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Underutilised Warehouse


Try Your Hand at Identifying Constraints in Flow, Operation and Design. And then make your recommendations for the ideal warehouse design!

In this interactive case study, you have a chance to compare your thoughts against the author’s?

A description of The Choice’s operation is provided including data, issues encountered and layout drawings. The text includes hints on constraints, flow problems and design flaws. As you read, you will note key points identified by the writer in highlighted boxes. These comments will help you uncover salient matters that must be addressed if an effective warehousing design solution is to be developed.

As you read, you may agree, or disagree with the comments, or have additional points to consider? If so, you are welcome to send them to author for consideration in the next issue of MHD.  And if you are really keen, you are invited to make layout suggestions. So why not send your thoughts and/or preferred layout on a sketch for consideration. Be brave, all inputs will be considered for discussion in the next volume of MHD.


The Choice – Case Study

The Choice makes a range of durable household products which are supplied to retail, wholesale and internet customers. Major customers include large retailers. However, sales over the web have lifted substantially in the last 18 months due to acquisition of a kitchen fittings business, Kitflix Pty Ltd and the company’s new web site.

With growth, the company has been experiencing a number of issues:

  • Poor work flow is proving dangerous to employees. Five accidents have occurred in the last 12 months. Although minor, they have resulted in 10 days lost time.
  • Truck drivers complain about loading and unloading delays.
  • The Council has sent three letters complaining about semi-trailers parking on the street and blocking local traffic.
  • Large amounts of overtime are being worked by staff.
  • Customers used to order by the pallet or cartons by pallet layer, but are now ordering by the carton, and inner. On line customers are ordering eaches. This is causing bottle necks in supply as staff struggle to get orders out in time.
  • About 15% of orders are inaccurate and result in many returns.
  • Fork truck drivers complain that there is never enough pick face positions from which they can pick eaches and inners.

The current distribution centre was an old tyre factory built in the 1950s which was been converted to a warehouse in the late 1990s. It’s a 5,000 sqm square building with a saw tooth roof design. The warehouse has 4 sunken docks, a ramp and a small awning for loading one vehicle space outside. There are remnants of a vulcanising machine in the warehouse, and the floor needs repair around it.

So this prevents storage to no more than 2 pallets high in this zone.


Point of View (POV): An old factory is unlikely to offer much flexibility as its purpose was manufacturing, not storage and distribution. The left over vulcaniser equipment impedes flow at receiving and dispatch and should be removed.
Observations: Columns restrict flow; docks do not allow easy access from the road.
Check: Column layout, load in and load out path for vehicles, truck turning circle.


The clear height under the saw tooth roof is 6.5m. The Choice also owns adjacent land of 9,600 sqm adjacent to a river.


POV: There is not much under roof clearance, compared to many modern warehouses which can range from 9 to 11m clearance. It is worth investigating the development of the property next door, however, being near a river may introduce some design challenges.
Observations: A nest of rare blue ducks resides on the vacant land.
Check: Potential flooding, need for piling if building, environmental and wild life disturbances.


Picking and Packing

Staff pick goods by hand off block stacked pallets. To do this they often have to shuffle stock around so that full pallets, cartons and eaches can be picked. 2.5t diesel counter balanced forklifts which were purchased at a bargain price by the procurement manager are used for order picking. Recently one of the staff members was accused of pilferage as some valuable stock went missing. However, the hapless employee was vindicated when the stock was later found buried amongst obsolete pallets of goods.

A constant complaint by staff and customers is that orders are being picked too late for delivery


POV: The need to shuffle stock around indicates poor layout, and picking practice. Picking cartons and eaches from pull pallets in a block stacked operation is less than ideal.
Observations: Picking is performed with 2.5t diesel fork lifts. This is not recommended for anything other than full pallets, despite the purchase price.
Check: Flows in the warehouse, receiving, picking and dispatch data, available storage space, ways of reducing congestion.


Receiving and Operations Manager

The receiving team, checks incoming goods against manifests. They only allow incoming goods to be put away after they have been totally checked. This can take anywhere from 2 to 3 days.   A bottle neck is that 90% of deliveries are in side loading taut liners, while the sunken docks provide for container unloading. This causes staff to unload off the taut liners on the road or in the yard, before loading pallets up to the container docks one at a time.

