What is warehouse storage capacity, why is it important, and how do I calculate it?

In the world of distribution and warehousing, space is money.  The more efficiently you use your space, the more cost-effective your operations become.

But how do you ensure you’re maximizing your warehouse capacity?

The answer lies in accurate warehouse capacity calculation.  This process allows you to understand exactly how much inventory your warehouse can hold. It also helps you identify strategies to increase warehouse capacity and optimize your space.

Let’s dive into the nitty-gritty of warehouse storage capacity. We’ll explore what it is, why it’s important, and how to calculate it effectively. Whether you’re a warehouse manager grappling with high operating costs or a supply chain director seeking to streamline operations, this guide is for you.

 


Maximize Warehouse Storage Capacity

 


 

What is warehouse storage capacity?

Warehouse capacity refers to the total available space within a warehouse for storing, organizing, and managing inventory, areas required for efficient picking, packing, and shipping operations, as well as unused space.  To get a complete picture of your warehouse capacity, it’s essential to differentiate between theoretical capacity and working capacity.

Theoretical capacity is the total physical space in the warehouse, considering both horizontal and vertical storage potential. In contrast, working capacity accounts for practical limitations such as the size and weight of stored products, the inventory levels needed to meet demand, and the space required for your team to efficiently access and fulfill orders.

Understanding how to measure and apply these basics is the first step towards effective warehouse capacity calculation.

 

Why is accurate warehouse storage capacity calculation important?

Warehouse capacity is a crucial factor in logistics operations, and it involves much more than just optimizing for inventory storage. Knowing your capacity allows you to strike a balance between having enough inventory on hand to meet demand and avoiding the risks of backorders or stockouts.

However, more warehouse capacity doesn’t always mean better efficiency. As warehouse space increases, so do warehousing and carrying costs, including rent, storage fees, and labor costs for tasks like picking, packing, and inventory management. Excess space can also lead to overstocking, potentially resulting in dead stock and tying up capital in unsold inventory.

If your warehouse is also used for order fulfillment, it’s important to design the space for efficient workflows. This setup can help ensure faster fulfillment times and improve order accuracy, ultimately enhancing operational performance.

 

How to calculate total warehouse storage capacity.

Find the volume of warehouse storage capacity in 5 easy steps.

Figuring out your warehouse capacity might seem a bit overwhelming, but when you break it down into these 5 simple steps, it’s a lot more manageable – and also the best way to determine how to optimize your useable space.

Step 1 – Total Square Feet:  Start by measuring the total square footage of your warehouse.

Step 2Non-Storage Space: Next, calculate how much space is being used for non-storage purposes, like offices, restrooms, break rooms, and loading areas.

Step 3Formula for Usable Storage Space: Now, subtract non-storage space from your total square footage to find your usable storage area.

Formula:  Total Sq Ft – Non-Storage Sq Ft = Usable Storage Space

Step 4Usable Vertical Space: To calculate your usable vertical storage height — you need to figure out how high you can safely stack your inventory, taking into account overhead objects like lights or fire suppressant systems.

Step 5Formula for Total Volume of Warehouse Capacity:  Multiply your vertical storage height by your storage space square footage to find your total storage capacity in cubic feet.

Formula:  Usable Storage Space * Usable Vertical Space  = Total Volume of Warehouse Capacity

This gives you a solid idea of your warehouse’s storage potential. By understanding how to calculate your warehouse capacity, you can better optimize your space to suit your business’s needs.

 

What’s the ideal warehouse space capacity ratio?

Now that you’ve calculated the total volume of your warehouse space, you’re able to make better decisions on how to optimize the space you have.  Making the most of your warehouse space is key to boosting capacity and efficiency, but there’s no one-size-fits-all solution.

While a 100% utilization ratio means your warehouse is fully stocked, you could end up with a cramped warehouse which slow can down operations if not properly optimized.

The ideal ratio for your specific operation can vary depending on a few key factors such as:

  • How long your inventory lasts (expiration dates).
  • The total number of products you have.
  • Whether you can stack items efficiently.
  • The shapes and sizes of your products.

For example, if your warehouse has a 40% utilization ratio, it might be because you’re dealing with items that are hard to stack or have awkward shapes, which take up more space. In these cases, squeezing out extra space can be a real challenge.

For operations with high turnover rates but no perishable items, a 60% ratio is usually a good target, especially if you have a mix of different products and lots of SKUs. If your inventory doesn’t expire and you turn it over several times a year, you could push your space utilization to 70% without any issues.

The sweet spot for most businesses tends to be around 80%.   This works well if you have a limited number of SKUs and no expiration concerns, but be cautious with turnover rates. Keeping your open capacity at about 20% allows for realistic growth and more scalable operations.

What are ways to increase warehouse storage capacity?

