Relocating to a bigger warehouse might feel like the obvious move when space runs out, but Prological says many sites are far from capacity. Here’s why.
In intralogistics, a key concern for growing businesses is whether a warehouse can handle rising inventory demands. Some consider relocating to a larger site or investing in greenfield or brownfield developments. Peter Jones, CEO of Prological – an Australasian-based supply chain consultancy – warns this can be a costly pitfall, as up to half of a warehouse’s space is often under-utilised.
“On numerous occasions, when we’ve been called in to assess a “full” warehouse, we’ve discovered it’s only 55 to 65 per cent occupied,” Peter says.
The first signs of trouble usually appear in the receiving area. Goods arrive, but the team struggles to find locations to put them away, slowing operations.
The 2nd symptom is order fulfilment accuracy – customers start receiving the wrong products. Peter explains that this happens when the put-away team can’t place items where the warehouse management system directs them too – either the location is blocked or partially occupied – so the put-away team improvise.
“For example, they might move a few small items to one side of a pallet to create space and put the new stock there,” Peter says.
A warehouse disconnect
Problems ultimately arise when there’s a mismatch between the WMS and what’s physically in a storage location.
“If the WMS isn’t updated, it still expects the product to be in the original location,” Peter says. “Later, when a picker goes to retrieve it, they find something else there and either pick the wrong item or ship the wrong product.”
When the system’s data doesn’t reflect reality, operators are forced to make judgment calls instead of following set processes – and that’s when errors and inefficiencies begin. Consequently, warehouse managers can be left unaware of the space available in a warehouse. The mounting evidence from the put away team and increasing errors in order fulfilment, can easy lead to the root-cause being an overfull warehouse.
Peter notes that many warehouses are assessed using only floor area and pallet count, ignoring true cubic capacity.
Instead of just checking whether each bay is holding product, he looks at how much of the available volume is being utilised – often finding large empty spaces on pallets that from a systems perspective appear “full.”
“If the warehouse has the right capacity, both in terms of the number of locations and the volume it needs to accommodate, then the system should function correctly and staff can simply follow the system,” he says. “Ideally, you don’t want warehouse employees having to make decisions; you want them executing what the system instructs.”
Why reconfiguring beats relocating
Peter explains that historically – and even today – when a warehouse manager or operations manager decides the warehouse is full, the next step is to speak with the property team and engage an industrial real estate agent to find a bigger facility.
“That’s been the default approach for years,” he says.
Penske Australia faced this decision at its Wacol, Queensland, warehouse. Unsure whether to relocate, the team sought advice before committing to a costly move.
The company had received approval from its head office in the US to move into a new, larger warehouse, but Randall Seymore, President, Penske Australia, decided to seek a diagnostic first. Prological was engaged to assess the space and within a year, the team unlocked up to 15 per cent more capacity in the Penske warehouse.
“It took a year – to diagnose, redesign and execute – but it gave Penske an additional ten years of life in the existing facility without the cost and disruption of relocating,”
says Peter.
In a similar case, M3 Logistics, an Australian-based 3PL specialising in transport and warehousing, had been advised by an industrial real estate firm to move into a new 60,000-square-metre warehouse to replace its current 60,000 square metres spread across three older, less efficient, lower-
volume sites.
“We helped them rethink their storage and layout and consolidate everything into their existing 40,000-square-metre warehouse,” says Peter. “Not only did it all fit, but they now have 10 to 15 per cent spare capacity and still haven’t fully implemented every optimisation initiative available.”
It was an outcome Malcolm Stanton, CEO of M3 Logistics, admits he didn’t expect.
“When Peter told me he thought that was possible, I thought he was full of it,” Mal said. “But you and I both know that if we walk over to that window and look out into the warehouse, everything’s in there – and I’ve still got spare space.”
First steps
Peter says success starts by challenging the assumption a warehouse is full and seeking independent analysis before committing to a costly move.
“If you want infrastructure that really supports the business strategy and objectives, it’s worth bringing in some specialist supply chain insight first,” he says. “That can mean checking if you can get a few more years out of your current site, which buys time and allows better planning for any eventual move.
“Or it might mean confirming you do need a new facility – but doing it with a clear business focus.”
He explains that the industrial property sector is often the first port of call when a business starts considering a move to a larger facility.
However, real estate providers may not always be best equipped to assess the full potential of an existing site. In some cases, a business may benefit from first seeking independent advice from a supply chain consulting firm – experts who can evaluate whether the current facility can be optimised or if a new development is truly the right step.
“I mean, who goes to a real estate agent simply with the brief “I need a new house”,” Peter says. “A supply chain adviser is objective, and will work with you to determine what you actually need. We’re working for the client and their long-term interests”
If you would like to discuss further or believe it may be time to review your warehouse, reach out to Prological and they can provide you with the support required.
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