How to Maximize Warehouse Space Utilization Without Expansion

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Managing inventory in your warehouse or distribution center is one of many challenges you face along the supply chain, and a primary challenge in distribution centers (DC) is limited space.

A distribution center is technically out of space when it hits about 85 percent of its occupancy. That’s not just in the storage area; it holds true for receiving, shipping and all other process areas. If you run out of space for inventory in your DC for any reason, there are several ways to increase capacity without the need for expansion.

What happens when a distribution center goes beyond the 85 percent limit?

The biggest problem is congestion. Congestion causes extra work – meaning extra work by moving product that you don’t have room for. You have to move "Product A" into another location in order to take this other "Product B" out. You start to store stuff in aisles. You use staging space that’s typically free space for new incoming material.

Think of it as a three-car garage. If you put all three cars in a three-car garage, you have no room for lawn mowers, snow blowers or yard tools, and you have to move a car out in order for them to fit. The same thing happens in a distribution center. If it’s jam-packed full, you’re typically moving inventory in and out, and you’re taking up valuable time and additional labor.

Why do distribution centers run out of space?

There are several answers to why warehouses run out of space. Some are good problems to have while others are inventory problems.

  • Business is booming. Products are hot – they’re selling. People are buying the product quickly, so you need more.
  • The purchasing department overbuys something. When planning the DC, you decide you only need two months of inventory, but purchasing gets a great deal on something and buys six months instead. Where are you going to put this?
  • Another reason is obsolete or dead inventory - inventory that doesn't move and has been there for more than several seasons. If you run your finger over a product and it’s full of dust, the product has been sitting there too long. It should be moved somewhere in a less-congested spot, a less-congested picking area, or it should be destroyed and moved out of the building.

How to Maximize Warehouse Space Utilization

1. Evaluate whether you can extend your racks up vertically

Extending racks up is usually the "lowest hanging fruit" to create more space. Typically, new buildings have ESFR which is a fire suppression sprinkler system, and you can store inventory within 18 inches of that area. There are some pitfalls of rack extension – the racking uprights or base plates may not be sized properly. In that case, a structural engineer and a PE can confirm that rack extension is a viable option.

2. Consider installing a mezzanine above a floor-level process

One of the best ways to increase space is to add a mezzanine. Installing a mezzanine above a floor-level process, like a shipping or receiving area, can nearly double floor space. Of course, there are pitfalls with a mezzanine as well. The floor loading must be able to handle it. There will be columns and base plates that now drop down to the floor that could be in the way of the process that’s below it, but it is much better to add a mezzanine, if possible, than to expand the building.

3. Reduce aisle width in the racking area

A wide aisle can range from 10 to 12 feet, but if that can be reduced to anywhere from five to eight feet, 15 to 20 percent of the area can be saved. When considering this option, lift equipment must be evaluated. Is the equipment capable of following or working in those narrow aisles? There is also the added expense of wire guidance in a very narrow aisle situation.

4. Evaluate and change your storage medium

Another option is to change the storage medium to higher density equipment, moving from a single-deep rack to a double-deep rack for example. A double-deep rack requires a reach truck to load pallets. Push-back or drive-in racks are also higher density equipment alternatives. These options are great for adding storage, but the problem becomes FIFO: first in, first out. Higher density limits accessibility to the first-in pallets.

5. Add half-pallet locations for product that comes in half-pallet quantities

Adding half-pallet locations can save space since some product comes in only a half-pallet quantity. We see that as fluid volume as opposed to just what’s in that area. Think of it as ice cubes in a glass. If I poured water in a glass, there is a lot more liquid. If I put ice cubes in a glass, there is more space. If you condense your pallets, you can put more pallets, and therefore more product, in the same area without too much white space.

6. Leverage your warehouse management system for directed put-away

Directed put-away is a great way of creating or saving space in a warehouse as well. It’s usually directed by your warehouse management system where instead of the put-away rules being just “put the pallet wherever you want”, directed put-away knows what locations are best suited for pallets. It tells you where to put a certain pallet as opposed to letting a worker put it in the most convenient location.

7. Identify underutilized space

Use space you never thought you had before. There’s often space above receiving or shipping doors where pallet racks full of supplies, slow-moving materials, or staging for inbound or outbound product that hasn’t yet been processed can be placed. If there is a pick module in the facility and a conveyor down the center of the module, hang a shelf above the conveyor. It’s an easy way to increase locations for smaller or slower-moving items that don’t need replenished as frequently. Those products will need to be replenished by hand or by the conveyor system.

8. Store product in trailers for short-term, seasonal needs

Finally, storing products in trailers is sometimes a necessary solution to temporary storage needs. Many warehouses will bring in extra trailers and pay the demurrage charge for temporary storage without a building expansion. This is frequent for seasonal product, especially among retailers.

Conclusion - There is No "One-Size Fits All"

There is no one right answer to warehouse space issues. In fact, the answer is usually a combination of several things. You can free up space, add equipment and add trucks to the yard. There’s usually more than one answer. We still like to remember the 85 percent rule. Don’t jam up product into 100 percent or even 90 percent. Remember that garage. You still want to be able to get the lawnmower out when you need to cut the grass.

If you want a third-party perspective on getting the most out of your distribution center, explore our supply chain solutions or contact us.

Want a more in-depth resource to help you think through space optimization offline? Download our space optimization white paper.

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