Warehouse design
4Supplychain provides warehouse consultancy services, helping clients develop the most suitable design for new warehouses and optimize existing warehouse facilities. Below, we briefly explain our structured approach to new warehouse design
Design in three steps:
1. Preparation
- Business case en feasibility
- Choosing between owning (lease or purchase) or outsourcing the warehouse
2. Design
- Mapping material flows and location requirements
- Selecting the storage and order-picking method
- Calculating capacity requirements
- Warehouse layout design
3. Final stage
- Technical design and tender
Preparation
During the preparation phase, you estimate warehouse costs and assess the feasibility of the investment through a business case. At the same time, you decide whether the warehouse will be managed in house or whether a service provider will be engaged, in other words insourcing versus outsourcing. For an in house warehouse, your options include purchasing, leasing, or constructing the building. Purchasing or constructing a new building allows for a fully customized design, but the project timeline is typically much longer.
Design, mapping process flows and location requirements
The warehouse’s position in the supply chain, along with its suppliers and customers, has a major impact on design. If a warehouse receives stock from a factory producing goods in large batch quantities and also ships in bulk, high density storage becomes a key design consideration. If the warehouse fulfills small B2C orders, such as e-commerce shipments, detailed order picking is required, which calls for a carefully designed picking circuit. So the first step is always to determine the warehouse’s position in the supply chain and the flows that will pass through it.
The ideal warehouse location can be determined through network analysis, which maps inbound and outbound transport movements. Minimizing travel distances helps identify the most optimal location.
Selection of storage and order picking methods
In traditional warehouses, operators move to the goods using forklifts or other equipment, following the man to goods principle. As technology advances, more warehouses are adopting the goods to man principle, where items are brought to a fixed picking station, often in a bin or tote.
Warehouse mechanization is developing fast. Below, we share several useful links covering different categories of mechanization:
The main difference between a mechanized and a manual operation is that mechanization requires a significant investment up front and a complex implementation process. The mechanized components must be purchased and installed before the operation can run. Manual operations also require investment, but a considerably lower one, and they can usually start more quickly. Recurring variable costs, however, are generally higher.
This is the key question: is the organization willing and able to invest up front to achieve lower costs over the long term? Rising labor costs and workforce shortages naturally influence this decision.
It is not an either or decision. Organizations can opt for partial mechanization and invest further in automation over time.
Calculating capacity requirements
Once the previous steps are complete, we calculate the warehouse’s capacity requirements. The main components are:
- Inbound and outbound traffic: the number of orders, order sizes, and how they are distributed over time, which determines the needed receiving and shipping space.
- Buffer stock: inventory that may sit in the warehouse for extended periods due to economic or minimum order quantities, long lead times, or in anticipation of new product launches or promotions.
- Pick stock: inventory from which order pickers collect smaller quantities to fulfill specific orders, placed in easily accessible locations for efficient picking.
- Workload and task distribution: analysis of the number of tasks and their timing, to determine the required workforce and equipment.
- Future scenarios: assessing whether demand is stable or shows growth trends, to support informed capacity planning decisions.
For example, to determine the correct storage capacity, we analyze the volume of incoming goods, the duration of storage, and fluctuations over time. Certain peaks in inventory levels may have occurred historically. These peaks could happen again, but they are often hard to predict, so a decision has to be made about how much certainty the warehouse needs when it comes to handling capacity peaks.
Organizations typically do not design a warehouse to accommodate every possible peak, since that leads to prolonged overcapacity. A common approach is to plan for 90 to 95 percent of expected cases. When inventory levels temporarily exceed this capacity, planners can choose to store goods elsewhere for a while. This keeps the warehouse from being sized for rare exceptions, which would otherwise mean long periods of low utilization and relatively high operating costs.
Pick stock
Pick stock is inventory located in areas where order pickers collect goods to fulfill orders. Managing pick stock takes careful consideration. To help order pickers work as efficiently as possible, it is important to keep the pick zone compact by using small pick locations. Small pick locations, though, need frequent replenishment, which raises costs. Order pickers and replenishment staff can also interfere with each other’s work, although this can be partly mitigated. In short, the pick zone design has to balance the costs of picking, replenishment, and potential congestion in the aisles.
Other operational areas
For other operational areas, such as receiving, packing, and shipping zones, capacity is calculated based on order patterns. The key question is how much volume, orders, order lines, handling units, and individual items, needs to be processed per hour, day, or week, and how that is distributed over time. The required capacity depends on operational hours and shifts per day.
Secondary spaces
Alongside operational spaces, a warehouse includes secondary spaces such as offices, break rooms, facilities and security areas, and battery rooms. These can be designed according to standard norms.
Determining the layout
Once capacity requirements are established, the warehouse layout can be designed. All required spaces are arranged within the available area to maximize capacity and minimize travel distances inside the warehouse. A logistical flow is defined first, for example goods entering from one side and leaving from the opposite side, or receiving and shipping on the same side to reduce travel distances. The final choice depends heavily on the type of operations and external conditions, such as access roads.
The layout also takes into account the product assortment and the placement of fast moving, medium moving, and slow moving products in optimal locations. Below is a simple example of a layout divided into zones for fast moving and slow moving products.
Final Stage
Once capacities and design are validated, the plans go to an architect for technical drawings. This is followed by the tender process to select the best contractor for construction, after which implementation can begin. Obtaining the necessary permits is an essential step that should not be overlooked, since it can significantly affect the project timeline.
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