Revamp Your Warehouse Layout for Improved Supply Chain Management

Good supply chain management requires a multidisciplinary approach. Supply chains are complex, so it takes a similarly complex set of strategies to ensure they work as efficiently as possible. Warehouse layout optimization is an important piece of that puzzle.

Many supply chain strategies focus on balancing logistics routes, choosing the right suppliers and adjusting inventory practices. These steps are important, but it’s also crucial not to overlook the humble warehouse. The layout of a single facility may not seem like a significant factor initially, but it can have a considerable impact.

Why Is Warehouse Layout Optimization Important?

Warehouses are some of the most critical facilities in the supply chain. Inefficiencies here will ripple across downstream processes, leading to substantial delays, disruptions and costs. Unfortunately, these inefficiencies are remarkably common.

Traveling throughout a warehouse often accounts for more than 50% of picking time, and errors are common. Injuries are also high in the warehouse sector, which further impacts efficiency and costs through lost productivity and workers’ compensation payments. Inventory distortion, product damage and time-consuming rework practices are also typical in these facilities.

All these factors have far-reaching consequences for downstream supply chain partners. They’re also all — at least in part — a matter of facility layout. Optimizing a warehouse’s layout will address each of these shortcomings, ensuring more efficient supply chain operations.

Once supply chain leaders understand this urgency, they can take steps to optimize their warehouses. Here’s a glance at what that optimization should include.

Choosing a Warehouse Flow

The first step in warehouse layout optimization is choosing the right flow for the facility. There are three main choices here: U-shaped, I-shaped and L-shaped.

U-shaped warehouse flows (the most common choice) keep ingoing and outgoing products on opposite sides, which is good for preventing bottlenecks and minimizing space. However, it makes it difficult to expand. Considering 59% of warehouses today already use 90% or more of their space, that lack of scalability will cause issues in many companies.

I-shaped flows are better for facilities with higher product volumes but involve more travel time, which can be inefficient.

L-shaped warehouse operations provide similar volume benefits and enable more efficiency but require significant space.

Warehouse leaders must weigh each option’s advantages and disadvantages with respect to their specific product volumes, available space, goals and projected future growth.

Maximizing Storage Space

Another way to optimize a warehouse layout is to rethink its storage solution. Back-loading racks are a good way to increase efficiency and safety in warehouses with sufficient space. Warehouses with many oversized items may need cantilever storage, while those dealing mainly in smaller products should prefer bins and pallet racks.

Regardless of the specific racking solution, it’s always a good idea to maximize vertical space. Storing more items above ground level minimizes the risk of product damage, improves safety, and leaves more room on the floor, all of which will enhance productivity.

Rack layouts are another factor to consider. Conventional aisles are a good way to prevent picking errors in facilities with high product variety. However, clusters accessible from all sides may be more efficient for warehouses with less variety and higher volumes.

Optimizing Item Locations

Warehouse layout optimization also involves considering where a facility stores specific items. Maximizing available space is only half of the issue when refining inventory techniques. It’s also crucial to ensure workers can pick items efficiently.

Generally speaking, warehouses should place high-volume items in more easily accessible areas to minimize picking time. That means putting them closer to outgoing product processes and keeping them on the first floor and on lower racks. If any products have limited shelf lives, they should receive similar treatment.

Keep in mind that which products see the most orders can shift over time. Consequently, warehouse managers should monitor sales trends closely and be ready to reorganize inventories if necessary to prioritize different items.

Determining Equipment Needs

Storage and flow considerations may be the obvious parts of warehouse layout optimization, but it’s also crucial to account for machinery. Warehouses may use a variety of equipment, from pallet jacks to forklifts to automated retrieval systems, each with unique space requirements. Facility layouts must ensure this equipment can operate efficiently.

Automated put-walls are an increasingly popular solution because they can boost picking efficiency by 30%, but these machines require more physical space to move around. Forklifts are an affordable material handling solution but need a lot of room to maneuver, whereas automated guided vehicles (AGVs) can operate within a few meters.

Warehouse managers should review all the equipment they want to use in a facility and determine their space, lighting and operational needs. They can then factor these considerations into layout choices to ensure machines can operate safely.

Ensuring Safety

Safety is another important consideration. The transportation and warehousing sector experienced over 122,000 workplace injuries in 2021 alone, with each resulting in an average of 24 days away from work. Warehouses must address that trend, if not for efficiency’s sake, then for workers’ well-being.

Visibility is one of the most impactful layout factors for workplace safety. There should be enough space in between aisles and around corners for workers to see any incoming hazards. Similarly, all warehouse areas should have sufficient lighting and sound protection to enable faster hazard identification.

Ensuring forklifts and other heavy machinery have room to maneuver will also help prevent accidents. Designing warehouse flows to minimize pedestrians’ proximity to active robots or vehicles is similarly important.

Testing and Adjusting

Finally, warehouse layout optimization must be an ongoing process. Managers likely won’t optimize everything as much as possible on the first try. Best practices will also change over time as new technologies emerge and client buying trends shift.

The key to adapting to these changes is frequent testing. Warehouses should measure their current performance across several KPIs. After implementing any layout changes, they should continue to gather data on these KPIs and compare them to previous levels to see what’s improved and what hasn’t.

Adjusting in response to changes in these KPIs will help warehouses stay on top of developing trends. These quick, data-driven adjustments will minimize losses.

Warehouse Layout Optimization Is Crucial for Supply Chain Management

These warehouse layout optimization steps will help any facility become as efficient as possible. Those improvements, in turn, will lead to gains across the supply chain. As supply chain pressures rise, these optimizations become increasingly important. Ignoring warehouse layouts in supply chain management will hinder any significant results.