Can an Organized Warehouse Actually Save You Money?

As business ramps up and the amount of stockable inventory you carry starts to rise, you may be faced with the temptation to move into a bigger warehouse or rent a second facility.

This is understandable. A lot of warehouses think that a larger facility will solve most of their problems, and why wouldn’t they? There’s more space, you get a clean slate regarding where you can put all of your warehouse storage, and you start to feel like it can be the solution to your organizational woes.

We hate to rain on your parade, but this might not be the best way to go about everything. On average, warehousing costs absorb roughly 2% of all total sales revenue. It looks small on its surface, but this can become a pretty staggering figure if left unchecked. Think about it—no matter how much you sell, what items you stock, or whatever you do inside your warehouse, 2% of all the money you make is going to be sucked right back into the warehouse.

This includes things like labour costs, utilities (heating and electricity especially), site rent, and so on. Sure, these are costings every business faces, but in the world of warehousing the building you use is the business. Without your warehouse, where would you be doing business? Of this 2%, labour tends to absorb most of that cost, which will only get worse as you hire additional staff to either fill out your expanded warehouse or start taking up operations in your new separate building. Up to 55% of all total warehouse running costs (or just over 1% of the sales revenue) stem from hiring additional labour. Staffing needs will increase and decrease as circumstances dictate, but the concept of having to staff (and then outfit) an entire second warehouse is going to become a long-term issue for your finances.

What’s to be done, then? The trick is to think long-term. In many cases, warehouse expansions are fuelled by the feeling that you need more space to store your inventory, since that’s what makes you money. However, by taking some time to analyse what parts of your warehouse aren’t being used as effectively as others and helping make your current warehouse run more efficiently, you can save a lot of money and time by not having to move into a completely new facility.

Many organizational issues can simply be solved with a little organization and traffic management. Reducing the aisle distance between your pallet racks, for example, can provide better traffic flow in areas where forklifts aren’t needed and can help provide room for more shelves and additional organization solutions, or even something like gravity flow racks to move and store products better.

Looking up can also be a huge benefit. In many cases, simply installing taller shelves can increase your storage capacity exponentially while still using the space you have available to you. Similarly, if you’re crunched for working space (to assemble packages or sort items before they get palletized and shelved), installing a mezzanine under your highest ceiling can be a huge benefit. Really, the point is to make sure you’ve exhausted all your options before trying to move warehouses. Long-term investments in more storage and better organized layouts will go a long way towards maximizing your current warehouse and ensuring you don’t need to sink time and money into moves or expansions—at least not until you know for sure you’re at capacity.