If you lived alone in a one-bedroom apartment but planned to soon live with roommates, you’d need to make arrangements to accommodate for more people, or move to a bigger apartment if the current space’s layout didn’t offer much flexibility.
The same principle applies to warehouse space — you need optimal space to store inventory and equipment, and enable a productive team to manage inventory and fulfill items, without overpaying and underutilizing space or running out of space too quickly and having to move.
But how do you choose a warehouse that has optimal space for growth, so you don’t outgrow it too fast — or never fully grow into it and end up paying for more than you need?
This article will help you learn how to calculate and optimize warehouse capacity, as well as explores alternatives to managing a warehouse.
What is warehouse capacity?
For ecommerce, warehouse capacity refers to the amount of available space for storage, inventory preparation, and order fulfillment.
To fully understand warehouse capacity, it’s important to make a clear distinction between theoretical storage capacity and working capacity.
While theoretical storage capacity refers to the physical capacity of the warehouse (both vertically and horizontally), working capacity is the amount of space available based on:
- The weight and dimensions of products being stored
- How much inventory you need on hand to meet demand
- How much space your team needs to locate items and fulfill orders efficiently
What makes warehouse capacity important?
Warehouse capacity plays a critical role in logistics operations and goes beyond optimizing for inventory storage.
Understanding your warehouse capacity helps you decide how much inventory you can afford to have on hand to meet demand while also reducing risk of potential backorders and stockouts.
Having more warehouse capacity is not always better. With more warehouse capacity and square footage, the higher your warehousing and carrying costs will be, including rent, storage, picking and packing, and inventory management tasks.
Additionally, more space makes it easy to store more inventory than needed, which can cause an accumulation of dead stock (from investing in more inventory upfront, where capital is tied until it’s sold).
Along with storage, you might also utilize the space for order fulfillment. If this is the case, you will need to decide how to set up your warehouse space for efficient workflows to enable fast fulfillment and higher order accuracy.
How to calculate warehouse capacity
Understanding your current warehouse capacity is the first step to determine how you can optimize it. Here is a simple step-by-step walkthrough of how to calculate warehouse capacity using square footage measured in feet:
Step 1: Get the square feet measurements of your entire warehouse facility. For this example, we’ll say it’s 150,000 sq. ft.
Step 2: Calculate the total amount of space being used for non-storage purposes such as offices, restrooms, break rooms, loading areas, etc. Let’s say this comes out to 30,000 sq. ft.
Step 3: Subtract the total amount of non-storage space from the total square footage of your warehouse to determine your warehouse’s usable space. The formula is as followed:
Usable Space = Total Sq. Ft. – Non-Storage Space Sq. Ft.
In our example, that comes to:
150,000 Sq. Ft. – 30,000 Sq. Ft. = 120,000 Sq. Ft.
Step 4: Next, determine how much usable storage space you have from the ground up (i.e., the maximum stack height or clear height). For this, you need to consider the lowest-hanging overhead object such as warehouse racks or lighting fixtures. Let’s say this is height comes to 30 ft.
Step 5: Multiply your maximum stack height by your total usable space to find out your storage capacity in cubic feet:
Storage Capacity = Usable Space in Sq. Ft. * Maximum Stack Height in Ft.
In our example, this calculation is as follows:
120,000 Sq. Ft. * 30 Ft. = 3,600,000 Cubic Feet
This example can give you an idea of how to determine your warehouse storage potential, but remember — you will need to also consider facility-specific factors, such as picking and packing workspaces.
By understanding how to best calculate warehouse capacity, you’re able to optimize space based on your business’s warehousing needs, including the amount of units and unique SKUs, total equipment, and fulfillment space needed to operate a warehouse.
Optimizing warehouse capacity
Once you understand how to approach warehouse capacity, you’re able to make better decisions on how to optimize the space you have and make informed decisions.
Digital warehousing tools can also play a major role in optimizing warehouse capacity, as well as improve ecommerce warehouse processes.