An additional issue is the constant movement of staff vehicles in and out of the common entry/exit as they access the car park and office. There have been many near misses between cars and trucks on the site. The old disused silo adjacent to receiving does not help as it crams the area into a traffic ‘funnel’.


POV: 2-3 days for receiving. Why so long? Should be no more than 24 hours. 
Car and truck movement around the property should be separated if possible. Get rid of the old silo which has no relevance to the current businesses.
Observations: Sunken docks are excellent for end loading/unloading of containers and refrigerated vehicles, but are unusable for taut liners in this warehouse configuration.
Check: What is holding up the receiving process, can docks be arranges another way? How many vehicles are received and dispatched each day?


Staff is under pressure, as there is simply not enough room to store all of the stock they need, let alone pick it.  Consequently 1000 pallets are stored at the bakery across the road at a bargain price of $2.50/w per pallet and $1.50 per pallet movement in and out. Although, the kindly neighbour’s first priority is bread delivery, not The Choice. This has exacerbated the supply delays.


POV: It’s a good idea to outsource for overflows, but not when someone else’s priorities prevent service levels being achieved.
Check: Other providers. Ways of holding stock at site e.g. via building extension, change of layout. Better flow.


Because of the current warehouse configuration, staff wander all over the warehouse carrying out various functions. Extra supervisors were hired to make sure their work was done.


POV: Bad layout and congestion causes over staffing. 
Observations: The racking layout features drive in racking and block stacking, with very little carton, inners and eaches order picking capability. 
Check: Building, layout, flow and racking types, picking methods.


The recently installed warehouse management system (WMS) is working well, but location management is yet to be used due to the chaotic layout of the store. If not for the oldest employee, who knows where every SKU is stored, the place would grind to a halt. This was brought to a head recently when the unfortunate staffer fell from a ladder and was off work recuperating while other staff spent weeks trying to find stock.


POV: A very common but high risk scenario. A key employee is the only person who knows where the stock is. Not recommended. As business expands, location address systems are imperative. 
Observations: Most modern WMS’s have location management capability.
Check: Use of WMS stock management, potential to install slot numbering system, numbering all locations. 


An additional problem is the reshuffling required with the drive in racking system. Many of the products have use by dates on them, but the constant moving in an out of goods makes it a nightmare to keep track.


POV: Drive in rack is not ideal for ‘use by date’ management as it operates on first in first out stock basis.
Observations: With increased web sales the lines picked per order will be reducing. Also the items picked per line or SKU is in quantities of one and two. Picking from drive in or block stack positions for such quantities is not recommended.
Check:Other modes of storage racking e.g. carton live storage or shelving, allocation of stock to each storage mode, quantities of stock stored per SKU.


But what really drives operations staff crazy, is the time taken to load in frequently picked stock that is due out the next day, because it is currently allocated a fixed position at the back of the warehouse. The manager heard of a concept called ‘first in first out’, but jokes that the Choice method is ‘last in, last out and lost in space’.


Observation: There is clear evidence of stock being stored in product families or groups, without reference to the frequency at which it moves in and out of the warehouse.
POV: As the company grows and expands its business it will need to dispense with the ‘fixed stock’ position and move to a system that places stock in storage locations according to usage. In simple terms, slow stock away from the docks, faster moving items closer to dispatch.
Check: SKU Movement data, ability to place stock in the warehouse according to movement.


Dispatch Manager

The dispatch manager oversees outgoing orders and consignments. Due to the growing number of orders, she is short of room.  Often staff is unable to load trucks, without double handling of stock in dispatch. So they regularly store picked orders on external hardstand. However, this has been less than successful, due to numerous orders suffering water damage as a result of thunder storms.


POV: Space in this warehouse is at a premium. Picking non weather resistant stock and storing it externally is to be avoided.
Check: Design of warehouse, use of awnings, order growth.


