12 Warning Signs of a Faulty Warehouse Layout

If you are a warehouse manager, you must be open to the possibility that a faulty warehouse layout could be at the core of the inefficiencies you are seeing. Here are 12 warning signs of a bad warehouse layout and setup.

Success in a warehouse depends on the efficient interaction of workers, equipment, and supply chain vendors and carriers. When problems occur, managers typically look first at these components for solutions. 

While those areas might need improvement, chances are better that the core problem actually lies with the initial warehouse setup itself. After all, a faulty layout will have an effect on the entire space, and how people, machines, and materials move around in that space. 

Managers must be open to the possibility that a faulty warehouse layout could be to blame for inefficiencies. Here are 12 warning signs of a bad warehouse layout:

1. There's a huge order backlog.

If teams are still working on Thursday to fulfill orders that should have shipped Monday, there’s a problem. Are workers too slow? Or are you understaffed? Possibly. But first, make sure those workers are free to be as efficient as possible, with pick paths that have them traveling the shortest distance possible, and inventory organized into zones to make picking more efficient.

2. Large or heavy items wind up on the floor near receiving.

When there is insufficient shelving or aisle space, it becomes difficult to shelve large and/or heavy items. So where do they end up? You guessed it: The floor. Having oversized or heavy items in the wrong place is thus a strong sign that your layout is off. That clutter is not only a safety concern, but it causes unnecessary traffic and bottlenecks, too.

3. There’s an unusually high rate of lost inventory.

There will always be some loss of inventory due to breakage, spoilage, or—heaven forbid—theft. But a sudden increase in lost inventory without a corresponding increase in orders or an event like rainwater damage from a leaky roof is probably a layout problem. Check to make sure inventory is being put away promptly and slotted appropriately.

4. There is no forward picking space.

Unless every item in the warehouse sells at the same rate (and let’s be real, that never happens), having no forward picking area is a sign of a faulty warehouse layout. An area should be set aside and replenished daily with high-velocity inventory or products that are typically sold together.

5. There’s a bottleneck at your loading dock.

A good warehouse layout should not have a shared shipping and receiving area, but it does happen. This can create a bottleneck at your loading dock that slows both shipping and receiving. Your dock should have separate areas with ample room for tasks such as packing and shipping, bundling, supplies storage, and labeling and addressing.

6. There is dead stock in the aisles.

“Dead stock” resulting from breakage, returns, or recalls must be assigned its own defined area until it can be returned to the vendor, thrown away, or inspected and reshelved. If it’s carelessly left in some random place, it not only will get in the way but could be mistaken by pickers for good inventory.

7. Pickers can’t find items efficiently.

When pickers complain that they cannot find the items they need, or cannot access them easily, there is likely a problem either with slotting or with labeling your racks. In fact, efficient slotting has been shown to save up to 20% in labor costs! So check that the proper slotting procedures are being followed, and clear rack labeling is used.

8. You’ve had collisions.

Collisions and other warehouse accidents can’t always be blamed on carelessness. Sometimes they are a sign of faulty warehouse layout. When pick paths aren’t well planned, aisles are too narrow, or corners are too tight, crashes can happen between people, equipment, racks, and pallets, sometimes with disastrous results.

9. Internal transportation cost KPI is high and growing.

The cost of moving a piece of inventory from point A to point B can point out flaws in the way a warehouse is set up. Locating something 10 feet away from its destination instead of 50 feet away can make a significant difference in the time and effort it takes to fulfill orders. Minimize these KPIs with a strategic layout.

10. Orders picked per hour KPI has plateaued.

If you can’t seem to move the needle on the metric of orders picked per hour, it may not be an employee motivation issue—your workers might simply have reached the maximum of what a human being can do with the given layout. Try adjusting picking methods and make sure to fully utilize forward picking areas. Then keep an eye on the KPI to measure improvement.

11. No improvement in the average days late KPI.

If late orders are caused by seasonal spikes or insufficient staffing, they should resolve over time. But if the problem persists, it could mean an inefficient warehouse setup. First, find out if it’s happening with a few SKUs throwing off the average, or if it’s happening with your products across the board. Then adjust the layout so things flow smoother and faster.

12. There’s little room for growth.

Truly outgrowing a warehouse is one thing—using the space ineffectively is another. One of the biggest mistakes in warehouse layout is not planning ahead for future growth and expansion. Make the most of square footage by creating an efficient flow of people and products. Be sure to use appropriate shelving and equipment that makes the most of vertical space as well as floor space.

What To Do If You Notice These Warning Signs

One or more of these warning signs could signal a faulty warehouse layout. These tips can help managers find a solution:

1. Try to get at the root of the problem. Key performance indicators can provide a wealth of data about all aspects of the warehouse’s operation. Use a WMS to define appropriate benchmarks and zero in on anything that falls short.
2. Compare your layout to proven successful layouts. Check out our series called  Warehouse Setup 101 that outlines best practices for small, medium, and large warehouses.
3. Listen to the people working on the warehouse floor. They can offer a first-hand view of what’s working, and what’s not. For example, are they walking too far to fulfill orders? Running into each other? Can’t find what they’re looking for? Data collection is great, but there’s nothing like human insight. It’s good for employee relations too!
4. Make sure the solution fits the problem. Small problems often require only small changes. Large, systemic problems will need large organizational changes. Be prepared for whichever you have and don’t over- or under-react. 
5. Be willing to invest in steps 1-4. Diagnosing a warehouse layout problem requires software that can gather data in real time and produce the right reports. Fixing the problem might mean investing in new shelving, equipment, or additional square footage. Management must find room in the budget if they expect to see results. 

A faulty warehouse layout can show up in several ways that can end up being attributed to other factors, such as unproductive workers, outdated equipment, or a vendor’s shortcomings. By digging a little deeper, managers may find that the true culprit is a bad setup or design of the space.