If your warehouse is already at capacity, you’re probably looking for ways to squeeze out more space. While optimizing your current setup can help, you can’t increase capacity beyond what your facility can physically hold. So, if you’re expecting growth soon, it’s a good idea to plan for it early by forecasting future inventory needs well in advance. To find ways to increase or maximize your current warehouse capacity, start by reviewing your setup and looking for improvement opportunities:

  1. Are you using all your available space efficiently?  Evaluating your warehouse layout, racking systems, and operational flow can help identify areas where space is being underutilized. Regular space audits can help you optimize every square foot for better efficiency.
  2. Would a different storage system help maximize your warehouse’s potential?  There are dynamic storage systems such as mobile racking, industrial mezzanine floors, and engineered pallet systems that may better suit your specific warehouse needs and help maximize available space.
  3. Can you adjust your aisle widths to free up space? Adjusting aisle width can free up space for additional storage. However, it’s important to ensure that your material handling equipment, like forklifts or automated mobile robots, can still operate safely and efficiently within the new aisle width.
  4. Would warehouse safety equipment help make better use of space? Proper warehouse safety equipment, like guardrails, pallet rack back, and safety nets, can help you better organize your space and prevent accidents, allowing for safer and more efficient use of the area.
  5. Could you combine shipping and receiving to make more room for storage? Combining shipping and receiving docks can free up valuable floor space for additional storage, but it’s important to carefully manage workflows to avoid congestion and maintain operational efficiency.
  6. Would switching to a different packaging process or automated packaging machine free up space? Using smaller or more stackable packaging can help free up space in your shipping stations. Optimizing with right-sized automated packaging machines can significantly increase storage efficiency by freeing up space once used for multiple-step processes.
  7. Are you using warehouse automation to manage and store inventory as efficiently as possible? Warehouse automation, such as Automated Storage and Retrieval Systems (AS/RS) or Pick-to-Light Systems, can greatly improve space utilization by optimizing inventory placement, reducing human error, and speeding up operations.
  8. Would warehouse slotting boost your capacity? This method helps maximize space and makes picking more efficient by organizing your inventory based on SKU numbers, product types, or other product characteristics. Slotting places frequently ordered items close to one another, cutting down on steps and improving efficiency. Not only does efficient slotting increase space, but it also streamlines inventory management and reduces costs.
  9. Have you implemented a Warehouse Management System (WMS)? A WMS improves operations by providing real-time inventory tracking and data collection based on past activity. This insight helps you spot inefficiencies, such as slow-moving stock or bottlenecks, and make informed decisions to streamline processes. By automating tasks like order picking and stock rotation, a WMS increases efficiency and reduces errors throughout your warehouse.
  10. Are you setting and tracking Warehouse KPIs? Setting and tracking Warehouse KPIs can help optimize operations and improve capacity by giving you measurable insights into how well your warehouse is performing. By monitoring key metrics such as storage efficiency, order fulfillment rates, and inventory replenishment times, you can identify areas for improvement and address inefficiencies.
  11. Do you have a good supply chain integrator and business consultant?  A supply chain integrator can streamline processes, optimize technology, and connect different systems—such as inventory management software, robotics, and automated systems —creating a more cohesive operation. Together, they provide the strategic guidance and technical expertise needed to improve overall performance, reduce costs, and drive sustainable growth.

As we move forward, warehouse capacity management will continue to evolve. The rise of e-commerce and changing consumer demands are pushing businesses to rethink their warehouse operations. This includes how they calculate and optimize their warehouse capacity.

Technological advancements, such as artificial intelligence and machine learning, are set to play a significant role in this evolution. These technologies can automate capacity calculations, predict future capacity needs, and provide insights for space optimization. This will enable businesses to respond more quickly to changes in demand and make more informed decisions about their warehouse operations.

 

Warehouse Capacity Management: How do I start?

Warehouse capacity management is on the brink of major transformation. With the explosion of e-commerce and ever-changing consumer demands, businesses are being forced to rethink how they calculate and optimize their warehouse space. It’s no longer just about stacking shelves—it’s about making every inch of your warehouse work smarter.

Getting started with warehouse capacity management is simple and IndPro tailors every step to your unique needs. First, we’ll conduct a comprehensive assessment of your current warehouse setup to identify any inefficiencies and untapped potential. From there, we’ll recommend strategies, including the latest technological tools like AI and machine learning, to help optimize your space and improve capacity management.

Once we’ve crafted a solution, we’ll work closely with your team to implement these changes, ensuring smooth integration and providing ongoing support to fine-tune operations as needed. With IndPro by your side, you’ll have the tools and insights to not only meet today’s demands but stay ahead of future challenges.

Ready to boost efficiency and take your warehouse to the next level? Reach out to us today. We’re here to help turn your goals into reality!

 


About IndPro

IndPro Services, a leader in Commercial Systems and U.S. Federal Government procurement, designs and executes successful, data-driven automation and robotic solutions for supply chain industries.

Dedicated to improving efficiency in warehouse and distribution center operations, we work on the same side of the table with you to procure the best possible solution, tailored to your budget and needs.