When it comes to ecommerce businesses, order fulfillment is the name of the game. The speed and accuracy with which you fill orders is one of the key factors in your long-term success. If you want to succeed you need to properly store and organize your inventory, so it can be picked, packed, and shipped with the greatest efficiency, speed, and accuracy.
That’s where warehouse optimization comes into play.
Warehouse optimization is not a process that should be implemented without careful thought. Before you can take steps to optimize your warehousing layout and process, you need to have a thorough understanding of what you’re currently working with and the limitations. Once you’re able to identify weaknesses and areas of unmet need, you can start getting into the details of optimizing your new warehouse layout.
In this article, we’ll walk you through the practical aspects of optimizing your warehouse layout starting with choosing the right warehouse space and brainstorming ideas for your ideal warehouse layout. We’ll also talk about how to implement your plan and provide tips for optimizing the different stages of the order fulfillment process.
When to Make the Switch and How to Choose a Warehouse Space
The goal of any business is to grow – it’s really that simple. Depending what type of business you’re running, the steps you take to accomplish that growth may differ. What all successful ecommerce businesses have in common, however, is an efficient order fulfillment process and, in most cases, that means a warehouse with a layout optimized for maximum efficiency.
If your business has grown to the point where you are considering purchasing or leasing a warehouse space, congratulations! Before you make the switch, however, there are a few things to think about.
First and foremost, are you really ready to make the switch?
Before you start looking around for a bigger warehouse space, you need to be sure that you really need it and that you can afford to run it. It might make sense to move to a larger warehouse space, for example, if your sales have started to exceed your storage capacity for inventory. It might also make sense to move to a different warehouse if you’re expanding into a new market. Take the time to think about whether making a switch is really the smartest choice for your business and, if it is, the next step is to carefully choose a warehouse space.
The first thing you’re going to be looking for when evaluating warehouse spaces is, of course, size. You need a warehouse large enough to hold your current inventory and to leave room for growth without being so large that you sacrifice efficiency. After size, you need to think about the little details that will really make a difference in your day-to-day operations.
Aaron Rubin, CEO of Ship Hero, suggests that even the smallest details like the type of flooring matters. In an interview with EcommerceFuel.com Rubin said, “The next most important thing that people don’t think about is the floor. You want something with a smooth, not pitted concrete floor.” He goes on to say that cheap flooring can produce dust that covers your products and pitted floors can damage rolling carts.
Here are some of the other key elements to consider when choosing a warehouse space:
- Size – When choosing a warehouse, think about how much space you need to store the inventory you currently have but leave room for expansion. It almost always makes sense to sign a multi-year lease. The caveat is you don’t want to get locked in should the business go under. Make sure your lease has a buyout clause so you can terminate it.
- Location – The location of your warehouse determines how quickly and efficiently you can fulfill orders and ship them to your customers. You’ll need to do some research about your market to determine the best location for your warehouse. Regardless of where it’s located, Rubin advises to find a warehouse that has a loading dock. This will make pallet shipments much easier to receive.
- Cost – Buying or leasing a warehouse isn’t cheap, so you’ll need to run the numbers to make sure you can afford it and that it will be a lucrative decision to make the change. In addition to the cost to lease or buy the warehouse, you’ll also need to factor in costs for shipping. If you’re an established business looking to expand, getting a line of credit from a bank could be the best option.
- Demographics – The location of your warehouse will impact the cost and the kind of job market you have to draw from in staffing your warehouse. Do some research to see if your business fits the local industry and whether you’ll be able to find qualified and experienced staff.
- Potential – Choose a warehousing space that not only fits your current needs but leaves room for expansion as well. Moving from warehouse to warehouse can be expensive and incredibly time consuming. Plan out what your inventory needs may be years down the line to give yourself enough warehouse space to accommodate it.
Now that you understand when the right time is to make the switch and what to consider when choosing, let’s discuss what to think about before you start planning your warehouse layout.
Things to Think About Before You Begin
Once you’ve chosen your warehousing space, next comes the task of planning the layout. Before you start getting into the details of planning your warehouse layout, however, there are a few things you need to consider. First and foremost, why is it even important to optimize how your warehouse layout?
As mentioned above, the speed, efficiency, and accuracy with which you fill your orders will determine whether your business lives or dies. The order fulfillment process can be fairly complex, so you need to really think through the details for picking, packing, and shipping. If you want to maximize profitability, it all starts with proper warehouse planning. When planning your warehouse, you’ll need to set up certain areas to make sure that your picking and packing process goes smoothly.
Here are some of the areas you’ll need to work into your warehouse layout:
- Receiving Station – This is where new products are received and checked in before they are stocked on warehouse shelves. This station needs to be well-organized to keep your inventory current and accurate.
- Packing Station – In this station, customer orders are packed into shipping boxes or poly-bags, and the shipping label is created and applied.
- Staging Station – Here is where items move from the packing station to skids or carts before being moved to the outbound shipping station.
- Returns Station – Many companies choose to have a dedicated returns station. If you don’t, you’ll likely be handling returns through the receiving station.
In addition to knowing which stations you’ll need and where to place them in your warehouse, you also need to plan around existing structures. For example, if your warehouse doesn’t have a loading dock, you’ll need to adjust your plan and create separate sections for inbound and outbound inventory. If there are walls or support structures in the middle of your warehouse, you’ll need to think carefully about the placement of your stations to prevent staff from having to navigate around them dozens of times a day which can reduce speed and efficiency.
Start with a Detailed Plan for Organization
Once you’ve thought through some of the details for optimizing your warehouse, next comes the stage in which you actually do the detailed planning. You’ve already thought about which stations you’ll need and whether there are any existing obstacles to work around – now is the time when you put those details together to actually map your layout for optimal efficiency.
