How to Better Utilize Your Distribution Center Space


With the recent growth in online demand, it is putting more constraints on supply chains and distribution space.  This often means that facilities are filling up faster than expected.  This challenge also occurs when companies acquire brands or expand into a new line of business, and the associated inventory is being transferred into the existing warehouse space. 

In most facilities, available storage space is already at a premium even before the new inventory arrives. So, what are some ways facilities can be better utilized in order to avoid taking on additional space?

This question may be the number one question asked as we conduct operational assessments with clients. It is rare that we meet a warehouse manager, or visit a distribution center where they are not trying to fit more product into what seems like nonexistent space - or having to utilize off-site storage. 

Here are seven tips that can help you to maximize your distribution center capacity.

1. Identify Slow-moving And Obsolete Inventory

Old inventory can cause high storage costs, get dirty and damaged over time, and incur labor expenses every time it must be moved. It is often difficult to get finance to buy into liquidating these units since the inventory, even though old or discontinued, is still considered an asset. If you cannot get permission to donate or sell through outlets or warehouse sales, move the inventory to the least accessible locations, and be sure to note the date received on each carton or pallet.

2. Ensure Picking Locations Are Sized Appropriately

It is vital that the picking locations are sized to match both the product demand and the products’ physical size.  Empty space is wasted space. Determine if you can keep 100% of the inventory in the pick location, this can eliminate unused space in the backstock areas. Evaluate the amount of empty space between the top of the product and the next shelf above – is there wasted space?  How about the amount of empty space behind the product, is it too much? Would a smaller depth shelf, or more shelves be beneficial?

  • Create various standard-sized locations. Make sure that you have a variety of location sizes in your pallet racking and bin locations. All too often we see facilities where every bin location is the same size. The result is many locations with only 30-50% of the space being used. Slotting can be a powerful tool that can aid in sizing different pick locations. Dimensions of product and physical locations are also very important in making sure slotting is performed properly.

3. Perform Routine Bin Consolidations

Depending on how replenishment are being performed, you can end up with several partial pallets of the same SKU in your storage area. If your WMS system has the functionality, run a consolidation routine regularly.  This function identifies pallets that can be merged to free up additional secondary locations.  You may need to manually perform this function if it is not available in your warehouse management system. 

READ: Key Principles to Assessing Your Warehouse Operations

  • Use the vertical height.  Go higher with your existing shelving or racking. This option would not come without its fair share of obstacles. However, if by going higher you can gain one or two additional full pallet locations, it may be worth it. Evaluate how many additional locations would be gained if every single bay grew by two or four pallets?
  • Go narrower with your aisles. If the above option is viable, also consider whether shrinking your aisle sizes at the same time makes sense. By going to a very narrow aisles design, you may be able to gain two or three additional entire runs of racking.  Be sure to keep in mind whether it requires new lift trucks that can operate in this width. 
  • Install a mezzanine. Is there an area of your facility where functions are performed at ground level but everything overhead is wasted space? Installing a mezzanine can help to utilize that valuable space by allowing the functions performed on the ground to continue while creating storage overhead.

4. Install Pallet Racking Over Your Dock Doors

This is often overlooked storage space. Since dock areas are usually busy, high-traffic areas, access to this racking may be limited to off-hours. We recommend using those locations for storing slow-moving products, packing supplies, fixtures, and other items which you do not need to access frequently.

5. Consider Cross-docking

Utilize cross-docking whenever possible to avoid tying up storage locations for short periods of time. As an example, when receiving products that are currently on backorder, move them directly to a pick/pack area instead of putting them temporarily into your storage only to then replenish a forward pick location. 

6. Invest In Automation

There are several automation options available that offer high-density storage opportunities.  This can greatly reduce the footprint needed versus being stored in a traditional manner, such as racking or shelving. Vertical lift modules and other goods-to-person technologies such as tote/shuttle systems can offer very dense storage in a reduced amount of square feet. Not only do they help to save the amount of space needed if stored traditionally, but they greatly increase the potential picking and replenishment throughput of your staff. 

7. Reduce Packing and Shipping Supplies

Often, we find several months’ worth of inventory in packing and shipping supplies in the warehouse, (flat corrugate for example). This can take up valuable storage space for actual product inventory. There are many corrugate suppliers that can offer supplies at a much faster rate than every two to three months, which is a typical amount of supply we find. You can push off the storage to the supplier’s warehouse and move to a one- or two-week supply, or less, of supplies by having the vendor increase the number of deliveries. This will help to free up vast amounts of full pallet or floor slotted locations that can now be utilized for inventory. Ensure that your supplier can accommodate this new process and that it does not dramatically increase your corrugate costs.  This may mean committing to a certain amount of inventory with that supplier.

Download 18 Warehouse Layout, Design & Efficiency Principles