How To Set Up A Warehouse: The Complete Guide

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If you are looking to set up a warehouse for your business, then you’ve got quite the journey ahead of you. Starting and maintaining a successful warehouse is not easy, but when done well it can completely transform your business and accelerate your growth. It’s not the hot topic you’ll see on the front of an entrepreneurship magazine, but it’s one of those operational tasks that can make or break depending on how well you execute on it.

In this article, we’ll take you through a step-by-step process for warehouse management, so that you can learn from the experience (and mistakes) of others.

Table of Contents

Step 1: Create a Warehouse Equipment Checklist

Before you can decide on how to set up your warehouse, you need to know what’s going into it and what capabilities are needed. To ensure that you cover your bases, go through this checklist carefully in the context of your own business:

Storage

Warehouse storage capacity is the first consideration for any warehouse layout. As goods move through your systems, you’ll need to be storing them efficiently and safely so that you can keep track of current inventory levels at all times. To do this, you will likely need various scaffolding, pallet racks, shelving, bins, drawers, and other storage containers that serve a specific purpose. The configuration of each will differ based on what inventory items you’re storing. So, spend some time identifying the size, weight, anticipated volumes, and handling frequency of inventory that you’re working with, and match your storage equipment to those calculations.

You’ll also want the storage equipment to fit together as tightly as possible so that you maximize your available space – so keep those logistics in mind as well.

Material Transportation

In order to store goods or materials, you have to get them into the warehouse space first. So, the next step is to identify what transportation equipment you need to get things from your loading dock into the warehouse floor itself. These can range from manual equipment like trolleys, carts, or a manual pallet jack, all the way to more advanced equipment like forklifts, cranes, or conveyor belts. Think carefully about what a reasonable investment is here based on your projected material movements, and purchase equipment accordingly. Remember, that the ideal warehouse layout (which we’ll get to in a moment) will minimize the transport distance so optimize for less rather than more here.

Packing and Positioning

Packing and positioning equipment refers to tables, workbenches, pulley systems, and the like which all support the order fulfillment outbound process. Any equipment that is needed to take a finished good and prepare it to be shipped out needs to be considered in this category. The packing station is bread and butter for any warehouse operation.

Shipping / Receiving

Speaking of shipping, the nature of a warehouse layout is to receive inventory on one side and ship out products from the other. So, this is a crucially important piece of the supply chain puzzle. A high-quality customer experience is what you’re aiming for and the way that you ship inventory contributes to a lot of that – especially the first impression. Here we’re talking about labels, scales, shrink-wrap, shelving, pallet rack, etc. This category is not only focused on efficiency but also on warehouse design because of how vital the unboxing experience is.

Tools

Creating a tool checklist is like assembling the Avengers. Think through every part of your warehouse management system and identify the tools that are needed to put the warehouse together and then to manage it going forward. It’s a long list but putting it down on paper helps to codify what needs to be procured. Sometimes it’s even worth talking with other players in your industry to see if there’s anything unexpected or unforeseen that you’re missing.

Inventory Tracking

Running a successful warehouse requires a lot of administrative discipline so that your inventory count is tracked throughout every step of the supply chain process. This is enabled through a computer of some sort, customized inventory tracking software, and any other portable devices (like barcode scanners or RFID tags) that assist with automating parts of the tracking. Getting the warehouse inventory management right can really save you a lot of time and headaches down the line.

Step 2: Create a Warehouse Layout

After laying out all the physical components, you now need to find the optimal way to set it all up. There is an art to warehouse layout because you have to balance so many different constraints including floor space, entrances/loading dock, shape, financial resources, personnel, inventory location, pallet racking, shelving, etc. Therefore, the more time you spend working through potential storage layouts, the more efficient warehouse solution you’ll be able to come up with.

When creating your warehouse layout design, you should be thinking about four different objectives:

  1. Maximize efficiency. You want to plot out a route for your warehouse organization that is as sleek and efficient as possible. The more friction you can eliminate, the more effective the whole business operation is going to be.
  2. Maximize space. You only have limited floor space, and you’re likely to be spending a lot of money on it, so you want to increase space utilization and squeeze every last inch out of your storage area.
  3. Prioritize Effective Inventory Control. None of the planning in the world will save you if your inventory control is haphazard. Your inventory management system should serve the final goal of maintaining strict inventory discipline, rather than the other way around.
  4. Prioritize safety. This is the number one priority for you and your staff. Don’t skimp when it comes to this one, ensure that the layout you choose lends itself to the highest of safety standards and there is a warehouse manager that enforces this.

Now that you have those goals in mind, let’s run through some of the tips and tricks of coming up with the ultimate warehouse layout.

