This is the sixth in our blog posts series that looks at measuring KPIs for warehouse operations. Having recently outlined the 7 KPIs to track for warehouse improvement, this series takes each KPI and examines it more thoroughly.
What does space utilisation measure?
Space utilisation is an inventory measure. It shows the percentage of bins in a warehouse that contain stock.
A certain amount of empty space in a warehouse is good thing, as this allows for optimisation. It’s that free space that makes it easy for products to be moved around. But it is also important not to waste space and a warehouse that has an excessive number of empty bins is not the most economical. Empty bins not only take up essential space, but also signify that there is out of stock product, meaning no revenue can be derived from those particular SKUs. Using the space utilisation KPI can identify improvements that will lead to holding the optimal amount of stock across the warehouse.
The more efficient warehouses are those one that minimise the utilised space that is needed to fulfil customer orders. It is vital to first identify under-utilised space, so that a warehouse manager can determine how it can be better utilised. For example, if a distributor is bringing in new product lines, it would help to understand how much available space there is, and therefore if there is the capacity to store them.
How is space utilisation measured?
For space utilisation, a count of bins with stock will be made. That will then be expressed as a percentage of the total number of bins in the warehouse.
So the KPI essentially measures the number of bins with product in. But it can also be expanded to use volumetrics to see how much of the space is used.
What is a good space utilisation score?
There is no optimum level of stock utilisation. It all depends on what is stocked, how large it is and how frequently it is picked. Understanding the flow and utilisation of product in the warehouse is key to optimising it.
A high level of utilisation will mean a large percentage of items are in stock. This can only be deemed to be a good score therefore if the stock turnover of those goods is also high, and they are not simply being stored for a long time without being sold. Then money is not being tied up in stock for too long.
The space utilisation KPI will also identify the empty bins in the warehouse. Empty bin reporting helps to indicate how much available space there is in the warehouse. This KPI can be used in conjunction with a check of stock spread, which shows whether stock is spread out across the warehouse. For example, if the same products are stored in multiple locations, they can be moved and allocated to the identified empty bins. This optimisation of the inventory can reduce travel time for pickers in the warehouse as the stock is not too spread out.
One downside of having stock consolidated in the warehouse though is congestion. Above around 85% capacity, there is little free space and the movement and picking of stock becomes restricted. Each pick or replenishment might then require several actions until it can be successfully completed.
How can you improve your space utilisation score?
Warehouse management systems (WMS) can help with assessing the space utilisation in a warehouse. It can identify spread out stock, and the volumetrics functionality can analyse the size of products and identify areas that can be freed up areas for other stock. This analysis can also identify if different sized bins would be better for certain products. It’s very common that not all products carried are the same size, so why have uniform bins to hold them when variable sizes would be more efficient?
If you would like to explore the options for improving your technology, or would like to discuss how to measure and optimise space utilisation, we can help. Our supply chain consultants can analyse your distribution operation and advise on KPI metrics, as well as recommend technology to help boost your supply chain performance. Call us on 020 8819 9071 or get in touch.