Here are some simple steps to complete as you start organizing your warehouse layout:
- Measure the warehouse space you are working with and be sure to note any obstacles.
- Decide where you are going to place your receiving, packing, staging, shipping, and returns stations – keep in mind the location of your loading dock, if you have one.
- Plan to dedicate about 15% to 20% of your total space to staging and make sure it is adjacent to the shipping station – the remaining ~80% will be divided among storage and other stations.
- Choose the best shelving for your products to save space and time (we’ll go into greater detail about shelving in the next section).
- Decide on a labeling system and make sure all aisles and product locations are clearly labeled.
- Create material flow paths and picking paths to maximize efficiency by choosing the fastest route between stations.
- Plan the specific locations where you’re going to store your inventory – make sure the highest-selling items are in easy to reach locations.
Throughout the planning process, it helps to have a clear objective in mind. Ask yourself what the main goal is that you want to accomplish by optimizing your warehouse layout. Do you want to maximize your use of space by optimizing your shelving and storage practices? Do you want to cut down on travel time by being mindful of how you arrange your inventory and packing stations? Do you want to increase your warehousing efficiency by cutting out unnecessary products and processes?
If you can identify the primary goal for optimizing your warehouse, it will help you make the right choice in all of the decisions you make along the way.
Optimizing Your Order Fulfillment Processes
Creating a detailed warehousing plan is one thing, but implementing it is something else entirely. Optimizing your warehouse means optimizing the different stages in the order fulfillment process. Your primary goal at all times is to get the right products to the right customers in the shortest amount of time. Optimizing warehousing processes including receiving, picking, packing, and shipping is the way to do it.
Here are some simple tips for optimizing your warehouse operation along all the various stages of the order fulfillment process to ensure maximum efficiency:
When it comes to optimizing your warehouse flow, it all starts the moment your product enters the warehouse. When products are received, they are checked for damage, mis-picks, and quantity so your staff will need plenty of space to perform these tasks without impeding the in-flow of new inventory. To make receiving as quick and painless as possible, your warehouse should have a loading dock – this will save time as pallets can be loaded directly from the truck into the warehouse instead of being removed from the pallets and delivered in smaller loads. Having a loading dock versus not is the difference between a one-man job and a multi-person job. Don’t count on the delivery driver to help.
In this stage of the order fulfillment process, pickers receive orders and then pick the products for packing. Where you store your inventory, the type of shelving you use, the locations of your picking stations, are all factors that affect accuracy and efficiency. Here are some simple tips for optimizing your picking process:
- Don’t store multiple unique SKUs in the same location
- Place products in easily accessible areas for pickers
- Designate certain zones for certain products (ex: hot sellers, seasonal, etc.)
- Reduce travel time by picking as many orders in a single run as possible
Optimizing your picking process is not something you do once – you should be making adjustments as your business grows and your inventory changes.
This stage of the order fulfillment process needs to be completed as quickly and accurately as possible. The best place to start in optimizing this stage of the process is to place your packing location near the shipping location to minimize travel time. You should also limit the types of packing materials you use, so pickers are able to assemble each order efficiently.
It doesn’t matter how fast and efficient your picking and packing process is if your shipping provider can’t keep up. It pays to have connections with multiple providers, so you can offer your customers the best price on a variety of shipping speeds. Plus, if one of your providers falls through, you’ll always have a backup, so you don’t risk losing a sale. When it comes to optimizing your shipping process, have a designated shipping station so orders can be picked up, scanned in, and shipped out quickly all in one place.
Tips for Improving an Existing Warehouse Layout
If you’re moving from in-house order fulfillment to purchasing or leasing a warehouse space for the first time, you’re in a great position. Starting from scratch may take time, but it gives you the opportunity to plan everything from the very beginning to optimize your layout and maximize profits. If you find yourself making adjustments to your warehouse layout as your business grows, you may face some limitations, but there are still things you can do to make improvements.
Here are some ways you can improve an existing warehouse layout:
- Adjust your aisle widths. Something as simple as moving your warehouse storage shelves closer together or further apart can have a significant impact on speed, efficiency, and safety. Rethinking your layout could help you find as much as 15% to 18% more space. Just make sure that your aisles are wide enough for safety (e.g. operating a forklift) but not so wide that you’ll be wasting storage space or losing time during picking.
- Change your shelving. The simplest things can have the biggest impact on your business – shelving is one of them. If it isn’t already, rearrange your shelves, so they are all running in one direction and orient the aisles, so you can see straight down from the packing station. Aim for fewer, longer rows than for many shorter rows.
- Rearrange your inventory. Take the time to examine your product velocity and make changes to your storage practices as needed. Many businesses make the mistake of storing similar products together when it is more beneficial to store them according to how quickly they sell. Place the highest-selling items closer to shipping lanes to cut out unnecessary steps.
- Measure your travel times. While it may seem like more space is always better, it could actually end up reducing efficiency due to longer travel times. Take the time to measure travel times within your warehouse so you can identify areas for improvement.
- Liquidate unsold inventory. If your business has been running for a while, you probably already know which items sell and which items don’t. If you eliminate some of those unpopular products, you can save storage space and time during the picking and packing process.
In the short term, making these and other adjustments to your warehouse layout could be costly both in terms of time and money. Depending how much you need to change, you may even need to shut down operations for a few days. To minimize the damage and maximize your benefits, do all of your thinking ahead of time until you have a detailed plan that you can put in place as quickly and as efficiently as possible. Though you may lose money on the time it takes to incorporate these changes; if you do it right, the payoff will be well worth it down the line.