Running out of warehouse space is increasingly common as demand grows. Many businesses face this challenge, and moving to a larger facility might seem like the only solution. However, optimizing your existing warehouse can be a more practical and cost-effective approach. This week, I’ll provide practical tips to help you make the most of your current warehouse and avoid unnecessary moves.
Watch the video below!
Why Warehouse Capacity Problems Aren’t Always What They Seem
Before we get into the practical solutions, I want to address something I see regularly in my consulting work. Businesses often come to us convinced they need more space, when what they actually need is better use of the space they already have.
I worked with a distributor last year who was certain they’d outgrown their facility. They were getting quotes on new buildings, looking at lease options, the whole thing. When we walked the floor together, we found nearly 40% of their racking was holding stock that hadn’t moved in over twelve months. Their capacity problem was really an inventory problem wearing a disguise.
The thing is, warehouse moves are expensive and disruptive. You’re looking at relocation costs, potential downtime, staff disruption, and often a lease commitment that locks you in for years. So before you start browsing commercial property listings, it’s worth exhausting the alternatives.
Maximizing Space Utilization
A useful guideline for managing warehouse space is to use around 85% of its total capacity. For example, if your warehouse has 10,000 pallet slots, aim to use about 8,500. This approach ensures that you have enough operational space for moving and reshuffling inventory. Overcrowding can lead to inefficiencies, much like trying to find a parking spot in a crowded mall. Keeping a portion of your warehouse open helps maintain smooth operations and productivity.
That 85% figure isn’t arbitrary, by the way. Once you push beyond it, you start seeing knock-on effects throughout your operation. Put-away times increase because staff are hunting for available slots. Pick accuracy drops because locations get cluttered. And your team ends up spending time shuffling stock around just to access what they need.
Improving Inventory Management
Effective inventory management is crucial for avoiding warehouse congestion. Poor purchasing policies, excessive stock, and inaccurate forecasting are common issues that can lead to space problems. To prevent these issues, balance your purchase quantities with your storage capacity and consider the total cost of ownership, not just the unit price. Regularly reviewing and adjusting inventory levels and purchasing strategies can help optimize space and prevent bottlenecks.
Honestly, this is where most warehouse capacity issues actually originate. I’ve lost count of how many times I’ve seen procurement teams buying in bulk to get better unit prices, without anyone considering what that does to storage costs. A 5% discount on a container load doesn’t look so clever when you’re paying for overflow storage at a 3PL down the road.
The conversation about warehouse capacity needs to include your purchasing team, your sales team, and whoever handles demand planning. If those functions are making decisions in isolation, your warehouse will always be playing catch-up.
Enhancing Efficiency with Slotting
Slotting, or organizing inventory for optimal efficiency, can greatly impact warehouse performance. For instance, if 80% of your picking tasks require traveling across the entire warehouse, it results in wasted time and higher labour costs. By strategically placing high-demand items closer to the dispatch area, you can minimize travel time and boost productivity. Slotting not only improves picking efficiency but also helps in better space utilization, making it an essential strategy for high-density warehouses.
What surprises a lot of people is how much capacity you can effectively “create” just by reorganising what you already have. When your fast movers are properly slotted near dispatch, you reduce congestion in those high-traffic areas. The flow improves, and suddenly your facility feels less cramped even though you haven’t added a single pallet position.
Utilizing High-Density Storage Solutions
Exploring high-density storage options can significantly increase your warehouse’s capacity. Adjusting aisle widths and using specialized forklifts, such as articulated ones, can create more space by allowing narrower aisles. Implementing vertical lift machines and carousels can also enhance storage efficiency, particularly for smaller items. Additionally, adding mezzanine floors can provide extra storage and picking slots without expanding your warehouse’s footprint, maximizing vertical space.
A quick note on the technology options here. They can deliver genuine results, but I’d encourage you to get your fundamentals right first. I’ve seen businesses invest in expensive automation to solve capacity problems that were really caused by poor inventory discipline. Sort out your slotting, clean up your slow movers, and review your purchasing policies. Then look at high-density storage solutions. You might find you need less investment than you originally thought.
When Moving Actually Makes Sense
Look, sometimes a move genuinely is the right answer. If your business has fundamentally outgrown its facility, if the building itself has structural limitations that can’t be overcome, or if your location no longer makes sense for your distribution network, then yes, it might be time.
But treat it as a last resort, not a first instinct. The optimisation strategies above can often buy you years of additional capacity from your existing facility, at a fraction of the cost of relocation.
