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How to Increase Warehouse Capacity

The availability of storage space – and knowing how to use it – is a daily puzzle for any warehouse manager. It’s all about making room for ever-widening inventory in a fixed amount of space, while also maintaining a steady workflow and a safe working environment in a cost-efficient manner. That’s a tall order.

Add in the complication of supply chain issues caused by Covid-19 along with the pandemic-fueled boom of e-commerce, and logistics get even trickier. According to the U.S. Department of Commerce, e-commerce sales rose to a record 15.7% of the country’s total retail receipts in mid-2020. That number may have gone down slightly as shoppers venture back into the world of brick-and-mortar stores, but it still remains higher than normal. With all these factors as well as uncertainties about the future, many companies are stockpiling goods.

So, where do operators put all that stuff? The following tips will help you increase warehouse capacity, improve efficiency safely, and manage ever-changing costs.

Why Is Warehouse Capacity Important?

According to a recent report on global trends in the warehouse and storage market, the industry reached a value of $451.9 billion in 2021. That number is forecast to reach $605.6 billion by 2027. Increasing warehouse capacity is crucial to keeping up with the demands that come from this kind of growth, but more room for inventory isn’t the only benefit in improving storage space. You’ll also gain advantages like:

  • Logistics operations: This essential part of the supply chain can make or break your business. When a warehouse is optimizing its capacity, the entire inbound-to-outbound process becomes more efficient. Finished goods move smoothly and successfully from initial order to fulfillment to shipping and delivery.
  • Inventory management: Not having enough product is a bad situation to be in. We all know this. But the flip side of having too much product isn’t good either, leading to inventory excess and general space constraints. Whether you have an overabundance of the right product or excess of obsolete items, you end up with mixed product, overflowing racks and dangerously congested aisles. When your warehouse is well-organized and space is maximized, inventory becomes easier to manage.
  • Cost savings: Increased warehouse capacity means you can order more of the right products in a single transaction. And since suppliers often discount their price per unit when you purchase bulk orders, this means you can save money.
  • Avoiding missed sales: Strategic warehouse organization allows you to maximize your storage capacity and keep more of the right product on hand. This makes it less likely you’ll run out of stock and allows you to fulfill orders in a timely manner, reducing the risk of missing out on all-important sales.
  • Order fulfillment efficiency: Efficient order fulfillment is crucial to profits. Ineffective processes like not enough inventory, a lag in restocking or even outdated technology can potentially cost you tens of thousands each year. It could also damage your reputation with your customers, who are much more informed these days and have higher expectations.
  • Organization improvement: Optimizing your warehouse storage space allows you to improve overall organization and operations. It’s easier to find and pick products, reducing the time it takes to complete an order. And when a vendor stops by for a visit, their confidence in your ability to distribute their goods increases, which means it’s more likely you’ll get repeat business from them.
  • Employee productivity: When you increase warehouse storage capacity, your employees are able to be more productive. This has the potential to decrease labor costs and increase the number of orders your staff can fulfill safely and efficiently.


Calculating Your Warehouse Capacity

Before making any major changes to your warehouse, it is key to measure and calculate your current storage capacity to see how well you’re using it and how you can improve. Here’s a simple step-by-step formula:

Step 1: Calculate Total Warehouse Size
Start with the total square footage of your facility, then subtract any non-storage space (i.e., offices, restrooms). Multiply the remaining square footage by your warehouse’s clear height. Now, you have your total warehouse size.

Step 2: Calculate Storage Area Size
Multiply the square footage of the outside dimensions of your racking by the height of the highest load in that area. (If heights vary in different areas of your warehouse, calculate them separately then add them together.) This gives you the cubic volume for your storage area size.

Step 3: Analyze Potential Storage Areas
Take the cubic volume from your storage area size from Step 2 and divide it by your total warehouse size from Step 1. The percentage you get is the amount of potential storage you have available in your warehouse. Ideally, that number should be between 22 and 27 percent, which means your staff has enough room to do their jobs safely and efficiently without wasting space.

Step 4: Calculate Your Space Utilization
The final step is to calculate a number that will allow you to understand how you are using your space. Add up the volume of ALL products stored in your warehouse. If you use a WMS, simply take the information from there and divide the total volume of products by the storage area size, then multiply by 100. If you don’t use a WMS, divide your storage area into sections and estimate the percent utilization of each section. Next, add the results of each section together and divide by the number of sections you used for your space percentage. Once you have your number, you’ll be able to evaluate your warehouse for improvements.


