Options for dealing with a shrinking warehouse
A growing catalog business with more than $3 million in annual sales, Old Saybrook, CT-based rock ‘n’ roll merchandise marketer Old Glory by summer ’98 had outgrown its small 8,000-sq.-ft. warehouse. “We had to make our walkways smaller and smaller to install more racks to hold more product,” says general manager Stephen Schofield. “The cramped space impeded our picking and packing operation.”
After months of searching, Old Glory moved into a new 42,000-sq.-ft. facility in Westbrook, CT, this past July. “The new space allows for a call center and offices,” Schofield says, “and more than half of the space is committed to storing merchandise.”
But while it was clear that Old Glory had to move its operation, other catalogers confronted with a space shortage may be able to avoid such a drastic option. Often you can create more warehouse space by adding to a facility or reconfiguring layouts.
Burlington, VT-based gardening cataloger Gardener’s Supply Co. has expanded its operations three times in the past 14 years, and each time came away with improvements in cost per order and equipment usage. “We typically exhaust all the possible improvements before we undertake the major disruption of a physical relocation,” says Irwin Langer, director of operations for the $27 million cataloger. Gardener’s Supply has also built decks and mezzanines to create more warehouse space.
First, evaluate efficiency
Before you make any moving or building decisions, be sure you’re using your current space efficiently, says Elizabeth Rosenberg, a Boca Raton, FL-based consultant. For one, don’t waste precious warehouse space holding onto old merchandise. And if you have to move, make sure you properly determine requirements for the new space. For example, mailers might allocate too much – or not enough – space for picking and packing.
The worst thing you can do, Langer says, is throw more space at a problem you haven’t fixed, because instead of solving the space problem, “you have compounded it, and are now paying for the extra space.”
Langer suggests using sales dollars per square foot to measure the efficiency of space used in the warehouse. In the catalog industry, it’s not uncommon to expect anywhere from $65 to $1,100 per sq. ft., he says. The wide range in sales dollars per square foot is due to variances among product lines. “For instance, expensive software programs will have a totally different profile from bulky composters,” Langer notes.
The optimal inventory occupancy level is about 85%, Langer says. “If you shoot for 100%, there’s no room to move materials. Merchandise needs multiple handlings, so you don’t want to max the space and slow the operation.”