At the start of 2024, warehouse availability surged to the highest level since the pandemic (5.2% in Q4 of the previous year), indicating that warehouse space is not the issue it once was. Maybe the better option is to improve your current warehouse operations?

Questions to ask when considering warehouse space and expansion (or not)

We’re all chasing sustainable growth in our revenue.

It could be developing new products, entering markets, adding physical stores, and a mix of strategies. With very few exceptions, growth in sales is excellent and reflects soundness in product and go-to-market plans.

Serving that growth is an often overlooked problem. It’s a common debate: should I improve my warehouse space and operations or expand?

When sales run faster than physical warehouse space operations

The supply chain often has no input to the sales strategy and needs to be able to flex and react quickly. Businesses often make commitments faster than physical warehouse space/operations can adapt. 

For example, food manufacturing often uses special equipment, and a permanent increase in capacity could have a 12-24 month lead time. That’s a long time to wait for your order.

Some scenarios that are easy to say, but hard to deliver would be:

  • The SKU mix significantly changed your facilities’ achievable throughput
  • Expanding into different marketplaces means adopting different SLAs
  • Adding or expanding B2B and drop-ship doesn’t fit in your pure retail replenishment facility
  • Direct-to-Consumer (DTC) and ecommerce changed your shipping profiles, affecting warehouse space allocation and workspaces

Every sales-side change or warehouse space expansion has an impact on the supply chain. Here are some questions to consider when looking at your current facility, a new one, or a combination of strategies. 

What shape is your growth?

When considering where the growth comes from, ask yourself: is this temporary or permanent?

A perfect example would be a new product line vs. a marketing event. Warehouse management teams are pretty scrappy and can absorb a reasonable amount of sprint and return to day-to-day operations when the sprint is over. 

Many bake that into their numbers. Retail operations with high seasonality are often built around their Peak Season needs and not their rest-of-year levels.

Consider your warehouse space against growth

When thinking about your building, here are some topics to explore.

  • Is this challenge temporary? Momentary pain can hide that there is a clear end to the surge. If you just gotta make it to January, it’s likely that adjusting labor management or looking at temp labor can keep you in that building.
  • Is the growth more or less efficient? If you are getting better unit density – case to pallets, you might be getting a better cost-per-unit (CPU) from your facility. The opposite is true if you are moving from pallets to each pick.
  • Is this a private label or bespoke offering? These can necessitate rework on the packaging, additional storage considerations, and dedicated teams/floor space side. For example, “Do I need to train my team differently? Does it require documentation, special processes, or different SLAs?” Then on the real estate side, “Does this require me to store more packing materials, isolate from other inventory, then customize and store inventory so that I have more locations with similar/same inventory because of boxes/UPCs?” 
  • Are you moving more kits and bundles? Will these be kit-to-order or kit-to-stock? Will there be delayed differentiation? Kit-to-order can be processed but not space disruptive, the other two can quickly tie up pick locations and floor space.
  • Do you expect an increase in returns from the offering? If you aren’t running dedicated or outsourced returns and rework, there’s a good chance you’ll find yourself with more returns processing, more QA holds, and the additional overhead that brings.
  • Are your safety stocks wrong? Have your planners bloated inventory or have warehouse management metrics/KPIs not aligned with the physical operations? If input variables like lead times are out of tolerance, talk to your suppliers about how their lack of discipline is blowing out your building. Reconsidering the amount of buffer often finds significant reductions in stock (without chasing off customers). This extends the valuable timelines of facilities while also reducing tied-up working capital.

Other questions that could come up

Expiry products could raise questions about limited refrigeration and freezer space. Quality goods could add additional considerations for serial-number tracking and audit trails. Make sure that you look at not just the growth but the flavor of growth and honestly assess how that’s going to impact your building.

Then, it’s important to think about your warehouse space and the building’s ability to absorb that.

Four walls, infinite configurations

No two warehouse facilities ever look the same. There’s more than one way to serve demand. Considering the growth questions above, you should inventory what can be done – and can’t – in the facility to meet that demand.

Here are some things to consider:

  • Have you leveraged the complete warehouse footprint? Empty warehouse space on the floor, room to expand or flex positions that can provide pressure release, inefficient slotting review… All of these can be solutions to handle spike demand or highly intermittent sprints.
  • What can reposition, what can’t? While racking and conveyance are bolted into the floor, much of it can be re-engineered as needed. Other things like pack stations, put walls, sortation areas, and flex zones are often mobile and can be moved around to accommodate. An honest look at low effort vs. high effort vs. structurally immobile can quickly identify areas for improvement.
  • Can warehouse automation be upgraded? Speed, throughput, density! Mechanization is far from a one-and-done that can only be rip-and-replace. Many warehouse management software has modularity, expansion, and upgrading into the product strategy. Can the racks go higher? Can speeds be adjusted or parts swapped to enable that? Can robots be added or strategically repositioned? Many things are really tweaks – minor and major – and not net-new investments. This approach also benefits from having shorter deployment timelines and minimized disruption.
  • Can automation be swapped out? Is it time to deploy an Automated Storage and Retrieval System (ASRS) over traditional racking? Can traditional racking be swapped for adjustable, mobile racking that increases density? Sometimes you need a step function upgrade over an incremental increase to buy time or remove the need to change buildings entirely.
  • Do you have the space across multiple buildings but need specialization? Sometimes, the answer can be as simple as a bad inventory placement strategy. Early business often will take a mirroring approach and keep that for a long time. But did SKU A need to be in California, in those quantities, if the demand comes from Maine? What about SKU B? Regionality, in cooperation with looking at lead times, safety stock, and other factors, can greatly reduce redundancy while improving SLAs.
  • Can this demand be outsourced? Just because you originated that demand doesn’t mean you have to service it. Could this program be direct from the manufacturer? Can you offload some of it to Fulfillment by Amazon? There are several technology-enabled strategies that allow you to blend owned and accessible inventory when filling demand. Looking at what makes sense to stock in your building and what could be held by others is critical when considering the strategic use of warehouses.

So, knowing that, what’s suitable for your warehouse space? No template model will be perfect for your business and reviewing what you need to move and how you’d like to move it will help you make the right decisions.

Finally, the warehouse software that runs it should be mentioned so you’re considering all factors.

Companies don’t worry about Deposco

improve-peak-seasonLuckily, we’re a period – an exclamation point – and not a list of questions.

Deposco is designed to support your strategy fully, no matter the form. Have the confidence that if you stay, go, or something in between, Deposco goes with you and makes the journey way easier and more affordable in the long run. 

  • If adding labor, we let you add users without coming back to negotiate more spend
  • If adding MHE and other warehouse automation technologies, we support you with Bright Socket WMS integrations and many direct and middleware integrations to make adopting it painless
  • If adding a new facility, we’re a native cloud-based WMS solution that doesn’t require an expensive server deployment. Add the new facility and its staff and get back to work. And that goes for owned, leased, or virtual sites. It’s all equal in our eyes.