, you have a bulletproof plan for moving your operation or adding more space. But that would be planning!
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Evaluate Your Empty "Air Space"
Before deciding if you should change or add equipment, figure out if your storage capacity practices are good. For example, when products are stored on pallets in racks that have a lot of “air space” around them, it takes up more space than necessary. You could easily consolidate pallets of material to reduce the total number of pallet spaces in use.
Another way evaluating air space is helpful, is by increasing the effectiveness of your racking configuration. For example, if your pallets only require 50 inches of clearance height to store but your racking is set for 80 inches, you could reconfigure your rack spans to the 50-inch requirement. This may add another row of rack space in your warehouse that was not previously there.
Evaluate Your Packaging
Similar to air space in your storage setting, you can also evaluate the compactness of your product packaging to increase capacity. We did this with one of our manufacturing customers, a toy gun brand.
We re-designed their packaging which reduced the overall size by over 20%. This not only increased their storage capacity, but it greatly reduced their transportation cost. When you can transport more products in less space, the savings about in lots of areas!
Implement Warehouse Slotting
One way to increase warehouse capacity is by doing something called warehouse slotting. This helps you use the space better and makes it easier to find things that you need. When you slot something, it means you put pallets in a rack based on a set organizational method.
Slotting can happen based on things like SKU number, product type, or any other type of product characteristic. This saves time and space. It also makes it easier to keep track of inventory and reduces warehousing costs.
Combine Receiving and Shipping
One effective way to introduce more capacity without adding space is to simply alter the amount of space used in other areas. For example, if the shipping and receiving areas are separate, you might be able to combine them into the same area. This instantly increases the usable area for storage space. A tactic like this might not be the best idea for all warehouses, but it could work for smaller ones with less traffic.
Change Your Equipment
One of the most effective ways of increasing warehouse capacity is to upgrade your racking and material handling equipment. Standard pallet rack aisles are 9 feet apart to allow for a counter-balanced forklift. However, there are smaller variations of forklifts such as a turret forklift that can operate in smaller aisle spaces. A smaller aisle means more racks can fit in the same overall area, thus more capacity.
Additionally, some forklifts can reach into “double-deep” pallet racks. This configuration places one pallet directly in front of another rather than only one pallet between each aisle. Furthermore, there are pallet rack configurations that add multiple units of depth, even up to 5 deep with gravity-fed systems that dramatically increase capacity.
Need help determining capacity?
Warehouse Capacity Calculator
Need help figuring out the total volume of usable space in your warehouse? We built a simple tool to help you calculate that.
Pallet Storage Capacity Calculator
The pallet storage capacity calculator quickly determines the total number of pallets your warehouse can store based on rack configuration.
Warehouse Capacity FAQs
Slotting involves organizing goods within a warehouse according to set criteria (e.g., SKU number, product type) so that it is easier to find what you need quickly; this helps maximize efficiency and save time spent hunting around for items within the warehouse space, leading to increased total storage capacity overall due to improved organization.
Warehouse capacity utilization is the measure of the total amount of used capacity in a warehouse. For example, if a warehouse is 3,000 square feet and the capacity utilization is 60%, then the total warehouse capacity utilization is 1,800 square feet.
To manage warehouse capacity you need to follow a core process. First, you need to know how much total storage capacity you have by measuring and calculating it. See our formula above to calculate warehouse space. Second, you need to know how much storage capacity you need by forecasting your inventory requirements. Third, you need to optimize your capacity by reducing the amount of “air space” or empty space in your warehouse.
You can increase warehouse capacity in 6 basic ways:
- Add More Space
- Reduce Your Empty “Air Space”
- Re-Design Your Product Packaging
- Implement Warehouse Slotting
- Combine Areas
- Change Your Equipment
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