Warehouse Organization Ideas

Now that you understand how much space you’re working with, it’s easier to determine what solutions you need to get organized and increase storage capacity. From utilizing space more efficiently to better inventory management to using robotics and automation, here is a comprehensive list of ideas you can implement in your warehouse.

Floor plan redesign (AKA: Warehouse slotting)
Redesigning the floor plan of your warehouse may sound like a daunting task, but the end results can be worth it. Whether you’re trying to make room for more product or you want to widen your aisles to accommodate specific equipment, organizing your warehouse to maximize space can make picking more efficient, improve inventory management, and lower your overall costs.

Bulk stacking
Bulk stacking is ideal for products that will be shipped in high volumes over a short period of time. (Think seasonal or promotional items.) It’s also great for warehouses with lower ceilings, providing extra storage for high-volume items. Keep in mind, though, that the stacking strength of some packaging has decreased with the trend of lightweighting. So, be aware of what sort of packaging you’re dealing with.

Minimize aisle width
You can gain a surprising amount of square footage by simply decreasing the width of the aisles between your racking. The sweet spot is when you can get the minimum width required for your equipment to maneuver safely without sacrificing your warehouse’s operating efficiency.

Choose the right storing system for your space
Every warehouse is different. What works for some may not work for others. Consider the specific requirements of your warehouse to determine the best solution. Is pick selectivity an important factor? What type of inventory management system do you have? Do you need a system with high storage density? Thinking through your short-term and long-term needs will inform your decision when picking the best storing systems.

Use containers that accurately fit the space
Often, the goods you receive are unpackaged and need to be kept in a storage container. Instead of using a “one-size-fits-all” solution where larger bins are used unnecessarily, keep a variety of container sizes on hand. Group the larger containers in one racking area and store the smaller ones in another. You’ll be surprised how much extra space this frees up.

Store items according to size
Optimize your warehouse capacity by storing like-sized items together. Simply take items that are smaller or larger than your typical pallet size and put them in a separate racking area. This area can still be on the same row, but strategically grouping items by size helps maximize your space. Plus, you’ll be less likely to misplace the smaller items.

Utilize Vertical Space

      1. Mezzanines: These elevated platforms are a great way to make use of what could be wasted space and instead increase the overall storage capacity. They can be used for anything from small item storage, bulk storage, process areas, or even a value-added service area, depending on the space.
      1. Shelving: A less permanent solution for vertical space than the mezzanine is shelving. Depending on the type of racking system you use, a shelving system can increase the total storage capacity of your warehouse and make it a lot easier for your employees to place and remove product from the shelves efficiently.
      1. Strategic beam placement: A space of six inches is required between the top of your stored product and the bottom of the rack beam. This allows room for the forklift to lift the pallet safely without hitting the beam above it with the load. But have you actually measured that space in your warehouse? There may be several inches of space there that you aren’t taking advantage of.

Racking storage

      1. Tunneling of racks: The area over aisles is often overlooked as potential storage, but that’s a ton of space that you could be taking advantage of. Known as “tunneling the rack,” this area can easily be converted to storage by creating back-to-back rack sections with custom measured and fit beams. Pallet decking or netting is typically added to catch any falling cases, and forklift operators should undergo extra training to ensure they navigate carefully around the tunnel with forklift mast down.
      1. Racks over docks: Another opportunity for storage is the space above dock doors. Adding a bit of racking here allows you to store pallets, packaging materials, or long-term storage of staged materials.
      1. Pallet racks: Double-Deep, Pallet Flow, and Pushback Racks are great when you have multiple pallets of the same SKU.

Temporary storage
Occasionally, you may need to store large quantities of excess inventory. A temporary offsite storage space or even a third-party warehouse could be a good solution if you need that space for other things, like fulfillment operations. Either of these can be expensive, but if you are able to foster a true partnership with a dedicated carrier or facility, then it could be a viable solution.

Consolidate locations
If you have multiple facilities, and you’re storing the same item at each of them, consider combining them together. This allows you to utilize your warehouse space more efficiently and will likely eliminate a lot of back and forth, saving you both time and money.

