Warehouse Design, Layout and Locations : A Detailed Guide – 2021 Edition

The warehouses today have almost tripled in size over the last two decades. The ever-increasing number of SKUs, disruptions in the supply chain, and e-commerce have propelled this change. Naturally, the design, layout, and location selection criteria for warehouses have changed with time. In this article, we are going to cover these aspects in detail so that the readers can ensure optimum utilization of their storage facilities. With the fast pace changes in the market, guaranteeing high warehousing efficiency has become more vital to profitability than ever before.

At the end of the article, the author expects that readers will be able to select the right locations based on their requirements. They will also successfully define the ideal design and layouts suitable to their business requirements. Dive in deeper to understand these areas in the below sections.

Designing the layout for a storage facility requires knowledge of diverse domains. It plays a vital role in operations. The accessibility of various areas concerning the SKU distribution, material handling equipment, and staff. Let us have a look at the basics for your ready reference:

Make Provisions For Material Handling Equipment

Take into account the dimensions of material handling equipment like handcarts and forklifts, as well as the SKUs. Older buildings didn’t have high roofs, so when you make a new one, ensure provisions are made for goods stored at more upper racks. Modern automation systems also include conveyor belts and robots. If you are going to install these technologies or planning to do so in the future, include them in the master layout. To achieve this, maintenance is also an essential factor. 

The layout shall include the provisions for packing stations and shipping stations. But, the space allocation for intermediate picking stations is a vital yet overlooked portion. So, make sure to include it. Making provisions for free movement of the material handling equipment through aisle mapping is an excellent way of safeguarding against bottlenecks. It is also advisable to consider that enough space for multiple pieces of equipment to work in parallel along with staff members.

Principles For Maximum Utilization

The utilization of the warehouses is generally measured in terms of storage space available per cubic foot. While open spaces are substantial to the utility, try to keep them at optimum levels. Consider the accumulation of the SKUs against the storage space and in terms of fast-moving and slow-moving SKUs. Place dock doors appropriately as they themselves are inexpensive, but their absence drains a significant portion of your efficiency. You can provide cross-docking compatibility by placing enough storage shelves near the loading area along with packing stations. The effectiveness of utilization is subjective, but these principles help in creating the required flexibility. 

The Automated Storage and Retrieval Systems (AS/RS) can help achieve 99.99% order accuracy.

Considerations For Product Volume

Ideally, your layout needs to include product volume as the primary design consideration. Place your racks to accommodate fast-moving SKUs near the doors and heavier ones near the ground level. The aisles too need to vary in accordance to the movement and size-weight of the products. You need not maintain pathways of uniform width as the material handling equipment, and frequency of travels will not be the same in all zones. 

Pareto’s principle is extremely helpful in distributing the products. It enables quick identification based on the most essential and most expensive constituents of inventory. This results in increased productivity during operations as unnecessary movements are curbed. 

Minimize Redundant Employee Movement 

One of the most typical troubles faced by workers due to faulty layout planning is that they have to walk long distances. Moreover, placing SKUs randomly is another bottleneck. I recommend completing aisle mapping in parallel to product placing. Slotting is the process of allocating items inside the storage facility. It is done in two ways. The first way is to follow static slotting where the stock is assigned a specific area once and for all. In the dynamic slotting method, the positions of all items are changed to facilitate free movement and higher efficiency.

Checking whether your warehouse design is efficient or not can be done by evaluating existing infrastructure against design objectives. This is a relatively simple checklist that will help you assess the efficiency of your design without any significant analysis. Check out these four things to get an instant answer to all your questions:

How The Current Workflow Satisfies Your Warehouse Needs

This typically depends on the purpose of warehousing. Many firms want to focus on inward movement while others want seamless outward movement. Some storage facilities are oriented towards cross-docking to meet their business requirements. You can assess whether the workflow in your premises is smooth, or is it facing hurdles continuously? Are your workers overwhelmed due to repetitive movements? Questions like these help in figuring out the need for reconsidering your approach to designing the layout.

Does The Accessibility Meet Your Objectives

The objective of any design is to facilitate the execution of the desired purpose as effortlessly as possible. Look out for the accessibility issues as they can point out the broader issues. Using the wrong type of equipment, miscalculating spaces between two racks, or even improper visibility result in reduced accessibility. Hence, these troubles hinder the completion of your objectives of running a storage facility. The inability to meet your goals is a clear indicator of something being wrong.

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Are You Allocating SKUs In All Available Spaces Without Lags

Workers trying to find an empty spot to place the incoming items are indicators to severe problems in the operations. This is a grave problem as it disrupts several departments, and the business ultimately suffers the irreversible loss of time. The chaos and time delays are bound to lower your efficiency as the problems are solved only for the time being. When a new consignment arrives, the rush for reshuffling resumes again. If you are not allocating consignments in a predicted fashion, it’s high time you consider fundamental changes to your approach.

