As e-commerce activity and consumer spending continue to rise, warehouse space is in higher demand than ever before. In the fourth quarter of 2018, the availability of industrial real estate decreased to 7%, the lowest point since 2000. Currently, national vacancies have continued to decline and are holding at around 4-5%. In certain high-demand seaport-dependent hubs, vacancies have reached a low of 0-1%. These numbers may be a positive sign of a growing economy and are great news for industrial real estate owners and developers. However, for business owners it means just one thing: higher rent for warehouse space.
With rental rates set to rise another 5% this year, warehouse managers are faced with a new set of challenges. Every inch of space in the warehouse needs to be optimized and all wasted space eliminated. At the same time, healthy inventory levels must be maintained in order to guarantee smooth operations and timely order fulfillment.
Put simply, in order to save space, warehouse managers have essentially two options: either carry less inventory or figure out how to fit more inventory into each square foot. Let’s explore these two options in more depth and see what makes sense for your business.
On average, a company will stock $1.43 of inventory for every $1 of product it sells. Over the past five years, the average amount of inventory on hand rose 8.3%. This means there is a lot of extra inventory being stored in warehouses at any given time, taking up precious and costly real estate. Not only does this cost businesses more money in actual rent, but it also consumes capital in the form of building maintenance fees, security, property tax, and insurance. Additionally, carrying extra inventory raises the risk of damage, theft, and of products becoming obsolete after sitting on the shelves for too long.
Customer satisfaction: The success of any fulfillment center is directly dependent on its ability to get orders out on time. Timely order fulfillment is the key factor in customer satisfaction. The risk of not having the necessary products in stock is simply too high. Even for companies who can afford the most advanced sales forecasting and inventory management systems, there is always some degree of inaccuracy and safety stock is necessary. Obviously, the less advanced your system is, the higher the chances of inventory inaccuracy and the more inventory you need to keep as safety stock.
Increased buying power: Buying in bulk means a company can purchase products and supplies at lower prices. More frequent ordering may free up warehouse space, but companies may lose out on significant discounts from their vendors.
Lack of JIT Inventory Management Systems: Just in time (JIT) inventory management is a system in which goods are received only as needed. This technique is intended to reduce excess inventory costs, free up capital, and increase efficiency. With a JIT system, you will have what you need only when you need it. It sounds like the perfect solution, yet many companies are hesitant to implement this change. For one, it can mean a complete overhaul of the current inventory management system which can be time consuming and costly. Secondly, for a JIT system to be successful, the company must have a precise sales forecast, leaving very little room for error.
More Time-Consuming Work: In warehouses that opt to carry limited supplies, managers will need to spend significantly more time counting inventory, reordering materials, and corresponding with vendors. Keeping inventory well stocked greatly reduces this inconvenience for warehouse staff.
If reducing inventory is not an option for your warehouse, here are a few ways to save space without disrupting the smooth operation of your facility.
Go Vertical: Instead of thinking of your warehouse in square feet, start thinking in terms of vertical space. There are a variety of options for creating multiple levels of storage, ranging from simple industrial shelving to complex pallet racking systems. You may also want to consider building modular offices or mezzanines as relatively inexpensive space saving solutions.
Optimize Packaging Materials– You may not be able to reduce the size or quantity of your product inventory, but have you considered how much wasted space your packaging material is eating up? Traditional bubble wrap, packing peanuts, and other Styrofoam protective packaging can be replaced with plastic air cushions. The cushions are delivered and stored uninflated and can be easily expanded just prior to packaging. These air cushions provide excellent protection for your products and take up 98% less storage space.
As an additional benefit, the compact design of these air cushions can significantly simplify the process of inventory counting for your staff. Less boxes to count means less time doing inventory and more time on productive work. Not to mention reducing the risk of accidents and mess caused by the massive forklift rides needed to transport bulky packaging materials.
Reducing the size of your packaging materials may very well be the simplest solution to your space limitation problems.
Airguard’s Packaging Solution
With industrial real estate prices soaring and businesses challenges with maximizing every inch of their available space, innovative solutions are in high demand. AirGuard’s revolutionary protective packaging solution is custom-designed according to the product’s shape and customer’s requirements, and shipped uninflated to the customer’s site, minimizing space required for both transit and storage. An auto-inflating device inflates air cushions of any shape, and the entire process can be seamlessly integrated into the packing workflow. The solution’s flexibility makes it suitable for a wide spectrum of vertical markets, including large consumer electronics, consumer packaged goods, picture frames, glass or delicate items, medical devices, wine or spirits, industrial materials, and more. For more information on how to get started on maximizing your warehouse space without reducing inventory,