How to Determine How Much Warehousing Space You Need from Partners

Do you need warehouse space? Every company’s storage and distribution requirements are different and determining how much warehouse space you need from your partners can be difficult. Since one of your main goals in finding a warehouse partner should be cost containment, it’s important that you get the right amount of space without overpaying. Reducing your costs when outsourcing your warehousing needs can increase profitability and pave the way for future growth.

In this post we’ll explain how to accurately assess how much space you need from a contract warehouse.

Information You Need to Calculate Warehouse Space

Warehouse storage space requirements are unique for each organization and you’ll need to accurately assess your situation before you can get quotes. If you’re asking yourself, “How much warehouse space do I need?” you should start by gathering the following information:

• What size are your pallets?
• How many pallets do you store on a regular basis?
• How many pallets high can your product be stacked?
• What warehouse space utilization model works for you? (See below.)

Warehouse Space Utilization Models

• 40% Utilization – Used when products can’t be neatly stacked
• 50% Utilization – Used for products that stack neatly and turn 10-15 times annually
• 60% Utilization – For non-date-coded products with 10-100 SKUs that turn 10-12 times annually
• 70% Utilization – Products turn 4-6 times annually with 10-100 SKUs and no date codes
• 80% Utilization – Products are stacked tight and neat with no date codes and 1-2 SKUs

Calculating Warehouse Space Needed

By calculating warehouse space using the method below, you can get a general estimate that you can then use to determine how much warehouse space will cost. Note that the variety of SKUs, geography, dispersion, seasonality and vendor/customer relations may impact your warehouse space calculations and costs.

1. Divide the number of pallets by how high you can stack.
2. Multiply the length and width of your pallets to determine the square footage of each pallet.
3. Multiply the numbers from 1 and 2 above together.
4. Divide the number you get from step 3 by your utilization percentage.

Other Warehouse Planning Considerations for Outsourcing

SKUs

• Will new SKUs be added with different dimensions?
• Will they require more space for something like assembly or kitting?
• Will any SKUs become obsolete?

Sales and Growth

• What are your future sales projections?
• Do you intend to expand your product line?
• Will you be increasing your price per unit?
• Will you be increasing the number of orders of units?

Inventory Turnover

• Are you currently carrying excess inventory?
• What is your inventory turnover ratio?

Number and Orientation of Dock Doors

Warehouse Process

• How does your warehouse partner use the space for efficient work and product flow?
• What is the pick and pack procedure?
• Do they offer value adds like kitting?

Finding available commercial warehouse space may be as simple as doing a Google search. But without first doing your homework, you won’t know exactly how much space you need. We understand that businesses large and small focus on reducing costs when outsourcing warehousing needs. We also understand that empowering and educating clients to make the right decision helps create trust and builds relationships with prospective partners. At NewStream Enterprises, LLC , our warehousing professionals can help guide you through the process of determining how much warehousing space you need.