For instance, using a warehouse management system (WMS) can help you collect and record warehouse-related data based on historical activity, including real-time inventory tracking. This insight can help you track the flow of inventory throughout your warehouse to identify inefficiencies and make improvements in your overall operations.
Periodical warehouse inspections can also bring warehouse capacity inefficiencies to the surface. By looking at warehouse functionality — and not just capacity alone — including warehouse receiving and put-away processes, you’re given a holistic view of how to optimize warehouse capacity based on overall performance.
Setting and tracking warehouse KPIs can help you find ways to optimize and improve warehouse operations, including capacity, by determining how efficient your team is at storing, fulfilling, and replenishing inventory.
Increasing current warehouse capacity
If your warehouse is currently at capacity, you’re likely looking for ways to increase it. While there are ways to optimize the existing space of your warehouse, you of course can’t increase it beyond what your facility can physically hold.
So if you’re anticipating growth in the near future, it may be wise to prepare for increased capacity sooner than later. Therefore, you will need to have a good sense of future demand by forecasting inventory needs way in advance.
To find ways to increase current warehouse capacity, start by looking at your current warehouse setup and look for opportunities to make improvements. Here are some questions to consider:
- Are you making the most of all your available space?
- Is it possible to use double-depth racking to save space?
- Are there other racking systems that would help you make optimal use of your warehouse space?
- Is it possible to adjust aisle width to make more room for storage without compromising operational efficiency and warehouse safety?
- Can you combine your shipping and receiving docks to make more room for storage?
- Will switching to a different type of packaging help optimize storage space?
- Are you making the most of warehouse automation to help with inventory storage and management?
One of the best ways to increase warehouse capacity is by going through the process known as warehouse slotting. This process is designed to help maximize space and make picking more efficient by storing and organizing inventory based on SKU number, product type, or any other type of product characteristic.
In essence, slotting puts items that are ordered together close to one another to cut down on steps taken. And efficient slotting not only helps increase space, but it also improves inventory management processes and reduces warehousing costs.
While slotting can be a major project that takes time and continuous improvement, it can benefit your business and positively impact your bottom line.
Of course, maximizing space by trying to reorganize or consolidate certain aspects of the warehouse can be short-term solutions as you’ve probably gotten to this place by growing — and most companies that find success will continue to grow.
Other options may be needed.
Managing growing capacity needs
Sometimes, increasing capacity isn’t an option. If you expect your business to grow quickly, your best option in managing warehouse capacity is to partner with a 3PL, as purchasing land and leasing another or bigger warehouse can be very expensive.
Even if you have a long-term lease on your current warehouse, a 3PL may help you fulfill regional orders (or even domestic orders in other countries), taking a more hybrid approach.
A 3PL like ShipBob offers warehouse-as-a-service solutions that takes time-consuming warehousing tasks off your plate. Partnering with a 3PL is the best choice for growing direct-to-consumer (DTC) brands that are anticipating increased capacity needs in the near future.
A 3PL can also save you time and fulfillment costs, so you can focus your attention on business growth.
It works by connecting your online store(s) to a 3PL’s technology, then shipping inventory to one or more fulfillment center locations within the 3PL’s logistics network. As your business grows, you can expand into more fulfillment locations and track inventory allocation across your distribution network.
Many DTC brands partner with ShipBob, so they can reprioritize on what’s most important by delegating warehousing and fulfillment to the experts.
“We were operating out of my garage, which was filled exclusively with inventory. I bought racks and organized all of the products. My garage was at maximum capacity — we couldn’t even fit another person in there.
I knew I had to make a transition in order to scale.
I could lease a warehouse somewhere and grow into the new space, but with how cyclical our business is, I would have to hire people to scale up over the summer and let them go in the fall.
Having to do that every single year didn’t appeal to me. With the seasonal nature of our business, meaning we’d have to scale up our fulfillment and workforce every year, I knew I had to find a 3PL partner.
