Bulk storage can be a great option for an operation with a low-variety, high-density inventory profile, as its storage capacity is dense without the need for racking. However, the bulk storage system must be configured correctly to match the inventory profile of the SKUs being stored.
LIDD recently visited a beverage manufacturer/distributor, whose warehouse has 4,300 sq. ft. of bulk storage for finished goods. Their production department has slowly been swallowing storage capacity for its own needs, making it harder to store finished goods in the warehouse. In order to increase the warehouse’s storage capacity, it was crucial to understand how utilization factors affected bulk storage.
Figure 1: Representation of 85% utilization factor in bulk storage
As LIDD’s principal, David Beaudet, explained in a previous blog about drive-in racks, “a pick slot is anywhere from full to empty, therefore used at 50% on average. If only one lane is assigned to an item, the entire [bulk lane] is used as a pick slot, meaning that half of the pallet positions are empty on average.”
LIDD recommends a storage capacity utilization of 85%, which requires a minimum of 3 fronts: 2 fronts @ 100% (reserve) and 1 front @ 50% (pick). Take for example the following bulk storage, 4 pallets deep and stacked 4 pallets high. The average configuration of the pallets would look like Figure 1 and require a SKU to have 40 pallets in inventory.
This beverage company had 26 lanes at 10 pallets deep, stacked 4 pallets high. To achieve a utilization factor of 85%, the inventory profile of an item would require a minimum of 100 pallets on hand (2 lanes @ 100% and 1 @ 50%). When looking at the inventory profile of all finished goods, only 1 SKU had 95 pallets in inventory. This led us to believe that the bulk storage area was severely underutilized.
Figure 2: Gross pallet capacity utilization in bulk storage
The operational data showed that the average yearly utilization of the bulk storage area was at 43% - half the recommended 85% utilization factor. Therefore, most of the SKUs’ inventory profile did not justify having 10-deep bulk lanes. LIDD developed an alternate layout (Figure 3) that considered the bulk storage profile of each SKU.
Figure 3: Existing vs. Proposed Layout
We added an aisle to the proposed layout to increase the number of available fronts. Although the gross capacity of the proposed layout was reduced, it was much better sized for the inventory profile. The storage capacity utilization factor increased from 43% to 85%, increasing the net capacity of the proposed layout by 141 pallets (Figure 4).
|Layout||Gross Capacity (Pallets on Hand)||Utilization Factor||Net Capacity (Pallets on Hand)|
Figure 4: Gross capacity & net capacity in the current vs. proposed layout
Understanding the inventory profile of your SKUs is essential in selecting and designing your storage strategy to optimize the overall utilization of your warehouse. Are you using your bulk storage efficiently? See how LIDD’s supply chain experts can help you make better decisions.