Implement cross docking
You can free up more storage space by cross docking large releases of back orders or single-line orders. This reduces the amount of inventory that needs to be stored, allowing it to be quickly sorted and sent back out into distribution. While it saves space, keep in mind that this process can be difficult to manage. Not all items are suited for cross-decking, and it requires a high level of organization and strict inventory control practices. Your staff will need to be trained on the new practices and procedures.

Improve Inventory Management
Use a real-time warehouse management system: A warehouse management system – or WMS – is one of the most useful tools you have to increase your warehouse capacity. A WMS allows you to manage your inventory at every point along the way in real time. It can generate purchase orders when stock falls below a certain level or identify obsolete inventory and free up vital storage space. Use the system to assign floor and shelving locations based on the product’s sales volumes or dimensions. The possibilities for efficiency are endless.

    1. Reducing on-hand inventory: Too much inventory can cause congestion in a warehouse and take up precious space. While forecasting has become more accurate over time, there can still be an overflow that needs to be diverted to other areas. There are certainly risks involved (like temperature control or theft) when using options like trailers or outside storage, but if managed well, reducing your inventory can make a big difference in storage space.
    1. Remove obsolete inventory: Obsolete inventory takes up extremely valuable storage space. It’s a good idea to examine velocity reports from your WMS to see how often each SKU is picked. If an item has not been picked in a year, it might be time to think about getting rid of them. Sell them for a discount, donate them to charity, or even see if the vendor will accept them back.


Implement Automation & Robotics
Automated storage and fulfillment systems are quickly becoming vital to improving warehouse capacity. From installations at new facilities to retrofitting at existing facilities, these systems boost efficiency and maximize space. A few of the most popular options are:

    1. Pick modules: Ideal for high-volume packaging and distribution, pick modules are multi-level engineered systems that allow you to fulfill thousands of SKUs quickly and accurately.
    1. Shuttles: Warehouse shuttle systems – much like shuttles for people – run along rails inside a racking system and safely and securely store and retrieve pallets, containers, cartons, and trays of inventory.
    1. Carousels: These automated shelving systems transport goods to users on a track system. Each carousel comes in a variety of heights and can be grouped together to form a single workstation. Carousels are efficient, safe, easy to operate, and come in a variety of heights to meet your facility’s specific needs.
    1. Vertical Lift Module (VLM): A VLM is a secured lift system composed of trays that automatically store, retrieve, and deliver items to a pickup window. Each VLM can be customized based on weight, transport needs, and workplace environment.
    1. Automatic Guided Vehicles (AGV): AGVs are computer-controlled, driverless machines that travel throughout your facility to deliver products. Each AGV moves on a pre-installed path to deliver items quickly, safely, and accurately, and they can easily be integrated with other machines.
    1. Packaging Solutions: Packaging is one of the last steps before the product ends up in the hands of customers, meaning it’s their first impression of your service. You can ensure each order is well-packaged and meets handling requirements by using automated technology to seal, package, weigh, and label boxes before they’re shipped out of the fulfillment center.
    1. Collaborative Robots: A strategically developed collaborative robot system can speed up your processes and improve your overall production efficiency and safety. This could include handling hazardous materials that may be dangerous for your employees. The system could also take on tedious tasks so that your team members have more time to focus on the areas where their time is most valuable.
    1. Robots as a Service: Robots-as-a-service programs are an ideal integration for facilities of all sizes with manual repetitive tasks. This technology can produce human-level dexterity and manipulate thousands of SKUs.


Managing Growing Capacity Needs

As you are anticipating growth, it’s wise to prepare for increased warehouse capacity sooner rather than later. Optimizing existing storage space while forecasting for future changes allows you the flexibility to handle both short-term needs and long-term projections. Incorporating automation and technology along with the organization methods in this article will help you flourish in the industry.

Need help increasing your warehouse capacity? Contact ISS Material Handling for a free consultation today!

About the Author

Tom Compton


Tom Compton is the President of Industrial Shelving Systems (ISS) and retains an active sales role with both ISS and ISS Material Handling. Tom is a seasoned professional who has been working in the industry for over 10 years. He holds a Bachelor of Science in Mechanical Engineering from Mizzou, where he honed his expertise in designing and analyzing mechanical systems. Tom has continued to show his dedication and excellence in the field by earning a 6 Sigma Green Belt. When Tom is not working, he spends his time with his family and friends. A devoted father of three children, he also is an avid sports fan and enjoys playing hockey and golf in his free time. He is also passionate about NHRA racing and follows the sport closely.

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