Are you using your warehouse space efficiently? Many warehouse managers say their biggest problem is that they don’t have enough warehouse space, however in reality they are not efficiently utilizing their space. In fact many warehouse spaces only use 20% of their space at any given time. Additionally some warehouses that have higher utilization rates have increased costs because of the negative impacts of high utilization on employee productivity.
Calculating your warehouse space utilization is a simple process. Start by calculating the total size of your warehouse. Then subtract any space that you use for offices, restrooms, etc. For example if you are renting a warehouse that is 70,000 sf and 5,000 sf of that is used for offices then you have 65,000 sf of usable warehouse space. Multiply 65,000 sf by the warehouse space clear height to determine its storage capacity in cubic feet. If the space has a clear height of 25 feet, then its storage capacity or cube size will be 1,625,000 cubic feet.
To determine your warehouse space utilization you need to first calculate your inventory cube size. Do this by adding up the volume of all the products that are stored in your warehouse and divide that total by the warehouse space store capacity. So if you have 250,000 cubic fee of product in your 1,625,000 cubic foot warehouse, then you have a 15.38% utilization, which is not bad.
To understand why a 15.38% utilization is relatively healthy take a step backwards and calculate the storage cube size in the warehouse. To do this measure the footprints of each pallet rack and calculate their total vertical storage capacity. Then multiply the true capacity of each rack by the total number of racks in your warehouse. This will give you the size of the storage cube. Most warehouse space storage cubes are between 22% and 27% of their storage capacities. With a 1,625,000 cubic foot warehouse a storage cube of 357,500 and 438,750 would be normal.
If your storage cube size falls outside the 22% to 27% range this would indicate a potential problem in your warehouse space layout or design. If your storage cube size is larger, you risk having high labor costs since your employees will not have much room to efficiently move around the warehouse for restocking & picking. If your storage cube size is smaller, you could be wasting space by not locating racks more efficiently.
Comparing your warehouse cube size to your inventory cube gives a lower number that reflects how you utilize space and design your warehouse space. Once you design your warehouse with optimization in mind, calculating the utilization of your storage cube by dividing it into the inventory cube will possibly give you a closer look at your efficiency. Now take the midpoint of the storage cube example above and assume the warehouse has a 398,125 storage cube, storing 250,000 cubic feet of product would be 62.79% utilization of the storage space available.
When evaluating your warehouse space, choose the metrics based on what you want to achieve. Some people compare inventory to warehouse space size, however this does not always help you understand what is really going on. The two-step model listed above helps you understand how efficient your warehouse space design is and how it’s being used on a day-to-day basis by your employees.