Is your warehouse too small?

Before looking for more space, understand what your business will actually need.

The question sounds simple: "Is our warehouse too small?"

But the answer is not always to find a bigger warehouse.

Before making that decision, there is another question that should be answered: "What are our short-, medium- and long-term logistics requirements to support the business?"

Looking at the requirement over different time horizons can help management avoid committing to additional space or major capital investment too early.

Short term: 1–2 years

In the short term, there is often an opportunity to make better use of the warehouse you already have.

You may be surprised by how much capacity is being underutilised.

To create additional usable capacity without major capital investment, you may improve areas such as:

• storage utilisation

• SKU allocation

• storage methods

• inventory positioning

• picking processes

• material flow

The trade-off is that some of these solutions may require an increase in operating cost. However, they can often be implemented with relatively little disruption to the daily operation.

Most importantly, this approach can buy the business time.

Medium term: 3–5 years

The medium-term requirement is different.

If the business continues to grow, operational improvements alone may no longer be enough.

This is where CAPEX starts to play a greater role.

The business may need to consider:

• redesigning the storage system

• changing the picking process

• increasing storage density

• introducing or changing material handling equipment

• improving warehouse flow

• considering automation

These decisions should be based on the expected operational requirements of the business, rather than simply how much space is available today.

Long term: 6–10 years

The long-term requirement should be driven by the expected scale and characteristics of the business.

As volumes, SKU numbers, order profiles and service requirements grow, the warehouse requirement becomes increasingly data-driven.

At some point, optimisation has a limit.

A square peg does not fit into a smaller hole.

If the business requires more capacity than the facility can realistically provide, additional space or a new facility may eventually be unavoidable.

So, is your warehouse too small?

Maybe.

But that should not be the first question.

The better question is: "How can we meet our short-term requirements while giving ourselves enough time to design the right medium- and long-term solution?"

In many cases, the answer may be to optimise the existing warehouse first, rather than immediately committing to additional space or a major capital investment.

This gives management time to understand:

where the business is today → where it needs to be → and what investment is actually required to get there.

A warehouse decision should therefore not start with: "How much more space do we need?"

It should start with: "What does our business need our warehouse to support over the next 2, 5 and 10 years?"

That provides a much stronger basis for deciding whether to optimise the existing facility, redesign the operation, invest in a new storage solution, or ultimately move to a larger facility.

A warehouse decision should start with the business requirement — not the building.

Still don't know where to start?

Talk to LSI. We'll help you understand what your warehouse needs today, and what it will need tomorrow.