Warehouse space management is crucial for an efficient supply chain

Warehouse space management and the ecommerce effect

July 15, 2022

Successful warehouse space management is becoming more difficult by the day due to the numerous challenges of ecommerce logistics. Ecommerce retailers require their logistics facilities to be near big cities to guarantee same-day delivery, optimize the last-mile, and cut transportation costs, among other factors.

A Deloitte study indicates that by 2023, demand for warehousing space will increase by 850 million ft². This upturn in demand is continuing to drive up the already lofty price of logistics square footage. Against this backdrop, companies are forced to optimize their warehouse space management to maximize capacity and reduce costs.

Ecommerce gives warehouse space management a makeover

Lack of warehouse space is one of logistics managers’ main concerns — even more so with the rise of ecommerce, which has directly affected the industrial real estate market. As a result, logistics real estate — the real estate segment dedicated to the rental and sale of warehouses, industrial facilities, and industrial land — has become a prized commodity.

The first consequence of the ecommerce boom is a lack of logistics floorspace and the ensuing price hike caused by the law of supply and demand. The trend suggests that this lack of warehouse space will continue to climb. According to the study Global E-commerce Outlook 2022 Update by real estate consulting firm CBRE, an additional 2.1 billion ft² of warehousing will be required over the next five years to support the growth of ecommerce worldwide.

So, why has ecommerce made warehouse space management so important? Ecommerce requires businesses to streamline processes in their facilities to meet the same-day delivery standard ― although there are even logistics services with deliveries in a matter of hours.

One common practice for shortening order delivery times is to bring the warehouse closer to end consumers, who generally live in large urban areas. The facility doesn’t have to be downtown, but it should be near the city to improve efficiency in last-mile delivery, one of the most critical points of ecommerce logistics. A survey from global consulting firm Aberdeen Standard finds that warehouse location is slated to become one of the most crucial factors for a company’s logistics operations. Almost 60% of logistics managers interviewed said that this would be a vital aspect.

The need to move warehouses nearer to cities and optimize storage space due to mushrooming online sales has brought about the concept of microhubs. Micro-fulfillment centers are small logistics centers that are set up near cities and equipped with automated storage systems. These urban microhubs can prepare a large number of orders containing few SKUs, as is typical in ecommerce logistics.

With the ecommerce boom, warehouses are getting closer to big cities
With the ecommerce boom, warehouses are getting closer to big cities

Solutions to improve warehouse space utilization

Rising demand for logistics square footage and the growing occupation of it mean that many businesses are facing a land shortage. The solution? Optimize your existing storage space.

These solutions can expand storage capacity in the facility you manage:

  • High-density storage: as opposed to storage solutions with direct access, high-density systems — e.g., the Pallet Shuttle — make the most of your storage space, limiting the number of aisles. This system is especially advantageous for facilities with many pallets containing few SKUs.
  • High-bay solutions: when it’s impossible to expand your surface area — either because there’s no more land or because it’s too expensive — you can increase your storage systems vertically to add more useful space. In this scenario, companies typically install automated storage and retrieval systems (AS/RS). These solutions efficiently manage a high number of operation cycles on racks as tall as 131'.
  • Warehouse management software: a warehouse management system (WMS) ensures maximum utilization of racking locations, assigning each product to a storage position according to certain characteristics such as product turnover, expiration date, or operator route. This functionality makes the most of your facility’s storage capacity, as it makes more intelligent use of the available spaces in the racks.

With skyrocketing square footage prices, many businesses are investing in these solutions to maximize their storage space.

The Pallet Shuttle system is an effective solution for optimizing warehouse space
The Pallet Shuttle system is an effective solution for optimizing warehouse space

The warehouse space planning ecommerce companies need

In a context where the scarcity of available industrial land calls for urban distribution centers to guarantee same-day deliveries, logistics managers are faced with the challenge of properly organizing and managing their ecommerce warehouse space.

Likewise, this industrial land shortage pits the sector against soaring prices, pushing retailers to take measures to leverage the space they have without losing efficiency. High-density storage systems and digitization are two tried-and-true solutions for solving the ecommerce logistics space conundrum.

Thanks to our extensive catalog of logistics solutions, Interlake Mecalux is a specialist in installing personalized storage systems and in optimizing space in ecommerce facilities. Get in touch so one of our expert consultants can show you how to get the most out of your warehouse space.

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