I kept hearing very good things about ShipBob and decided to go with them.”
Noel Churchill, Owner and CEO of Rainbow OPTX
Need more warehousing capacity? ShipBob can help!
Need more warehouse capacity? How about outsourcing all your warehouse management needs to ShipBob.
With ShipBob, you never have to worry about managing a warehouse and optimizing for space. With dozens of locations across the globe and an ever-growing network, we can grow with you.
At ShipBob, we don’t just store your inventory; we help you figure out the best way to allocate product across our logistics network, so you can broaden your customer reach by shipping orders from multiple locations to reduce shipping costs and speed up transit times.
With ShipBob’s advanced and user-friendly dashboard, merchants are given full visibility and transparency into fulfillment operations and can access insights — including warehousing costs — using the free data and analytics reporting tool.
ShipBob partnered with a brand that was already hitting $20 million in annual sales as they were preparing for a busy Black Friday/Cyber Monday weekend.
The brand decided to make the switch from their own warehouse to ShipBob for DTC orders to support their explosive growth. Over the BFCM weekend, ShipBob fulfilled more than 8,000 orders, with 2,500 orders fulfilled on a single day, while repurposing their current warehouse.
“The transition to ShipBob also helped us refocus our in-house efforts. In our business, we have two main divisions — ecommerce and wholesale.
By turning over our entire ecommerce fulfillment to ShipBob, it allowed our entire ecommerce fulfillment team to focus on wholesale, which has been a rapidly growing part of our business.”
Want to get a glimpse inside how ShipBob works? Get a 3D behind-the-scenes look at one of our fulfillment centers:
By partnering with ShipBob, you can easily streamline fulfillment efforts, track inventory in real time from a single dashboard, and save time and money by leaving warehousing and fulfillment up to the experts.
Get the process started by requesting custom pricing.
Optimize your warehouse’s capacity with ShipBob’s WMS
To optimize warehouse capacity, you need the right tech in place. ShipBob has a best-in-class warehouse management system (WMS) for brands that have their own warehouse and need help managing inventory in real time, reducing picking, packing, and shipping errors, and scaling with ease.
With Merchant Plus, brands can even leverage ShipBob’s fulfillment services in any of ShipBob’s fulfillment centers across the US, Canada, Europe, and Australia to improve cross-border shipping, reduce costs, and speed up deliveries.
Warehouse capacity FAQs
Here are answers to the top questions about warehouse capacity.
Can you outsource warehousing?
Yes, you can outsource warehousing to a 3PL like ShipBob. ShipBob not only stores your inventory, but also takes care of the fulfillment and shipping process for all kinds of orders. Once you connect your sales channels to ShipBob’s technology, you can ship inventory to one or more of our fulfillment center locations. Once orders are placed, they are automatically routed to the nearest fulfillment center location to be picked, packed, and shipped.
How do you measure warehouse capacity?
To measure warehouse capacity, get the square footage of your entire warehouse facility. Then, calculate the total amount of space being used for non-storage purposes such as offices, restrooms, loading areas, etc., and subtract the total amount of non-storage space from the total square footage of your warehouse to determine your warehouse usable space. The formula is as followed (all measure in square feet):
Usable Space = Total Space – Non-Storage Space
Next, determine how much usable storage space you have from the ground up, i.e., find the maximum stack height or clear height. Multiply your maximum stack height (in feet) by your total usable space (in square feet) to find your storage capacity in cubic feet:
Storage Capacity = Usable Space * Maximum Stack Height
How do you increase warehouse capacity?
One of the best ways to increase warehouse capacity is by going through the process known as warehouse slotting, designed to help maximize space and make picking more efficient by storing and organizing inventory based on product characteristic. But as your business grows, you will eventually max out on available warehouse capacity. Therefore, many fast-growing online brands will outsource warehousing needs to a 3PL, so they don’t have to worry about increasing warehouse capacity, which can become a costly expense.