Optimizing Warehouse Capacity: Strategies for Expansion and Efficiency

Warehouse Capacity Planning Strategies

Body Copy: This is the second blog in a two-part series covering warehouse capacity planning and strategies to maximize space and balance growth efficiently. Read part 1 here. 

There’s nothing like hands-on experience in a warehouse to get familiar with the pain points of inventory management, and the drama of demand planning that isn’t a hit but a miss. 

But when you come from a place of knowledge, understanding the big picture is the next step before honing in on the details. 

Know your warehouse capacity.

Deciding on how much warehouse space you really need starts with knowing what your current usable warehouse capacity is. Once calculated, you can then explore the many ways to expand your storage footprint.  

To configure warehouse capacity: 

1. Take the square footage of the entire warehouse facility; 
2. Deduct all square footage not used for storage such as safety zones, office space, dock areas, restrooms, hallways, and aisles; 
3. The sum total equals your available warehouse storage space.   

Whatever your warehouse capacity is does not mean you’re stuck with the storage footprint you have. With a little visual agility, engineering creativity, and professional guidance, growing warehouse needs can be met.  

Expanding the Existing Warehouse

Working with the space in place pushes the boundaries of what’s in front of you, offering many advantages—though it’s important to exercise caution.  

Before moving forward with any of the following options, you may want to consult with a seasoned industrial real estate consultant. Changing the interior of a warehouse can also alter safety protocols, staffing needs, and equipment requirements, not to mention structural integrity.  

Vertical Expansion

According to the U.S. Energy Information Administration, warehouses are the most common commercial building in the country, and it’s no wonder.  

Rising consumer demand for goods has put pressure on manufacturers, suppliers, and distributors to store and move more product. But with the rising cost of land and limited space, especially in population centers, warehouse expansion may require “leveling up” by growing storage capacity vertically. 

Horizontal Expansion

Businesses will often search for warehouse space in less-populated areas, where costs for storage use and land are more affordable.  

When business needs increase and expansion is necessary, adding storage capacity can be achieved by extending the existing foundation. This “addition” enables more floor space from the sides, front, or back of the building.  

The process, depending on the complexity of the horizontal expansion, typically involves less permitting and zoning variances than completely new construction. 

Mezzanine Levels

When storage needs expand and contract from season to season, integrating a mezzanine level can be an ideal solution.  

Because mezzanines are free-standing structures, they can be added and removed as needed. Situated between the main floors, a mezzanine adds square footage much like a loft does, though its ceiling is lower than the building’s height. It covers a partial area, creating a second level, and overlooks the main floor.  

Lease Acquisition

For businesses leasing individual warehouse space in a large industrial center, adding square footage could be found on the other side of their doors. Ask the warehouse building owner or property management company if any of the other businesses leasing space are coming up at the end of their contracts. If so, it could be a great opportunity to negotiate more warehouse space and, if needed, tenant improvements. 

Shared Space

Honing warehouse needs isn’t an exact science. Demand fluctuations could leave you with empty racks or in search of space to store inventory, and paying for unused space or the overflow, respectively. 

For periods of reduced inventory, consider offering up your extra space to a supplier or strategic partner looking for a temporary fix to their storage shortfall. Sharing warehouse storage space could be a cost-friendly alternative to a temporary situation. 

What About Building a New Warehouse

When financing is in your favor, constructing a new warehouse storage facility enables companies to design the space needed to their unique specifications, instilling warehouse capacity planning before construction ever begins. 

An industrial property real estate broker can help select the right location and include information about soft targets (areas closest to the site) that could impact future expansion, zoning, permitting, logistics benefits, and more. 

Working with an expert in warehouse design can help the project avoid unnecessary hiccups. An industrial architect knows how to navigate the entire process and can recommend layouts optimizing square footage and workflows. And because of their ongoing relationships with local contractors and city building inspectors, the construction timelines are credible.  

Outsourcing to a 3PL Provider

Articulating warehouse needs and defining right-sized capacity planning can be more of an undertaking than initially expected. Imagine the time and energy involved, and all it takes to effectively manage evolving needs of the warehouse, from top to bottom and in the mezzanine. 

Partnering with an experienced and reliable third-party logistics (3PL) provider takes the hassle out of business expansion. A well-established 3PL company has a wide network of logistics solutions, in numerous locations, enabling cost savings at each step of the process. 

And because 3PL providers focus on moving, storing, and distributing product efficiently, they are in active communication with other strategic relationships, giving them a realistic lay of the logistics land.  

Choosing the right 3PL for your business becomes evident when challenges arise, requiring agility, flexibility, and resiliency to complete objectives through the last mile. Plus, 3PLs have long-standing industry relationships allowing them to successfully negotiate competitive freight rates on your behalf. 

Optimizing Warehouse Operations

Warehouse capacity planning can further optimize operations by including other operational methodologies. 

An Evolving Warehouse

Finding excesses in processes, procedures, people, and production make up the key framework of lean warehouse methodology. By streamlining operations, wasteful resources are removed, improving workflows and reducing lead times on a continual basis.  

There are occasions within a warehouse environment that require a “meeting of the minds” to respond to a variety of situations. This brainstorming session, known as a Kaizen event, supports lean warehousing and could involve members of one department or a cross collaboration of many. The issue for discussion could be isolated in production, for example, or affect multiple departments, such as a missed KPI or discrepancies in customer satisfaction.  

Six Sigma is a continuous improvement methodology used to boost warehouse efficiency. The quality-control practice involves five phases: a compilation of statistics, financial analysis, and project management to define, measure, analyze, improve, and control processes. Each is essential to locating and reducing product defects and errors, supporting consistency, increasing quality, and improving operational efficiency. 

Technology Fine Tunes Functionality 

Warehouse management systems (WMS) software helps 3PLs manage and control warehouse operations seamlessly, from inbound, storage, and fulfillment to outbound. Inventory management systems (IMS) improve quality, safety, risk, and productivity—and complement WMS.  

Transportation management systems (TMS) measure available routes and carriers to shipments and recommend cost-effective options. TMS also provides real-time tracking and visibility for warehouse operators and their customers, ensuring reliability and providing alternative solutions should obstacles arise. 

Warehouse capacity planning and the methods used to measure its effectiveness and identify where improvements can be made requires constant analysis and a willingness to shift strategy. Even time-tested, proven methods could use a backup plan. 

Maximizing Warehouse Capacity Efficiency with a 3PL

Determining growth potential and assessing capacity limits and opportunities is a tactical endeavor, an alliance of what is and what could be. 

Introducing warehouse capacity planning early on can bring time- and cost-savings by integrating a host of business methodologies, technologies and solutions, serving both short- and long-term goals. In the process, you’ll get more comfortable with developing and releasing new product lines by gauging capacity and inventory needs. Guided by data analysis and warehouse management tools, warehouse capacity planning helps control growth, increase market share, and align with market trends.  

Working alongside an experienced, knowledgeable 3PL brings added protections to your business, offering inventory, labor, and transportation management services catered to your specific needs.  

Greater efficiency starts with expert warehouse capacity planning now.