How to optimize your warehouse to increase production

Warehouse layout optimization tips to increase production

Lauren Koppelman Last Updated: October 15th, 2020

Labor costs, on an average, constitute more than 65% of the expenses for a warehouse. It is a best practice to review the operation of your warehouse before implementing automation, but it also has a significant impact on production and operational efficiency. The processes in a disarrayed warehouse cannot easily be automated as automation heavily relies on warehouse layout optimization, as well as standardized processes and procedures.

Optimizing your warehouse layout and implementing an effective inventory management strategy helps to:

  • Improve warehouse organization
  • Improve the accuracy of order picking
  • Save time and money
  • Enhance efficiency and productivity
  • Ensure customer satisfaction

Warehouses come in many sizes and shapes, and many facilities serve specific functions. For instance, cold storage warehouses specialize in temperature-controlled storage for perishable products, so the processes and systems may be different from those of a warehouse that’s dedicated to a particular retail organization, a warehouse that exclusively stores electronic goods or a general storage warehouse. As such, there is no single standard warehouse layout optimization solution. Still, there are some common steps in the process and best practices to rely on.

Conduct a space assessment

Warehouse layout optimization tips to increase production

The major purpose of a warehouse is to provide space for inventory, and it stands to reason that an assessment of available space should be one of the first steps taken in warehouse layout optimization. It is best to have a custom space built for the specific use case of the warehouse. But various constraints like time limitations and cost considerations mean that some companies settle for using an existing warehouse or repurposing another building for warehousing. Before any inventory is placed inside, companies should assess the building and surrounding space. The surrounding area should be surveyed to match it against the company’s requirements.

The type of HVAC employed by the building needs to be assessed if the warehouse needs to store vulnerable inventory such as food or pharmaceuticals. Even if the warehouse does not have any perishable or temperature-sensitive goods, the efficiency of the HVAC system has to be up to scratch since there will be workers in the space. A building with adequate heating, ventilation and air conditioning is a must for creating a comfortable working environment. On top of that, the existing lighting, doorways, loading bays and racks need to be assessed.

Assess your inventory

Once you’ve identified a suitable facility, the next step in warehouse layout optimization is to conduct a comprehensive inventory audit to identify specific storage requirements, such as items that require specialized racking or shelving, goods that require low-humidity or other climate considerations and the general space requirements for each type of inventory based on your typical inventory composition.

After auditing your inventory, you can then begin to establish zones or sections based on storage requirements to establish the appropriate storage locations for each type of inventory.

Divide and label warehouse storage locations

Warehouse layout optimization tips to increase production

The average size of a modern warehouse is more than 180,000 square feet. It is an endless array of tall racks, shelves and bins that can be difficult for workers to navigate efficiently without proper warehouse layout optimization, organization and signage. Dividing the warehouse into levels or sections is a helpful starting point. Depending on the size of the warehouse and the number of aisles, break down each section into a set of aisles, bays, shelves, rows and bins.

Some sections may have different types of racks or storage to accommodate certain types of inventory. For instance, sections with drive-in pallet racking that can accommodate forklifts should be designated for storing pallets, while cantilever racks should be reserved for storing longer, heavier items. Consult your inventory audit to divide the warehouse into zones appropriately sized and with the proper climate conditions for your inventory.

Now the divided space needs to be labeled. The general convention is to give a number or letter identifier to the levels, aisles, bays, shelves, rows and bins. It provides more clarity if each of the subdivisions is labeled alternatively with alpha and numeric characters. For instance, 2B6F4D may indicate a location on the 2nd level, aisle B, shelf 6, row 4 and bin D. Alternating numeric and alpha characters for location labels eliminates confusion and allows for easier and more efficient warehouse navigation.

Estimate traffic

In a warehouse, products don’t move at the same rate; some items will have higher turnover than others. If these high-velocity products are located far from the sorting station or packing station, warehouse associates will have to walk longer distances to pick items from these locations. Storing fast-moving inventory in proximity to sorting, packing and shipping stations reduces walking, saving considerable time and effort.

Similarly, estimating the turnover for all the products in the facility’s inventory allows you to allocate space for products according to velocity and optimizing the time required to pick the items. Don’t rely solely on inventory and supply chain data to estimate future product demand; marketing and sales data are important pieces of the demand planning puzzle. Integrating data from multiple sources provides meaningful insights and supports more accurate demand forecasting. This data can be leveraged to allocate space for inventory strategically to reduce the total walking distance and time required for order picking.

Implement inventory management software and analytics

Warehouses and distribution centers have to handle an increasing number of SKUs every year. Manually managing the inventory for a large warehouse with a significant number of SKUs leaves room for human error and leads to both inaccuracies and inefficiencies. Most warehouses today use some type of inventory management software. With the right software solution, you can map physical locations in the warehouse and the inventory each location is designated for. Doing so helps with order optimization and inventory replenishment processes to ensure forward pick locations have adequate inventory to meet demand.

Analytics can be used to identify if the current layout of products is optimal by factoring in the distance traveled and the frequency by which the products are ordered. The results of the analysis can be leveraged to change the layout to enhance efficiency. This helps to increase productivity, reduce the time required to fulfill orders and save on order picking and inventory replenishment costs.

Leveraging the right automation technologies is another way to optimize your warehouse. Collaborative mobile robots like Chuck by 6 River Systems prioritize work in real-time based on the current conditions on the warehouse floor and guide associates through each task to increase efficiency. They’re easy to integrate with your existing layout, requiring no costly or permanent infrastructure changes. Download our white paper, The Business Case for Collaborative Mobile Robotics, to learn how collaborative robots can transform your fulfillment operations with the flexibility to meet demand and reduce costs.