Ideas for improving warehouse performance (3)

Continued from Ideas for improving warehouse performance (2)



Do you have too much warehouse space? Chances are you are either out of space or getting close to it. It happens all the time…

Inventory (and other stuff) tends to expand to fill the amount of available space. When you do run out of warehouse space there are many options to consider including expanding your warehouse, building a new facility, or leasing outside space. Alternatively there are many proven, low cost concepts you should consider to improve the utilization of your existing space.


Random vs. Dedicated Bins

There are two primary material storage philosophies…fixed or dedicated bins and random or floating. In dedicated bin storage, each individual stock keeping unit (SKU) or item is assigned a specific storage bin. A given SKU will always be stored in a specific bin and no other SKU may be stored in the bin, even though the bin may be empty. Dedicated bin storage is analogous to a classroom where each student is assigned a specific seat.

With random storage, any SKU may be assigned to any available storage bin. An SKU in bin A one month might be in bin B the next and a different SKU placed into bin A. Random bin storage is analogous to the assignment of rooms in a hotel. When a guest checks in they are randomly assigned a room (based on the guests pre-defined criteria). The amount of storage space required for a SKU is directly related to the storage philosophy. If dedicated storage is used, a given SKU must be assigned sufficient space to store the maximum amount of the SKU that will ever be on hand at any one time. For random storage, the quantity of items on hand at any time will be the average amount of each SKU. In other words, when the inventory level of one item is above average, another item will have a below average level; the sum of the two will be close the average.

Often the storage philosophy chosen for a specific SKU will be a combination or hybrid based on where the SKU is in the storage process. A grocery store is an excellent example. Dedicated bins are used on the store shelves where the consumers can easily find what they are looking for, and not stored (on purpose) in any other bin (promotions excluded). In the back storeroom however, the excess stock is usually stored randomly, wherever there is a bin. Because combination storage bin is based on a mix of fixed and random storage, its planned inventory level falls somewhere between the fixed and random quantity. Choosing one storage philosophy over another means making

a number of trade-offs between space, accessibility, and material handling efficiency.

Use of space in a dedicated bin model is poor because space for the maximum amount of inventory that will ever be on hand is allocated, although actual on hand inventory will normally approach the average inventory level. Therefore excess empty space and bins are common in dedicated storage. Random storage is extremely space-efficient because the space requirements are only 15% above the average amount of inventory expected on hand.

Material in dedicated storage has excellent accessibility. Blocked stock is not a problem because each bin contains only one SKU and the bin of each item is known (remains constant). Accessibility to stock in random storage can be good but requires more management especially if a materials tracking system is not in place or kept up to date. Without good management or a tracking system, using random storage will result in blocked stock, lost material and eventually obsolete inventory.

Dedicated and random storage score equally well for material handling. With either, inventory is typically handled during the put-away process and then again during picking. Combination storage is typical of a forward pick and reserve storage strategy requiring a replenishment flow. This replenishment adds another product touch as inventory is moved in smaller loads from the reserve (random) bins to the forward (dedicated) bins for picking.

In summary, dedicated storage trades space efficiency for better inventory accessibility and vice-versa for random storage. Combination storage trades material handling efficiency for middle of the road efficiency in space and accessibility. Which is best for your operation is unfortunately not a clear cut decision and will depend on several other factors. The only general conclusion to be made is the poor use of space in a dedicated bin strategy is a big negative. Compared to the use of space in a random strategy, a dedicated bin strategy will generally require 65-85% more space. With the escalating cost of money, land and construction, few companies can afford to design fixed bin storage warehouse. This factor alone can justify the investment in technology to help manage a random storage warehouse.

However, occasionally efficient use of space is not a critical factor, so dedicated bin storage is preferred. For example, when the items to be stored are extremely small or extremely valuable, accessibility and accountability may trump space utilization. Few jewelers care about efficient use of space when they are storing and securing diamonds.


Varied Bin Sizing

An often-overlooked method of reducing space requirements is optimizing the product bin sizes. Many warehouse operations store and process a wide variety of product types and sizes. To effectively accommodate this variety, it is desirable to provide a variety of storage types and sizes. Trying to utilize only one type of storage media and bin size with a variety of products can lead to inefficiencies and low overall cube utilization.

For example, storing pallets with a consistent 44” pallet height into a 60” pallet storage opening is just wasting space. The right balance between tailored product bin sizes and flexibility results in improved space utilization.


Storage Density, Velocity and Accessibility

Reducing aisle widths is a good way to improve space utilization. Thought should be made to the number of aisles used in your facility. The number of cross aisles and people aisles should be assessed to maximize the utilization of the aisles. Then compare various storage utilization improvement concepts against expected velocity and capacity constraints.


Aisle to Storage Space Ratio

The ratio of aisle space to storage space is key when developing space saving ideas. One way to reduce the ratio is to block stack pallets of product on the floor two or three levels high. Block stacking requires enough inventory of the same SKU and product that can be stacked without damage. Floor stacking pallets four or five deep is common in operations with high stackable inventory per SKU. This ability to deep stack pallets with few aisles manages the aisle/space ratio to your advantage.



