HOW TO THINK ABOUT YOUR WAREHOUSE Space

As an eCommerce business owner, one question you're likely grappling with is, "How much warehouse space will my business need in the coming years?" Answering this question is no small feat. As a leader in third-party fulfillment, Amplifier is well-equipped to help you untangle the web of variables that influence your warehouse space needs. In this comprehensive guide, we'll delve into nine key factors you need to consider.

1. Taking Stock of Current Inventory Volume

Inventory volume is a fundamental yet often overlooked factor when estimating warehouse needs. Your current inventory—how much stock you have on hand—directly dictates your immediate storage requirements. However, a simple tally isn't enough.

You must consider the physical size and quantity of each product. For instance, if you have a small number of large, bulky items, you'll need more space than if you have a large number of compact items. Remember to account for different SKUs too. Each SKU will likely need its own designated area for efficient picking and packing.

Moreover, an organized, well-laid-out warehouse can significantly increase operational efficiency. Plan for aisle space for easy access and areas for specialized storage needs, such as temperature-controlled sections or secure spaces for high-value items. The aim is to have enough space to store your products in a way that facilitates smooth, efficient operations. Don’t be afraid to seek out experts, either. When Amplifier moved to our latest warehouse, we brought in a consulting firm to design and layout our own floor for maximum efficiency. It was money well spent.

2. Understanding Implications of Your Business Model

Every eCommerce business model comes with unique storage and fulfillment needs. If you're operating on a dropshipping model, your supplier handles storage and fulfillment, and your warehouse space needs might be minimal or non-existent.

However, if you're running a traditional eCommerce setup where you source, store, and ship products yourself, warehouse space becomes a pivotal part of your logistics and fixed expenses. Here, you'll need to consider both storage and operational space for picking, packing, and processing orders.

For subscription box services, storage needs are typically higher. You need ample room to store large quantities of pre-packaged goods, and a separate area for assembly and packaging processes. The nature of the business also demands a flexible warehouse layout to accommodate changes in box contents from one cycle to another.

Businesses running flash sales or deal-of-the-day services face their own unique challenges. You need a warehouse setup that allows for flexibility to accommodate large, infrequent shipments and handle sudden, often massive influxes of orders.

3. Gauging Your Inventory Turnover

Your inventory turnover rate—the speed at which your inventory is sold and replaced—directly influences your warehouse space needs. If you have a high turnover rate, it implies that your products are constantly on the move. This frequent movement could mean you need less static storage space than a business with slower-moving goods.

However, high turnover rates also increase the risk of stockouts, especially during periods of high demand or supply delays. To prevent this, you should maintain a safety buffer—extra stock to cater to unexpected sales surges or supply hiccups. This buffer should be factored into your overall warehouse space calculations.

4. Accounting for Product Size and Packaging

Product dimensions and packaging processes are significant determinants of warehouse space. Larger or oddly-shaped items require more room than small, stackable ones, both for storage and safe handling. Bulky items can be challenging to store efficiently, often requiring specialized shelving or storage solutions, which should be accounted for in your space estimations.

Packaging needs can also add to your space requirements. If your products need individual boxing or extensive bubble wrapping, you'll need dedicated space for these activities. If products are stored on pallets, consider the additional aisle space required for forklift movement.

5. Projecting Business Growth

Forecasting your business growth is essential for long-term warehouse planning. Consider your projected sales growth and any plans to expand your product range. Both will impact your future inventory volume, and thus, your warehouse space needs.

While making these predictions can be tricky, analyzing historical sales trends, industry growth rates, and market research can provide a useful estimate. It's better to have a warehouse slightly too big than too small—it’s easier to grow into a space than to be constrained by a lack of it.

6. Evaluating Your Inventory Management Strategy

Your chosen inventory management strategy, whether it's first-in-first-out (FIFO), last-in-first-out (LIFO), or a batch processing system, affects your warehouse layout and space utilization.

For example, a FIFO strategy, typically used for perishable goods, requires a warehouse design that allows easy access to all items. Old stock must be easily accessible to ensure it’s sold before new stock, leading to a larger footprint.

A LIFO strategy, typically used for non-perishable goods, can function well with less accessible storage, allowing for more compact storage solutions. In this case, new stock is placed in front of old stock, meaning you can often utilize vertical space more effectively.

7. Factoring in Seasonal Demand

Many retail businesses experience seasonality, with sales spikes during particular times of the year. Seasonal sales fluctuations can lead to temporary increases in stock levels and, consequently, the need for more warehouse space.

Forecasting these fluctuations can be complex, but a detailed analysis of your historical sales data can provide useful insights. By identifying patterns, you can predict when your high and low seasons are likely to occur, and plan your inventory—and hence, your warehouse space needs—accordingly.

8. Incorporating Space for Receiving and Returns

In addition to storage, your warehouse also needs to accommodate the processes of receiving inbound shipments and handling customer returns. Both these functions require designated spaces within your warehouse for efficient operation.

You'll need areas for receiving, inspecting, and storing inbound goods, and a separate space for returns processing. As many eCommerce businesses often experience high return rates, this aspect of operations should not be underestimated in your warehouse space planning.

9. The Advantage of Third-Party Fulfillment PARTNER

Finally, it's worth considering the possibility of outsourcing fulfillment to a third-party like Amplifier. Our scalable warehouse solutions flex with your business needs, providing warehouse space as and when you need it. With Amplifier, you can bypass the complexities of space estimation and focus on what you do best—growing your business.

In conclusion, estimating the warehouse space needed for your eCommerce business is a complex, multifaceted task. By understanding and considering these nine critical elements, you can make well-informed decisions for your warehousing needs, helping your business to thrive.

Whether you opt for in-house warehousing or partner with a third-party fulfillment company like Amplifier, a thorough understanding of these factors will enable smoother operations and efficient space utilization. If you want to learn more about how Amplifier can help you navigate your eCommerce fulfillment journey, don't hesitate to reach out to us.