17 Practical Tips to Optimize Your Warehouse Space

Tags: inventory management

Warehouse space is at a premium these days, and the cost of under-utilizing your warehouse adds up quickly. The following space-saving tips will help you optimize your warehouse space, improve efficiency and decrease costs.

1. Calculate Your Current Space Utilization to Know Exactly How Your Space Is Used

Optimizing your warehouse space starts with determining exactly how much of your warehouse is being used and what it’s being used for. These warehouse utilization metrics are important to determining what steps you should take next.

Here are four easy steps to calculate your current space utilization:

Calculate Your Total Warehouse Size

For example:

Calculate Your Storage Area Size

For example:

Analyze Your Potential Storage Area

For example:

Now Calculate Your Space Utilization

For example:

For example:

Warehouse space utilization is completely dependent on your specific warehouse, your storage system and your inventory characteristics, including the number of items, their size and how much you carry.

Once you’ve determined your warehouse space utilization you can analyze that number. For example, you may ask yourself, “Why is our utilization only 60 percent?” The answer might be, “We use a floor-stacking method which requires the entire row to be emptied before it can be filled again.”

Use this number to evaluate your warehouse for possible improvements and changes.

2. Pull Extra Space out of Thin Air with Strategic Beam Placement

The space between the top of the stored product and the bottom of the rack beam is reserved for forklift interaction. You’re only required to allow for 6 inches here, but you might have 8 inches or more between the load and the rack.

Here’s how to fix it:

If it’s more than 6 inches, evaluate why. Is the same size product placed here every time? Or is a larger item stored here at times? Can the racking be optimized by lowering the beams to just 6 inches above the top of the product?

3. Use Containers That Fit the Stored Item to Find Extra Space

Unpackaged parts are often placed in storage containers and stored on racks or shelves. Many warehouses use a “one size fits all” approach when it comes to these containers instead of having a variety of sizes.

“When the containers are stored on the rack, the space maximization can appear to be good, but in reality, there is a lot of wasted space inside of the containers, which is costing the company money,” says Martin Murray at The Balance Small Business

Here’s the solution:

You’ll find extra space you never knew you had and increase your storage capacity by simply storing items in containers that are the right size.

4. Maximize Your Space by Storing Items According to Size

You can optimize your available space by separating products by size and storing them with like-sized items. The process is similar to the previous tip, and it’s easier than you may think.

This strategy helps maximize the space you already have in your warehouse, and you’ll minimize the chance of misplacing the smaller items since they will all be together.

5. Follow the Pareto Principle to Use Your Space Effectively

You may have heard of the Pareto principle. It can be applied to many areas of business, including warehouse storage.

Victor Coronado said it best in his article on optimizing warehouses: “Eighty percent of the activity in a warehouse comes from 20 percent of the items, and these items are the fast-movers within the warehouse.”

Coronado outlined a product analysis to determine the optimum location for your SKUs according to the Pareto principle:

Sort Your SKUs into Different Product Categories

Classify Each Product Category According to Activity

Establish How Quickly Each SKU Is Moved

Allocate Warehouse Space

6. Nix Obsolete Inventory to Increase Storage Space

Your storage space is extremely valuable, and obsolete inventory shouldn’t be taking up any of it. Here’s how to find and remove the space invaders:

7. Put Vertical Space to Use in Your Warehouse

You can increase your storage capacity by using the vertical space already available in your warehouse. This can be a huge win when trying to optimize warehouse space. It's already there! You just have to use it effectively.

Using the vertical space available in your warehouse can be more cost effective than acquiring an off-site warehouse, and the increased storage capacity often brings improvements to productivity and operating efficiency as well.

8. Minimize Your Aisle Widths to Add Warehouse Space

Decreasing the width of the aisles between your racking can boost your available warehouse storage and add some much-needed square footage.

All that’s left now is to make the change and take advantage of all that extra space.

9. Clean up Your Floor to Gain Valuable Space

Whether you use a racking system or floor stacking, your floor space is extremely valuable since it’s one of the most accessible locations in your warehouse. It should be reserved for active inventory only. Here’s how to clean up those floors.

10. Add a Mezzanine to Maximize Inventory Storage

Mezzanines provide the opportunity to increase usable square footage without actually expanding. Here’s how to get started:

11. Reduce SKU Quantities to Minimize Overloading

Storing too many of one particular SKU can overwhelm your warehouse. This is more common than you might think. Someone in purchasing may get a great deal on a six-month supply of a certain product and your warehouse ends up clogged with too much inventory.

This scenario can be remedied fairly easily.