The Dispatch manager is under pressure from the Transport Company due to delays loading delivery vehicles. The transport company manager has threatened to increase rates unless The Choice reduces from the current two hour loading time, to no more half an hour.


POV: Space in this warehouse is at a premium. Picking non weather resistant stock and storing it externally is to be avoided.
Check: Design of warehouse, use of awnings, order growth.


The Dispatch manager is under pressure from the Transport Company due to delays loading delivery vehicles. The transport company manager has threatened to increase rates unless The Choicereduces from the current two hour loading time, to no more half an hour.


POV: Scheduling of deliveries will help, but spatial capacity to load is limited.
Check: Receipt and dispatch times, ability to schedule load and unload times, ability to load/unload vehicles within 30 minutes.


Returns Manager

Returns have increased by 300% after The Choice’s internet sales increased. Returns staff spend most of their time identifying miss picked SKUs and matching the SKU numbers with what should have been picked. Data revealed that 95% of the mistakes are because of wrongly identified product. Mainly due to difficulty in telling the difference between some of the Kitflix SKU numbers.


POV: The Choice’s foray into sales over the web has been successful. But its picking, packing and dispatching capability is delinquent.
Observation: 300% increases in returns, says that the internet supply chain is suffering chronic pick errors
Check: Ways of improving accuracy of picking including bar code scanning of product and location codes


Managing Director

The Choice has been a vibrant and proactive company and has increased its market share to be a major supplier of space age fittings for the modern kitchen. However, its costs have increased at a faster rate than its revenue. This occurred following the acquisition of Kitfix Pty Ltd, two years ago.

With its healthy range of snazzy household goods, The MD was hoping for big profits, but instead noticed expenses rising. He examined warehouse costs and notes they are around 25% of revenue. He received some benchmarking advice and discovered that warehousing costs should be around 8-12%. So he wonders what can be done to:

  • Strip costs out of her warehousing operation,
  • Improve the flow and layout,
  • Remove obstacles to supply,
  • Make the whole operation more efficient.


POV: With costs at such a high level, The Choice needs to rectify the many and varied flaws of its operation
Observations: The square warehouse layout is suspect with bottle necks at receiving and dispatch. The yard layout and truck queuing on the street is also
Check: Costs, flow, layout, racking modes, obstacles to supply, bottle necks, staffing levels, KPIs.


Your task is to advise the MD on what to do! To assist, he handed you some data which his operations staff prepared.


Data Provided:

Pallets in Stock: 4,100
Pallets of Obsolete Stock: 200
Days of Stock: 90
SKUs: Used to be 50 under the Choice, but has grown to 1500 SKUs in the last two years with the acquisition of the kitchen fixtures business ‘KitFix’

12 m taut liner semi-trailers received per Day: 10-15

5 Inter State taut liner B Doubles
3 Trailers to Regional warehouses
15 Rigid 14 Pallet trucks (back loading)

Order Information
Orders Per Day: 150 to stores and wholesale customers. Range of pallets per order is 2 to 4.
400 per day to Internet Customers. Supplying mainly eaches, but also some inners
Cartons / Pallet: 50
Full Pallets Picked Per day: 300
Cartons Picked Per Day: 4,000
Inners Picked Per Day: 2,000
Eaches Picked Per Day: 5,000. Picked over about 3000 bin hits
Eaches / Carton: 9

3000 pallets of Drive in Racking in 4 high configurations
100 pallets of Selective racking 4 pallets high
900 pallets of block stacking room
100 pallets in returns waiting processing


Existing Building

Existing Warehouse Layout


Existing Elevation

Warehouse Elevation Layout
Warehouse Racking Arrangement


Warehouse Flow

Cross Section of WarehouseWarehouse Design Proposal

Best Regards,
Mal Walker
Email: [email protected]  or call: 0412 271 503



Mal is Manager Consulting with Logistics Bureau where he leads the Warehousing and Distribution Centre Design Practice. He works with local and international organizations and has over 35 years’ experience in warehousing and supply chain, 20 of which have been in consulting.  He is a Life member of the Logistics Association of Australia, Member of Council of Supply Chain Management Professionals. He holds qualifications in Engineering, Logistics and Business Administration.


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