There is no universal warehouse-size that fits all businesses. If you have too little warehouse capacity it can restrict the number of SKUs that you can ship – inhibiting revenue and service levels. In contrast to this, having too much warehouse space inflates your overhead expenditures and ties up working capital.
So how should you select the ideal warehouse for your business? – unfortunately, warehouses are not like clothes, you cannot try out your new space before you buy it and there’s no 30 days returns policy on it. The capacity of your new warehouse should satisfy current and future business requirements and it should be flexible enough to accommodate unforeseen inventory fluctuations.
Let’s have a look at the most important factors that you need to take into consideration when looking for a new warehouse:
How big is your current warehouse?
The size of your current warehouse can be a good starting point, think about how much space you currently have and if you’re using that space efficiently. By understanding the success or limitations of your current facility, you can come to a conclusion whether your new facility should be similar or a different size. If you’re constantly running out of space in your current warehouse, and if your new warehouse will encounter similar changes in demand, then it would make sense to get a larger facility.
On the other hand, if you currently have a lot of wasted or empty space, then it means that your new facility has to be smaller – this will save you money from taxes, property costs, utilities, etc.
How many SKUs do you have and what is your projected growth?
You also have to think about what will happen if you increase the number of SKUs which you are working with? Companies often think where they are currently and how many SKUs they have added recently. You must take into account changes in the business and answer some of these questions:
- Will you be adding news SKUs at a higher rate than the previous year?
- Will these new SKUs have different sizes compared to the ones you currently house? Will they be larger, smaller, heavier, longer or wider?
- How the change in the cubic dimension of the SKUs might affect the storage requirements and other material handling equipment including conveyors and pick carts?
- Will there any SKUs that might become obsolete in the same timeframe?
- All of these factors are essential to warehouse planning, especially when calculating the number of pallet positions and pick locations.
You might also want to think about what are the processes your inventory goes through before being shipped?
In every operation, products flow through a unique set of processes from the moment they arrive in the warehouse to when they are shipped as a part of an order to one of your customers. These processes will determine how a large portion of your new warehouse’s footprint is put to use – for this reason, it is critical to understand the inventory flow before you settle on a layout or building size.
The three main areas which need more consideration are inbound receiving, QA and staging; returns processing and refurbishment, and forward pick configuration for the shortest pick path.
You will also have to ask yourself if you will support new functions such as kitting or value-added services – and you’ll also have to take into consideration how you’d like your company to develop in the future.
So, how much do you plan on growing your business?
The chances are that you are planning on moving to a new warehouse because of an increase in demand. Your business is growing and you need a bigger facility to accommodate extra inventory and processes. It’s important to keep business growth in mind when switching to a new facility, because if you aren’t careful, you may find yourself quickly outgrowing the new space, leading to a redesign, expansion of to build another new facility – which all cost serious money.
If there are strong indicators that your business will grow rapidly, it may be in your best interest to preemptively move into a larger warehouse. If growth will be slower, then it would make more sense to move into a warehouse that can hold your existing inventory.
When choosing a new warehouse, settling for the size of your facility is one of the most crucial steps in the process, as it will affect much what comes later, such as the systems and technologies you can put in place, how large of a workforce can it accommodate. The factors/questions above can be used to determine what the perfect size will be for your current needs and future growth.