Warehouses and distribution centers are, for most retail and logistics businesses, the most expensive overhead cost. Consider the various costs associated with operations, occupancy, and storage and materials handling. In fact, according to a 2017 survey, the average cost per square foot of warehouse space is $6.53. With these facts in mind, it should become clear to every warehouse manager just how important space utilization is to the success of a business. Read on to learn more about calculating warehouse space utilization and get tips for improving efficiencies.
What is space utilization?
The basic definition of space utilization is your warehouse’s or distribution center’s occupancy divided by its capacity. This gives you a percentage of how much space your actually using versus how much is simply sitting unused.
The struggle for most businesses lies not with calculating space utilization rates, but with determining the proper and most effective space utilization for their needs. As a result, if you are a warehouse manager looking to optimize your space, ask yourself the following questions.
- How much can we divide up our space?
- Gow much space do we need to give each individual worker?
- How will changes to our space impact our productivity?
How to calculate space utilization rates
Calculating warehouse space utilization is a fairly simple process.
Step #1: Start by calculating the total size of your warehouse in square feet.
Step #2: Subtract any space that you use for offices, restrooms, etc. For example, if you are renting a warehouse that is 80,000 square feet and 10,000 square feet is used for offices, then you have 70,000 square feet of usable warehouse space.
Step #3: Multiply 70,000 square feet by the warehouse space clear height to determine its storage capacity in cubic feet. For example, if the warehouse space has a clear height of 25 feet, then its storage capacity or cube size will be 1,750,000 cubic feet.
Step #4: Next, calculate your inventory cube size by adding up the volume of all the product in your warehouse. Then, divide that total by the warehouse space store capacity. For example, if you have 250,000 cubic feet of product in your 1,750,000 cubic foot warehouse, then you have a 14.29% utilization.
Tips for improving warehouse space utilization for your business
Below are five unique ways to improve space utilization for your warehouse. So, implement any of these tips to ensure that you are using all of your available space and resources to the maximum capacity.
1: Analyze & Use All of the Available Space (Think Vertical!)
Look up and make sure you’re using all the vertical space available. Investigate storage media to take advantage of your clear span height. How much cubic feet of vertical space is free to use? Be sure to know how your design might impact your sprinkler design and fire code. In addition, you can identify functions that do not require high ceilings in areas where lower stacking heights are dictated by the clear height. We often see unused overhead space where large departments like packing and shipping are performed.
2: Consider Picking Slots & Aisle Width
The size of your picking slots and warehouse aisles can make all the difference.
Match the size and sales of the item to the right-sized pick slot to maximize the utilization of the picking slot cube. Having various sizes of picking slots can facilitate this process. The same logic applies to locations where you store reserve or overstocks. In forward picking, keep 4-7 days of sales by SKU to reduce replenishment. Also consider the question: How wide are your warehouse aisles? Try to design the minimum width required to match the material handling equipment used without compromising operating efficiency.
3: Install a Mezzanine
If your building layout permits, consider the use of a mezzanine. A warehouse mezzanine is a great, dynamic solution to house functions that do not require high-bay storage. While these can be expensive and are fairly permanent, they will maximize warehouse space utilization.
4: Door Usage
Perhaps the most simple change for a warehouse or distribution center to make refers to shipping and receiving doors. If your business has separate shipping and receiving docks, consider combining them to save space.
5: Change Shipping & Supply
As the main functions of most logistics businesses, changes to the day-to-day shipping and supply can cause some hesitation. However, if you store and ship large items, consider utilizing drop shipping to reduce your in-house inventory and costs. Additionally, when it comes to product supply, try to manage the inventory to avoid overstocks. Ask your corrugated supplier to keep some inventory at its site for you, and alter your delivery schedule to be more evenly spaced.
Specialized Storage Can Help You
For over 30 years, Specialized Storage has provided warehouse storage and optimization products to growing businesses nationwide. With a team of experts in operational efficiency and layout optimization, we are capable of helping to improve the efficiency of your warehouse and improve profitability for your business. An expert from our team will come to your warehouse and perform a total operational efficiency analysis. We can then customize a warehouse solution for your unique business needs. Contact us today to learn more! We would be happy to help you optimize your space.