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How to Manage Excess Inventory in Your Warehouse

With inflation running at 9.1% in June 2022, compared to last year consumers are feeling the crunch. And retailers are right there with them after having largely missed the mark on predicting the slowdown of pandemic-era spending. The difference for retailers is the biggest crunch is happening in their warehouses.

After being burnt by a persistent lack of supply during the pandemic, retail buyers were eager to stock up. As a result, many retailers ordered too early and too much, according to Gordan Storch, a consultant at Storch Advisors.

Retailers anticipated consumers would continue to buy electronics, furniture, and other discretionary items. But by the time the inventory arrived, consumer spending had shifted away from goods in favor of experiences. And warehouses started to overflow.

Cost Savings Hiding in Plain Sight

Excess inventory in your warehouse is a very expensive problem.

According to a Modern Retail article from June 2022, due to its excess inventory, Target’s operating income dropped 43% year-over-year in the first quarter of 2022. Target also slashed its expectations for operating margin rate from 5.3% to about 2%. Facing a similar excess inventory issue, Walmart’s operating income decreased by $1.6 billion in the first quarter of 2022.

In response to their overflowing warehouses, Target and other retailers are offering heavy discounts to offload inventory. In the tight spot they're in, this makes sense. But it’s also just a short-term solution to the new, unpredictable world we’re living in. The long-term solution is a holistic rethink of the way retailers and other fulfillment operations utilize their warehouse space. Because an overflowing warehouse isn't always as simple as having too much “stuff.”

The problem of too much stuff is created, or at the very least compounded, by suboptimal warehouse space utilization. Fortunately, optimizing your warehouse space isn’t just a band-aid. And with a trained eye, the signs that suboptimal space utilization is affecting your operation are easy to spot.

Finding Space in Your Warehouse

In warehouses that are not fully optimized or experiencing storage challenges, you only need to look up to find lots of unused vertical space. Our research shows that reclaiming overhead space alone allows you to recover up to 85% of unused space.

You can also find unused space hiding in plain sight with a close look at your warehouse’s storage racks. For instance, if a rack is slotted to hold 4x4 boxes but its largest containers are only 3x3, this is a poor use of space. As small as this example may sound, fixing that type of discrepancy can make a dramatic difference in space efficiency.

Less easy to spot, but equally damaging are:

  • Lack of, or ineffective policies governing SKU storage, which leads to inefficient storage.
  • Haphazard pick and pack processes that decrease throughput.
  • Inflexible storage solutions that can’t adjust to increasing SKU variety or changing SKU velocity.
  • Lack of balance between reducing pick time and increasing storage density.

Finding and fixing these issues alleviates the multi-faceted challenges presented by inventory overflow because they enable you to store more in your existing space, increase throughput, and adjust storage as your needs change.

4 Things You Can Do Right Now to Maximize Warehouse Space Efficiency

1: Reclaim vertical space

In some warehouses, narrowly spaced, high storage racks paired with vertical picking machines can help maximize space utilization (and pick efficiency). In other warehouses, unused vertical space can be found by adjusting beam levels on your racks and/or rearranging SKUs by height. The point is, vertical space is often hiding in plain sight, just waiting for you to reclaim it.
Increase Warehouse Space Utilization

2: Follow putaway rules

Strict enforcement of putaway rules maximizes picking productivity and improves throughput by ensuring SKUs make it to the ideal storage location. Your warehouse management system should direct putaway rules; if it doesn’t, create or adopt a system that does. And make sure those rules are followed.

3: Adopt re-configurable storage

A big part of the problem with excess inventory is that retailers have too much of one thing and not enough of another. A more flexible, configurable warehouse storage system creates a margin for these kinds of SKU snafus. So consider implementing systems like universal carton flow beds that allow for flexible reslotting. This way, when demand changes, you can remain agile and adjust your SKU slotting accordingly.

4: Choose storage mediums based on SKU velocity

The faster a SKU moves in and out of your warehouse the better. There are certain storage mediums that are suited for slow, medium, and fast-moving SKUs. Determining which storage mediums you require for your unique product mix ensures slow-moving SKUs aren’t taking up the easily accessible space that should be reserved for fast-moving SKUs. It also ensures fast-moving SKUs aren’t packed too densely to be picked efficiently.

To learn more about selecting the right-sized storage mediums for your operation, download our comprehensive Guide to Understanding Throughput for Fulfillment!

UNEX Solutions that Can Help Combat Inventory Woes

There’s no one-size-fits-all recipe you can follow to reclaim unused space in your warehouse. But, as you may have gathered, there are universal principles. And in the face of unpredictability, it’s these principles—balancing SKU speed and accessibility, proper slotting, choosing configurable solutions, etc.—that will see you through.

Of course, it doesn’t hurt to have a few tools of the space utilization trade in your belt. Carton flow beds and reconfigurable flow racks, for example, are two space-saving storage solutions you may consider to stay flexible as inventory levels change.

Carton Flow Beds SpanTrack Wheel Bed

Carton Flow Beds - SpanTrack Wheel Bed: Flexible carton flow beds that drop into existing structures to create flow rack systems for full and split case picking operations. This solution helps you adopt configurable storage because it can be added to any new or existing pallet and filled with products of various sizes and weights. SpanTrack Wheel Bed allows you to flood entire levels of pallet rack with carton flow storage, giving you maximum flexibility left-to-right for reslotting.

FlowCell Modular Flow Racks

Modular Flow Racks - FlowCell: Storage units and workstations that can be configured to your facility’s unique operation. FlowCell is very versatile in that it can be easily reconfigured as your needs change. Utilize FlowCell for extra SKU storage at the ends of aisles, or in areas of your facility where overhead clearance is an issue. When your needs change, you can reconfigure FlowCell to work in many other areas of your facility like staging, packing, shipping, and more.

No matter your inventory woes, UNEX offers a full range of engineered-to-order solutions that help optimize workflows and maximize storage for a variety of businesses. If you have questions or want to learn more about increasing storage capacity and efficiency in your warehouse, contact us today.

Explore the basics of Warehouse Space Optimization in our FREE Guide.