Don’t Let Your Inventory Take Over, Get More Space.

When more space is needed, most people first rationalize the pros and cons to justify the expense. Then, based on the cost and benefit, a decision is made. Need more space

This is the rational manufacturers and distributors are contemplating across the country, but on a much larger scale.  According to Peerless Media’s “Annual Warehouse and Distribution Center (DC) Operations Survey,” participants indicated that their biggest warehouse and DC issue was not enough space. 

So, what are the first steps to get more warehouse or DC space? The answer is data analysis.  Data analysis helps to determine the next steps of either implementing warehouse automation to optimize current space or increasing the size of a conventional warehouse to gain more space.

By analyzing specific pieces of data from a warehouse, a company can determine how to get more space in order to optimize operations and meet consumer demands. Five questions that will help to pull operational data and begin the analysis process are:

• Looking five years out, how much inventory must be stored? Knowing how much inventory will need to be stored can help to define the size of the warehouse needed.
• How many items (SKUs) make up the inventory? The number of SKUs defines how selective the inventory will have to be.  If considering warehouse automation, this will help determine whether or not a multiple-deep system can be implemented.
• Approximately how many SKUs represent 80% of the annual sales volume of the inventory? This question relates to the pareto analysis (the 80/20 rule) which defines what storage depth is needed. Eighty percent of volume usually represents the fast-moving SKUs where twenty percent of the volume represents the slow-moving SKUs.
• How many unit loads per hour enter and exit the facility? This will help to determine the throughput needed. If automating via an automated storage and retrieval system (AS/RS), this data will help determine how many storage and retrieval machines (S/RMs) are needed.
• How many hours or shifts is the warehousing operation active? Calculating labor requirements and the shifts that are needed will determine how many working hours there are.  Typically two shifts are best when implementing an AS/RS.  Also, worker productivity is often higher in automated environments.

A great tool that can help with this is Westalia’s Benefits Calculator.  This interactive calculator asks a few questions, questions you would have answered above, and generates a preliminary look at what a high-density automated warehouse would look like based on your operational or planned data. 

You have the ability to play with the numbers based on different projections you have or different building sizes you are contemplating.  Using this calculator is a great start to help rationalize implementing automation via an AS/RS and the benefits of doing so.

Now that the data has been analyzed and it has been determined whether or not to implement automation, the last step is cost justification.  The cost of an AS/RS verse the cost of a conventional warehouse is not equally comparable. 

An AS/RS has long-term value where the benefits may not be seen right away due to the system’s 25 plus year lifecycle.  Although, annual benefits such as labor cost reductions, smaller footprint and higher customer service levels may be seen immediately, ROI may not be achieved for five years.

Finally, consider these “rules” of investing in automation:

1. Purchase high-quality equipment
2. Be patient
3. Bring in operations personnel early on
4. Be proactive
5. Make sure to select a vendor carefully

After reviewing and understanding what is needed for your warehouse to operate efficiently, you will be on the path to getting more space, ultimately arriving at a solid solution to improve operations and allow for continued growth.

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