Warehouse Space Optimization: Saving Floor Space with SKU Data
Order fulfillment operations nearing their physical capacity limits—they cannot store and handle the amount of inventory necessary to operate effectively—have few options at their disposal. They can either expand their existing facility to accommodate the necessary inventory, or they can move to a larger and more accommodating facility. Both of these are costly options which should be reserved for the absolute last resort.
But there is a third, oft-overlooked option: They can leverage their SKU data in order to optimize their shelving and storage practices.
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The vast majority (up to 80 percent) of any shelf is air. It’s empty space. By reclaiming as much of that space as you can, it is possible to increase your capacity for inventory at relatively little cost compared to the other options.
Reclaiming Wasted Shelf Space
If your operation is like most, the last time you thought about your racking and shelves was the day you had them installed. You configured them once, put them in place, and they have sat in that same configuration ever since.
If the dimensions of your inventory have remained the same for all of these years, and you handle the exact same items in the same quantities as you did when your shelves were configured and installed, then this fact may not be a problem for your business.
In recent years, though, most operations have experienced profound changes in the number of SKUs that they handle, often adding dozens, hundreds, or even thousands of SKUs in order to accommodate changing customer demands. Each of these SKUs has its own dimensions and storage requirements. For an operation experiencing SKU proliferation like this, failing to adjust shelving in order to accommodate these changes has likely led to a highly inefficient slotting process.
If you think that this is an exaggeration, go and take a look at your rack and shelving systems and ask yourself:
- How much open space is there between the top of each box or tote and the shelf above it? We find that this is often over 60 percent.
- How many boxes or totes on the shelf have different heights? It’s possible that heights vary by 80 percent or more.
- If using shelf bins, what percentage of the bin is not being used by inventory? In some operations, we’ve found that even though a bin might use 100 percent of its allotted shelf space, the items stored inside of it often only use 10 percent or so of that dedicated space.
What’s the best way to optimize your warehouse’s shelving? By understanding and leveraging your SKU data, it’s possible to identify ideal storage requirements for each SKU, which you can then use to generate cell sizes and, ultimately, adjust your shelves and racking as necessary.
Generally speaking, there are three ways that you can calculate ideal cell sizes for your SKUs:
- Rely on software: Depending on the sophistication of the various software that you use to manage your operation, optimizing cell sizes may be as simple as enabling a certain feature. Most modern warehouse management systems (WMS), warehouse control systems (WCS), warehouse execution systems (WES), and inventory management software include a built-in method to store and track each SKU by its physical size.
- Calculate requirements manually: While software makes the process easier, it is also possible to calculate and designate cell sizes manually if necessary. The challenge is to determine what the right number of different cell sizes required; you want enough so that you can tailor your shelving and racking, but not so many as to make it impossible to effectively manage. There is often a point of diminishing value. Once you have designated every SKU a cell size, calculate how many cells you need for each size. Figure out your linear storage calculation for each size (width). Now divide that by the width of section of rack and shelving. You now know how many shelves. Do this same exercise for the height of each cell size to determine shelf height. Use the least amount of space above each box or tote as you can get away with. Only place totes with the same size on each cell to eliminate wasted shelf spacing. Same sized totes or boxes should also be based on consumption patterns. This of course begins another conversation about slotting and the proper usage of slotting techniques.
- Conduct an audit: If you find that your team simply doesn’t have the required tools or expertise to calculate the ideal cell sizes for your operation, it may be in your best interest to work with a systems integrator or consultant who can help you audit your facility and determine your best path forward.
Embrace Automation for Greater Space Savings & Optimization
Identifying the correct cell sizes to use for your different SKUs has the potential to save anywhere from 25 to 35 percent of wasted space. Paired with smart slotting practices, it’s possible to efficiencies in even more ways—for example, by reducing pick times, etc.
Beyond simply optimizing cell sizes and shelf space, though, there are other options to help you get more out of your existing space. One is to regularly undergo the process of SKU analysis and rationalization in order to ensure that you are only adding inventory that is truly necessary and which will drive revenue.
The other is to embrace automation. Automated Storage & Retrieval Systems (AS/RS) of various sorts, including carousels and vertical lift modules (VLMs) can help you further optimize your facility by reclaiming unused or wasted space—particularly helpful in the case of vertical space.
What is the best solution for your operations? Feel free to give us a call and discuss your situation with one of our consultants who can help you create your best path.
- Romaine has spent over 30 years involved with organizations looking to optimize their distribution, manufacturing, and warehousing operations. Focusing on the customer’s processes, automation and business model, Romaine has helped dozens of organizations improve profitability by reducing labor, floor space, errors and inventory while improving accuracy, inventory turns and cut-off times.
Within the industry trade association, MHI, Romaine has taken numerous leadership positions including: Chairman of the Automated Storage & Retrieval (AS/RS) Group, Chairman of the Order Fulfillment Council of America, Chairman of the Warehouse Execution Systems Group and was one of the originators of the Carousel and VLM Product Section Group. He has also spearheaded the efforts to create the first ANSI industry safety standards for horizontal carousels.
Romaine is a frequent editorial and information contributor to hundreds of publications, blogs and online publications and has been a speaker at dozens of Supply Chain, Logistics, Lean and Facility organizations and functions. Just a few include the Parcel Forum, Institute of Industrial Engineers (IIE), Promat, North American Material Handling, Modex, National Mfg Week, Southern California Plant Operations, NJ Material Handling Assoc., Applied Ergonomics, Warehousing Education & Research Council (WERC), Lean Manufacturing Conference, Council of Supply Chain Management Professionals (CSCMP), NeoCon, Health Information Distribution Association (HIDA), National Catalog & Operations (NCOF), CSCMP and more.
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