How to Tell When It’s Time to Update Your Warehouse Design?

An efficient warehouse design is critical to the smooth operation of any logistics or distribution center. Over time, as business demands evolve, operational challenges may arise, indicating that your current layout is no longer sufficient.

Whether it’s overcrowded storage, inefficiencies in inventory management, or outdated equipment, recognizing the signs that your warehouse needs an update is essential to maintaining productivity and scaling with growth.

This article outlines key indicators that signal when to reevaluate and optimize your warehouse design for improved efficiency and operational success.

How to Determine When to Update Your Warehouse Layout?

Here’s how to determine when it is time to update your warehouse layout –

1) Space Utilization

Warehouse space is a key indicator of warehouse inefficiency. If you notice that pallets are being stored in aisles or on loading docks, it’s a sign your warehouse has exceeded its capacity. Check your warehouse management system (WMS) for key performance indicators (KPIs) such as location occupancy or utilization rates. If these metrics are consistently over 90%, operators struggle to find available locations to store products, leading to operational delays.

Ask yourself these questions –

• Do you need to move a pallet to access another one?
• Are you frequently consolidating pallets into fewer locations?
• Are your velocity reports indicating stagnant SKUs that haven’t moved from 6 to 12 months?
• Are containers sitting in ports due to insufficient space to bring them into the warehouse?
• Are you shifting trailers/trucks to get access to the product that you need?
• Do you have multiple facilities in the same area?

If any of these issues sound familiar, it’s time to reassess your warehouse layout to maximize space utilization and improve flow.

2) Inventory Management

Inventory challenges often signal the need for a redesign. If orders are not shipping on time or your fill rate is dropping, it may be time to look at how your warehouse handles inventory. Changes in your SKU profile—whether from business growth, new product lines, or industry shifts—can impact the efficiency of your current design.

Here are some things to consider –

• Is your company shifting towards e-commerce or another industry?
• Are you transitioning from typical retail distribution to more e-commerce distribution by percentage?
• Are you growing organically or through acquisition?
• Is your transportation moving from less-than-truckload (LTL) shipments to more parcel-based logistics?

If your warehouse is not keeping pace with these changes, your design needs updating to reflect new operational needs.

3) Labor Efficiency

Labor is another key factor highlighting the need for an updated design. High turnover rates may indicate that the current design makes work too difficult or inefficient. Additionally, long onboarding times for new staff or reliance on temporary labor can suggest your warehouse layout is too complex.

Consider the following –

• Do you struggle to find enough labor to meet demand?
• Is your attrition rate high due to poor working conditions or low pay?
• Are you over-relying on temporary workers to manage orders?

If labor inefficiency is hampering your productivity, a warehouse redesign that optimizes workflows and reduces the physical strain on employees may help reduce turnover and improve overall efficiency.

4) Equipment Maintenance and Flexibility

Equipment age and performance are strong indicators that your warehouse needs an overhaul. If your maintenance budget has been rising year after year, or if you’re constantly repairing the same pieces of equipment, it may be a sign your equipment is outdated. 

Warehouses with equipment over 20 years old are often less flexible and require more staff to operate efficiently.

Ask yourself –

• Is your equipment adaptable to handle reduced staff numbers?
• Are you stocking more spare parts to keep up with frequent breakdowns?

A redesign that incorporates modern, flexible equipment can reduce maintenance costs and increase operational efficiency.

5) Layout and Operations

An inefficient layout of a warehouse can waste time and resources. If you notice products scattered on the floor behind pick areas or find too much time searching for products, it’s a clear sign that your layout needs improvement. 

Excessive replenishment labor suggests that pick areas are either poorly designed or too small to handle your current inventory needs.

Questions to ask-

• How much time do you spend searching for products?
• Are you replenishing inventory too frequently due to inadequate storage space?

Reworking your layout to streamline pick operations and reduce replenishment tasks can significantly improve productivity.

6) Warehouse Management System (WMS)

A heavily customized WMS or frequent workarounds using spreadsheets may indicate that your warehouse system is no longer serving your business needs. If it takes too long to onboard new products, or if different buildings follow inconsistent processes, it’s time to standardize your WMS across all operations.

Key considerations include:

• How long does it take to onboard new products?
• Are you supplementing your WMS with manual processes or Excel sheets?
• Is there a lack of consistency between warehouses?

If your WMS holds you back, consider upgrading to a more versatile system that supports your current and future operational demands.

Taking Action: Refresh Your Warehouse Design Today!

Recognizing the signs that your warehouse design needs updating can help you stay ahead of inefficiencies and improve overall productivity. Whether it’s optimizing space, rethinking inventory management, enhancing labor efficiency, or upgrading equipment and systems, a proactive approach will ensure your warehouse can scale with your business.

Frequently Asked Questions