Warehouses throughout North America are stocked to the rafters. The space crunch comes as e-commerce orders have exploded and companies stockpile inventory to avoid running short of goods amid disruptions like pandemic surges and labor shortages. The consequences are significant: Real estate specialists say the run on space in distribution centers is driving vacancy rates to new lows and rents to record highs.
The lack of storage space is making it tough for shippers and logistics service providers to manage their inventory, but some are getting help from the warehouse management system (WMS) software that controls the daily flow of goods through their facilities.
In traditional applications, retailers use WMS software to manage material flows solely “within the four walls” of a building, says John Santagate, vice president for robotics with Körber Supply Chain. That approach balances variables like labor, slotting locations, inventory levels, and fulfillment schedules in order to efficiently funnel goods into individual channels, such as e-commerce orders or store replenishment, inside a single facility.
However, that traditional approach may not be sufficient to keep product moving and free up storage space when the building is at capacity, a condition more and more companies are experiencing right now, Santagate says. With too much inventory in the building, goods that languish on the racks can quickly go out of style or pass their freshness dates, leaving warehouse managers with obsolete inventory taking up space that could be used for new inventory.
One response to that challenge is to minimize the amount of outdated product in storage by using a WMS that tracks and manages items not just by their stock-keeping unit (SKU) codes, but also by a wider range of attributes, such as expiration dates, sales history, or location while in transit, says Dave Williams, vice president of technology solutions at Westfalia Technologies Inc., which makes the Savanna.Net WMS product. By taking that fuller profile into consideration for each product, a WMS can help ensure that products are moved out of the warehouse before they become obsolete. One way it does that is by being “aware” of saleable inventory that may be located at other points in the supply chain—such as suppliers’ stocks or goods in transit—and allocating those items to fill orders, thus allowing organizations to get by with fewer goods within the DC.
A WMS can also help DCs make better use of storage space by deploying more efficient slotting strategies—for instance, by helping them configure their warehouses so that slower-moving products don’t interfere with faster-moving ones, Williams says.
To obtain these benefits, users enter precise data about each type of inventory they hold. “You have to know when a product is going to sell,” Williams says. “Then you can set the density of storage, avoid unproductive moves, incur the least amount of re-warehousing, [minimize] product damage, and utilize as much of your real estate as possible.”
Another way companies can leverage a WMS to more fully utilize precious warehouse space is to maintain the inventory used for both e-commerce and store replenishment orders under a single roof, says Adam Kline, senior director for product management at software developer Manhattan Associates. By leveraging the ability to manage goods for multiple channels in a single pool, an intelligent WMS can create “opportunistic” workflows, such as assigning multiple tasks to a warehouse worker in a particular row or aisle of the DC, according to Kline.
“In the old world, retail and e-commerce [operations] were in different buildings, sometimes even with different [enterprise resource planning] systems. But now it’s [all in] one building, [with] one software,” Kline says. “That allows you to understand who’s busy in the warehouse, where space is available, what’s the most intelligent way to get all the goods out on time, and keep that demanding customer at their keyboard happy.” Together, those improvements can lead to more efficient use of space, he says.
When merchandise for multiple channels is stored in the same DC, the WMS can create a “hybrid pick cart” that allows for multiple tasks on a single trip—not unlike asking a spouse to pick up a jug of milk while out running errands. In the warehouse, the software might assign a single employee to pick certain items into totes for retail replenishment, place other items directly into a shipping carton for an individual consumer’s order, and then move a third batch of goods back onto storage racks to replenish inventory for the next shift. Doing all three jobs in a single trip allows for more efficient use of a worker’s time, thereby helping companies move goods through the building more quickly.
Yet another way a company can leverage a WMS to help manage overcrowded warehouses is to use a cloud-based platform that extends its view over multiple DCs in different locations. With a multilocation WMS, users can manage inventory that is spread across several sites, reducing the need to carry every item in every DC, says Brad Wright, CEO of Chunker, a startup that provides a short-term warehouse marketplace for owners, tenants, and third-party logistics service providers (3PLs). Accessing inventory stored at different sites also helps users avoid congestion by allocating overstocked goods to be shipped out first.
Perhaps surprisingly, Wright argues that even in today’s tight real estate market, there is a lot of underutilized space available. That’s because vacancy rates are measured from the landlord’s perspective—whether they have leased the entire building or not—but individual tenants frequently have pockets of unused capacity in their own DCs, and they are eager to lease that space for extra income.
There’s no denying that DC space is a hot commodity in 2022, but the right software can help retailers and 3PLs rotate their goods, get orders out on time, and make space for those new pallets that just arrived at the dock door.