📦Warehouse Location & Utilization

How you use those warehouses—space, labour, and systems—determines your operational throughput and service performance. Companies that fail to optimize these areas often face rising logistics costs, poor service levels, and excessive working capital tied up in inventory and space.

Concept Explanation (Theory)

Warehouse Location

Warehouse location strategy involves deciding how many facilities to operate, where they should be placed, and what role each should serve (e.g., regional DC, e-commerce hub, cross-dock centre). Key factors influencing location decisions include:

• Proximity to demand: Reduces delivery time and transport cost.
• Access to transport infrastructure: Highways, ports, rail hubs, and airports.
• Cost environment: Land, labor, utilities, and taxes.
• Supply chain structure: Sourcing origins, manufacturing plants, and customer segments.
• Risk profile: Natural disasters, political risk, congestion zones.

Typically, location decisions are made using network optimization models that balance total cost (inventory + transport + warehousing) against service objectives.

Warehouse Utilization

Warehouse utilization focuses on maximizing operational efficiency within the facility. It addresses how effectively space, labor, and systems are used to store, pick, pack, and ship goods. Core dimensions include:

• Space utilization: Measured by storage density, cubic fill rate, and SKU velocity zoning.
• Labor efficiency: Pick rates, travel time, and order batching.
• Throughput: Volume handled per shift/day vs. capacity.
• Technology adoption: Use of WMS, barcode scanning, conveyors, or automation to reduce manual effort and error rates.

Optimal utilization ensures high service levels (accuracy, speed) without over-investing in space or labor.

Operationalization

In day-to-day planning, warehouse location and utilization play out in several practical decisions:

• Location Planning: Use historical order data to map customer density, delivery frequency, and shipping costs. Simulate how moving or adding facilities impacts service coverage and cost.
• Capacity Planning: Regularly forecast inbound and outbound volumes to adjust labor shifts, racking layout, or storage strategies.
• Slotting Optimization: Assign fast-moving SKUs closer to shipping areas; reduce travel time and increase pick rates.
• Cross-Docking or Flow-Through: For high-velocity goods, bypass storage altogether to improve speed and reduce handling cost.

These actions must align with upstream production and downstream demand to avoid bottlenecks or imbalances.

Excel for Warehouse Location & Utilization Analysis

1. Facility Location Modeling (Cost-Based)

• Input:
  • List of candidate warehouse sites with fixed operating costs.
  • Customer locations with demand volumes and transport costs per km/unit.
• Objective:
  • Minimize total cost = fixed warehouse costs + transport costs.
• Approach:
  • Use Excel Solver to select the optimal set of locations while meeting all demand.

2. Warehouse Space Utilization Dashboard

• Track key indicators:
  • Total pallet positions vs. used
  • SKU storage efficiency (% space by velocity class)
  • Weekly throughput vs. max capacity
• Visualize using:
  • Stacked bar charts for space allocation
  • Line charts for trends in pick/pack efficiency
  • Heatmaps for ABC zones

3. SKU Slotting Tool

• Input SKU dimensions, velocity (picks/week), and storage type.
• Rank SKUs by velocity and assign zones (fast, medium, slow).
• Use VLOOKUP or INDEX/MATCH to assign storage locations.
• Calculate average travel time for picking by simulating zones.

For advanced users, Power Pivot or Power BI can enhance visibility across multiple warehouses with interactive maps and drill-down metrics.

Leveraging ChatGPT for Enhanced Productivity

Prompt for Warehouse Location Decision:

“Design a warehouse location strategy for a retailer serving 5,000 customers across three regions. Prioritize delivery time and total logistics cost.”

Prompt for Utilization Analysis in Excel:

“Help me build an Excel model to track warehouse utilization across 3 facilities, including space usage, labor productivity, and inbound/outbound volumes.”

Prompt for Scenario Optimization:

“Compare a single central warehouse model vs. two regional DCs. Evaluate total cost, service level impact, and inventory requirements.”

Final Thoughts & Business Reflection

Effective warehouse location and utilization strategies are not just about storage—they’re about strategic agility. The right network footprint minimizes cost and accelerates responsiveness, while efficient facility operations unlock capacity and boost service levels without capital expansion.