Another area to review is the width of existing aisles in the warehouse. Most material handling equipment (MHE) is designed with a minimum aisle width or turning radius associated with particular style of fork truck. Make sure you don’t overdesign the aisle width and waste potential storage space. In larger warehouses with many aisles of racking, a small decrease in each aisle width can result in additional rack bays for storage. But avoid making them too narrow and causing other operational issues.

Reducing aisle widths is a start to optimizing storage space. The type of lift truck used and the pallet parameters will influence aisle widths. However, with an assessment of aisle widths, you may identify aisles that can be reduced using the same equipment.

In other cases, you might consider the investment of narrow aisle (96” to 108”) or very narrow aisle (44” to 66”) industrial vehicles, such as reach or swing-mast respectively.



In a warehouse it is common for aisles/cross aisles to consume 30-40% of the space. Rules of thumb for space planning include:

·         Docks and processing areas = 15-30% of total space

·         Aisles = product storage space

·         Cross aisles = 20% of the aisles + product storage space

·         Benchmark for storage capacity = 10 – 15 square feet per pallet


Think Cubic Feet

The impact of using vertical storage space depends on your current storage clear height and product stack-ability restrictions. For example, in the beverage industry, a stack height limitation of one to two pallets is common. With these low stack heights, a simple 4 to 5 level pallet rack structure, using basic counterbalanced vehicles can drastically reduce the space requirements of the facility. In addition, the vertical space within a pallet rack structure should not be wasted. The lift-off height provided between the top of the load and the beam should be adequate but not excessive. The typical lift-off heights within a pallet rack structure range from 3 to 8 inches.


Rack Over Doors

Most receiving dock doors are spaced far enough apart to permit racks to be erected and span the door openings. These racks can provide several levels of product storage above the clear height of the door opening. These racks can be used to store very slow moving products (i.e. packaging supplies and empty pallets).


In-Rack Tunnels

In warehouses where pallet rack is used, a missed opportunity exists if rack “tunnels” are not used over cross aisles. Most warehouses try to align rows of rack on either side of a main or cross aisle. The area above these aisles is wasted unless racking is installed bridging the aisle between the ends of rows of rack. Even allowing clearance for lift truck traffic, it is possible to add two or three levels of pallet storage.



As a rule of thumb, the reduced travel distances from using cross aisles or tunnels will improve picking efficiency up to 25%, far offsetting the resulting decrease in storage bins/space utilization.


Bin Utilization

After you establish the layout and bin characteristics, the next job is to make sure you utilize all of the potential space in each bin. During tours, I frequently see instances where one or two cases are stored in a bin designed for a full pallet quantity. This is overcome by having a variety of bin sizes to accommodate the variety of storage needs on a product by product basis.

Another waste of space occurs in picking areas where only the front portion of the pick slot is utilized with empty space left behind. A formal slotting analysis should help identify areas of opportunity. Make sure the pick slot is designed to fit the cube movement of the SKU. It is impossible to attain 100% storage capacity on a daily basis but the higher percentage you can maintain in established bins, the more space you will have available.



Although they can be costly to install, the option of installing a mezzanine makes sense in some situations. If you can find the right use for this type of space, you can double the footprint of the warehouse where you install the mezzanine. Issues such as product flow and the cost per square foot of space in your warehouse will determine the potential use of a mezzanine.



Measure both Absolute and Relative bin utilization. Absolute determines if there is any inventory in the bin and is a binary measure, 1 or 0, Yes or No. Relative determines how much of any given bin is full. Keep the measures simple - 0, 25, 50, 75 and 100%. As you walk through the warehouse, take a random sample to see how the facility measures up.


Layout/Product Flow Review

A proactive strategy for managing warehouse operations is to develop and maintain a scaled layout drawing. A periodic review of the layout will help you define the overall approach to utilizing space within the warehouse facility.

Common space utilization tactics, such as storing products along outer walls, can be identified and integrated into the physical layout. Performing a review of your existing space utilization is advisable before investing in other options for handling space shortages. If not, you might duplicate bad space utilization practices into your next facility or expansion. Another key factor for improving warehouse space utilization is planning for future expansions at the start of any new building design. However, best practices organizations have 5 year growth plans including an evolving warehouse layout.

For example, the biggest decision on developing a new facility is using docks on one-side of the facility or both sides. Having docks on multiple sides of a building requires multiple staging areas for unloading and loading products. This leads to the majority of your facility being occupied by floor storage or wasted vertical space. If you can operate with docks on one side of the facility, then you can share the space required for unloading and loading.

Cross Dock If Possible

The best way to improve space utilization and pick labour productivity is to not do it. Don’t put product into storage and don’t pick orders.

Cross docking is a logistics procedure where products from a supplier or manufacturing plant are distributed directly to a waiting sales order with marginal to no handling or storage time. You can potentially reduce storage requirements and improve overall labour productivity by moving product from the receiving dock direct to an out bound order. This practice is best supported with some form of technology to match inbound receipts with open outbound orders.


Contributed by: HighJump Software Inc & iWMS Supply Chain Software (the SA channel partner for HighJump)



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