The right time to expand the warehouse

"The warehouse is overflowing" often rests on a feeling: the manager saw a pallet in an aisle, an employee complained. But expansion is a big decision for several years, and it should be made on numbers, not feelings. The sensible time to expand comes when the warehouse is permanently more than 85-90 percent full and movement slows.

Why the 85-90 percent rule works

A warehouse cannot be 100 percent full: goods need free space to move. The fill level is simple to calculate: divide the number of occupied pallet positions by the total number of pallet positions. Beyond 80 percent, finding room for newly arrived goods starts to get harder. At 85-90 percent, hunting for free space becomes routine work: received goods wait in a temporary zone, re-handling grows, picking gets denser and errors rise.

To calculate the fill level correctly, the location codes and their status (occupied, free, blocked) must be accurate in the database, otherwise the percentage itself becomes a guess.

The most important word in the rule is "permanently". A two or three week peak before a holiday or on promotion days is not a reason to expand; it can be covered with temporary rental or an extra shift. A warehouse that stays above 85-90 percent for months is another matter.

Signs beyond the figure

Before the percentage rises, the warehouse itself gives signals:

• goods lie in the aisles and in the receiving zone;
• finding a place for new receipts has stretched from minutes to hours;
• moves and reshuffles have increased and equipment travels more;
• pickers cover long distances because goods were put "wherever there was room";
• errors have grown because goods stand at the wrong location;
• temporary external storage has appeared;
• trucks queue at receiving.

What to check before expanding

Often what is needed is not expansion but order. Check the following:

1. How many pallet positions does dead stock occupy?
2. Are days of stock above the norm, that is, is surplus stock lying there?
3. Are aisle width and height fully used?
4. Are goods in the receiving zone staying longer than the set time?
5. Are there many half-empty and mixed pallets?

An example, with illustrative figures. The warehouse has 6,000 pallet positions and 90 percent are occupied, that is, 5,400. If 12 percent of the occupied ones is dead stock, that is 648 pallet positions. Consolidating half-empty pallets frees about 270 more. In all, 918 positions are released: occupied positions fall to 4,482 and the fill level drops to about 75 percent. Expansion can be put off for several years.

When to start: the growth arithmetic

An expansion project, meaning finding space, the contract, fit-out and the move, takes several months. So it should be started not after the fill level reaches 100 percent but before.

An example. The warehouse is now 80 percent full, sales are growing 20 percent a year, days of stock do not change, so stock also grows 20 percent a year. The arithmetic shows that you reach 90 percent in about 8 months and 100 percent in about 15. If finding and preparing new space takes 6-9 months, the decision must be made now, not after 90 percent is reached. One more point: growth does not stop after expansion. Size the new capacity for a horizon of at least three to five years, otherwise the new space fills up again within a year.

Expansion options

Expansion does not always mean a new building:

• densification: tall racking, narrow aisles, a mezzanine;
• renting extra space next to the current building;
• a second warehouse, closer to customers;
• using an external logistics operator for seasonal peaks;
• moving to a larger building.

The choice depends on time, price and management complexity. For example, if a second warehouse is opened, stock is split between two points and total stock usually rises, so compare that option with the benefit of being close to customers.

Conclusion

The decision to expand should rest on the fill level, speed of movement and the growth arithmetic, and the existing space should be put in order first. The OmborExpert specialists analyse the real capacity of a warehouse and help determine by calculation when to defer expansion and when to start.