  • Avoid bottlenecks in the receiving area. A common mistake made by those who are running their first warehouse business is to underestimate how much a receiving bottleneck can slow the entire process. Your layout should seek to remove any congestion where physical inventory is delivered so that they can join your process as quickly as possible. This involves thinking about the outdoor warehouse setup processes as well as what goes on inside the warehouse itself.
  • Focus on item velocity. When goods are making their way through your warehouse, speed is everything. The fewer unnecessary steps the better – so think about an ideal route for your inventory and warehouse worker and try to lay out the warehouse to support that. If you’re selling a range of inventory, then you’ll want to prioritize the higher-selling items – and ensure that their track is as streamlined as possible.
  • Aim for single lines of flow. Straight lines win in warehouse floor plan situations so do what you can to minimize people, equipment, or inventory having to cross over each other wherever possible. The more direct you can make it, the more efficient it will be.
  • Think long-term. Warehouse layout is a big business decision because you need to be planning it with future growth prospects in mind. Don’t get caught in the trap of only considering current business operations – try to set it up with the longer-term future (and multiple warehouses) in mind.
  • Separate packing and shipping. As mentioned in the section above, the inventory packing and shipping tasks within a warehouse are in a different league from the rest because they aren’t solely focused on efficiency – they also need to be done with the customer in mind – to ensure a good delivery experience. So, it’s a good idea to separate these out which creates psychological compartmentalization that assists with making this mindset shift. Once the inventory gets to this stage, we think about it differently.

Keep those in mind, sketch out a bunch of different warehousing options, and do your best to think through the business ramifications of different layout decisions. There is no right answer here, but there are degrees of suitability and efficiency levers that deserve serious consideration.

Step 3: Create a Warehouse Maintenance Plan

The new warehouse is going to look perfect when you first get started and the excitement will carry you through any speed bumps along the way. But as things move forward, warehouses (and all of life really) will trend towards chaos and disorder. Therefore, it’s important to have a solid warehouse maintenance plan before you even start so that you have a clear vision of how you are going to keep things running at full tilt.

Here are some important things to think about as you craft a maintenance plan:

  • Systematize it. Maintenance is something that is easy to ignore if it’s not front of mind, so you want to build warehouse efficiency systems that regularly nudge you to perform the maintenance tasks that you decide on. By creating automatic reminders and working those into your workflows effectively, you can do a lot of proactive, preventative maintenance rather than just reacting to things as they happen.
  • Document everything. When it comes to performing maintenance, it’s crucial that you document all the relevant information about tools and equipment so that nothing falls through the cracks. As maintenance is performed, it should be documented to inform the next set later down the line.
  • Think about its impact on the production process. It’s important to set up your maintenance plan in a way that minimizes the impact on actual production. This includes considerations about the order in which maintenance is done, the time of day or year that it’s performed, and the personnel required to perform it.
  • Have a checklist. To ensure that you’re not missing anything, you should have a standard checklist of all your planned maintenance procedures so that every piece of your warehouse business is sure to receive some attention on a regular basis. This avoids things falling through the cracks especially when warehouse operators are very busy and there are other business priorities.
  • Keep it clean. Keeping a very clean warehouse facility is a very underrated piece of business advice. Specific effort should be made to clean and order the warehouse floor as often as possible because this drives better warehouse productivity while the production process is ongoing. You don’t want to be looking for things or moving stuff around to get the job done. You want everything in its place as and when you need it.

Those are some key principles to keep in mind. Every maintenance plan is going to look different based on how things are set up – but a good one that you stick to regularly will reap tremendous benefit for your business operations.

Step 4: Avoid Common Mistakes in Warehouse Floor Plan Setup

It’s much better to learn from the mistakes of others than to make them yourself, so here are some of the most common mistakes made in warehouse floor plan setups:

  • Holding Too Much Inventory. Inventory management is notoriously difficult and so many companies end up holding too much in their warehouses at any one time. This takes up valuable space and the longer inventory sits there, the bigger the opportunity cost. Try to stay as lean as you can in the warehouse space itself and you’ll reap the benefits of more efficient business operations.
  • Sub-optimal picking paths. A common mistake is not to think very carefully about picking paths and that leads to a compounding effect of the process taking longer than it could. It doesn’t seem like a big deal on one shipment, but when you add it up it becomes a significant waste of business resources.
  • Refusal to Digitize. You can’t be relying on paper-based systems at this point regardless of how you’ve done things in the past. Especially in warehouse management scenarios, the benefits of full digitization are indisputable. There might be a learning curve in the beginning if you haven’t done it before – but warehouse inventory management software is well worth it in the long run.
  • Not cleaning regularly enough. Keeping your warehouse space clean through regular work is one of those things that you don’t realize how important it is until you haven’t done it in a while and are forced to pause business operations to do a big clean. Tackle things when they are small, not when they are big.

There you have it, the ultimate guide to setting up your warehouse management system. We trust that this step-by-step breakdown leaves you with lots of food for thought and that you can take some of these lessons and apply them in your own scenario. Do the hard work upfront and get these things right, and you’ll have a much smoother path down the road.

Good luck!

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