12. Implement Cross-docking

With cross-docking, stock isn’t stored unnecessarily between legs of its journey. Instead, it’s quickly sorted and returned to the distribution chain. The technique can be difficult to manage, but it certainly saves space.

Here’s how to get started:

13. Improve Forecast Accuracy to Reduce Excess Inventory

Inaccurate forecasts can result in excess inventory that complicates warehouse inventory management. Here are a few ways to improve your forecast accuracy:

Use the Right Forecasting System

Instead of using a spreadsheet to generate forecasts, utilize software designed to manage inventory. Determine if the size of your facility and the complexity of your forecasting constitute the use of a different solution.

Forecast at the Right Level

You should periodically review the current forecast level. Is it still appropriate for your goals? For example, forecasting at the SKU level may not be enough. You may need to use greater detail by forecasting by sales region or channel.

Measure Your Forecast Accuracy and Track the Results

Check your forecasts against actual sales. You can use this information to fine-tune your forecasts and further improve your results.

14. Use 5-S and Lean Management Principles to Improve Warehouse Space

The 5-S methodology can improve your warehouse space, reduce waste and increase efficiency. You’ll be able to identify issues quickly, address their causes and prevent them from happening again.

Here are the basics for implementing 5-S in your warehouse:

Identify Potentially Unnecessary Items in the Warehouse

Evaluate their usefulness and eliminate any items deemed unnecessary, such as obsolete inventory or unused equipment.

Place All Necessary Items in Their Optimal Positions

In terms of inventory, place the highest selling products in the most accessible locations.

Look for the Root Cause of Every Problem That Arises

As you continue through the process, you may notice inconsistency or lack of organization in your warehouse. Make changes and implement countermeasures as you go. For example, you may notice that inventory is scanned individually when it could be done in batches.

Develop Rules or Policies That Allow You to Duplicate the Process Every Time

This way you can share the process with your team and onboard new associates.

Finally, make the process a habit so that associates follow standards as second nature.

15. Choose the Right Storage System to Increase Storage Density

Selective racking may not be the ideal storage system for your warehouse if you’re looking for more storage density. Here’s how to pick the right storage system for your warehouse:

Determine Your Top Requirements for the Storage System

Do you need a high storage density? Is pick selectivity still a big factor? Does the system need to accommodate a first-in/first-out (FIFO) or last-in/first-out (LIFO) inventory management system?

Identify Your Options

Research which storage system will work best for your warehouse and your top requirements. Here’s a quick overview of common storage options:

Floor Stacking

Pallets are stacked on the floor in rows. If products or loads can be stacked directly on top of each other, you can achieve extremely high-density storage with this option.


Selective Racking

Selective racking is one pallet deep. The racks can be placed back to back or against walkways. This option offers low storage density but high pick selectivity.

Double-Reach Racking

Instead of one row of racking or back-to-back rows, the racking is two rows deep. You could even place racking both back to back and two rows deep. This option reduces the number of aisles and maximizes storage density. Keep in mind that a specialty forklift is required for this system to work.



Drive-in/Drive-through Racking

With this option, pallets are stored on rails rather than shelf beams. Forklifts drive into the structure for pallet placement and removal.


Push-Back Racking

This style of racking features pallets placed on a series of nested, mobile carts which then glide on rails. When a new pallet is loaded, it pushes the other carts back. This is ideal when there is limited storage space available and the product is a consistent size and weight.


Pallet Flow Racking

When pallet flow racking is used, pallets flow down an incline on a series of rollers or wheels.


Weigh Your Top Options

There are trade-offs for each storage system. One may have a higher pick selectivity but takes up too much space for the storage density it provides. Consult experts and stakeholders. Get input from others to compare the choices and determine the best solution.

16. Run Racking Lengthwise to Increase Storage Capacity

For rectangular facilities, racking should most likely be set up lengthwise. You will get the most storage capacity by running the rows as long as possible, rather than in short sections.

Here’s how to check if this tip will work for you:

17. Add Storage in Unexpected Places to Optimize Your Space

Adding extra space in your warehouse can be as easy as installing racking over dock doors and above cross aisles. This additional storage doesn’t interfere with shipping, receiving or forklift operation. Plus, it adds extra space without physically adding square footage.

Here are suggestions for implementing this tip:

Now It’s Time to Add More Space

These 17 tips should help you save space, improve efficiency and decrease costs in your warehouse. Keep in mind that not all of these tips will make sense for every facility, so use the ones that will work best in your warehouse. Now it’s time for you to start optimizing your warehouse space.