Trade isn’t about goods. Trade is about information. Goods sit in the warehouse until information moves them. – C.J. Cherryh, Chanur’s Legacy.

Are You Meeting Budgets

You can also check if you are able to execute the operations within the decided budgets and attain desired profitability. These are the most crucial criteria for evaluating the efficiency of warehouse design. All problems are reflected in the balance sheets as they either over-consume resources or cut your profitability.

The design of a warehouse is based on its location and a plethora of relationships between operating conditions. Combining operations management and computational models has emerged as a breakthrough for businesses. Today, we can build designs that are realistic and meet future requirements adequately with the help of a warehouse management system. The following considerations are included in the design process:

• Distance from demand centers and type of transportation available
• Warehouse capacity vs. material handling capacity analysis
• Expected inventory turnover
• Process flow mapping
• Workforce and freight movement analysis
• Safety considerations and simulations
• SOP development and mathematical modeling of supply chain
• Statistical analysis of order fulfillment capacity vs. production capacity vs. sales forecasts
• Bottleneck identification and provisions for an ancillary support mechanism

Businesses can benefit by implementing the results of these warehouse design considerations and save a significant amount on rebuilds and modifications. The implementation of this data also helps in increasing efficiency. This is because of the fact that the warehouse is designed for dynamically meeting emerging conditions. Adding to it, enterprises can manage material handling and human resources safety economically.

Now that you understand the designing part let us know about selecting the perfect location for your warehouse.

Location of your storage facility is an asset itself. You need to consider the ideal location of your warehouse to meet both present and future demands. To meet your targets, I suggest evaluating the following factors in both current and future context:

Distribution Of Demand Centers Around It

As a rule of thumb, instead of keeping your location near to the significant demand center, go for multiple centers. You can select a place that is at the center of a region that has existing and developing demand centers. Having distributed demand centers also improves profitability with time. A lot of enterprises use this strategy to take advantage of the diversification opportunities availed by it.

Distribution centers are seen as assets by only a mere 26% of company managers. 

Connectivity To Means Of Transportation

Connectivity plays a crucial role in staying near multiple markets. Various modes of transportation, like railways, seaways, airports, and highways, play a vital role in its effective utilization. This increases the rate at which you can fulfill orders by helping service carriers access you quickly. It also reduces the shipping costs of both bringing the merchandise from the factories and sending them to customers.

Manpower Availability

Having enough human resources is a must-have. The labor required for picking, packing, loading-unloading, and managing clerical work should be local. Their unavailability bloats the compensation budgets. The region’s demographics can give you an idea about the earnings, age, and educational qualifications. Also, you will need IT technical support as most of the warehouses are moving towards computerized management tools.

Compliance And Compatibility To Design Requirements

Materials falling under the category of ‘hazardous substances’ require the construction of Hazmat warehouses. These substances can be dangerous due to their biological, chemical, physical, or nuclear (radioactive) nature. Thus, they are potential for the human lives in the working premises as well as the nearby population. Local surroundings are also at threat if adequate safety measures are not ensured. Therefore you have to keep compliance and the design requirements applicable to your purposes in mind.

Feasibility Analysis For Evolving Supply Chain

The location of the warehouse needs to accommodate future expansions and technology implementation. It also needs to cater to a variety of evolving circumstances in the supply chain. Omnichannel marketing is fast becoming the norm. Hyperlocal deliveries and much faster inventory turnover are among the near-future developments. Expansions and strategic benefits are at the core of feasibility analysis for choosing the right location. Dropshipping is another business model demanding peak agility.

Other common concerns include utility costs and lease considerations. They form the significant portion of fixed costs apart from the labor costs. Local taxation is another factor that adds to the turmoil, especially while transferring goods between two states/regions. The environmental and labor laws impact businesses extensively, like in the case of Hazmat warehouses. 

Tech tools are changing the landscape as IR 4.0 is turning into a reality. Right from barcodes to automation software solutions, technology has changed how we work with inventory and processes. Moreover, robotics and automated freight handling systems increase the utilization rate by leaps and bounds. Connecting warehouses with the entire supply chain ecosystem are both a challenge and a necessity, but it is undeniably the future. This will help in synchronizing production, storage, logistics, and sales seamlessly. Also, the sellers are active on multiple platforms and deal with numerous logistics partners. Thus, integrating them without appropriate technical support isn’t possible. RFID, Voice and light enabled order processing technologies contribute to a reduction of 67% in picking errors.

The layout, design, and location of a warehouse are both interconnected and interdependent. While considering three of them, the focus should be on the value they deliver to each other and as a whole. This is, by far, the best approach as it will help drive operations at optimal efficiency. Long term appreciation of invested resources depends on the coherence of these three aspects to run warehouses profitably.

• Warehousing – 10 Principles of Design and Operations
• Warehouse Design – Key Factors to Consider
• Warehouse Location Decisions
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