PART 1 OF A 3-PART SERIES
How to do Warehouse Optimization Planning Right
Most manufacturers don’t wake up one morning and decide to redesign their warehouse. More often, the conversation begins with a small trigger. A lease renewal comes in higher than expected. Labor costs keep climbing. Inventory slowly fills every available aisle. Forklifts spend more time traveling than moving product.
Teams work around the friction and keep things moving—until the operation reaches a point where someone finally asks the question:
Is this really the best way for this warehouse to operate?
That moment often marks the beginning of a warehouse optimization discussion.
Over the past 35 years, we’ve seen this pattern repeat across industries. What starts as a response to rising costs or space constraints often becomes an opportunity to rethink how materials flow, how work is performed, and how the warehouse supports the entire operation. When companies take the time to optimize warehouse operations intentionally, the results often go far beyond reclaiming space. They improve flow, reduce cost, and create a system that can scale with far less friction.
Let’s break down why optimization matters—and how to plan it the right way.
Why Warehouse Optimization Matters More Today
Warehouses today face far more pressure than they did even a decade ago.
- Labor is scarce—and expensive.
- Customer expectations demand faster fulfillment and fewer errors.
- Year-over-year growth plans rarely consider impact to warehouse utilization.
- Inventory levels are rising due to supply chain instability.
- Real estate costs in many markets are climbing fast.
When these forces combine, inefficiencies inside the warehouse become impossible to ignore. One personal care manufacturer we worked with experienced this firsthand. Over time, the company had expanded into several warehouse facilities scattered across a large metropolitan area. Each building supported a different part of the operation, and the setup evolved gradually over the years.
On paper, it worked. Operationally, however, it created constant friction.
Materials moved between buildings throughout the day. Supervisors spent valuable time traveling between sites. Because forklifts couldn’t safely cross public roads, duplicate equipment had to be maintained at multiple locations. None of these issues alone seemed critical, but together they created a steady drag on performance.
Then came the trigger: lease renewals with significant cost increases. Maintaining the footprint would have cost an extra $1M per year. They used the moment to pause and ask: Is this the operation we would design today?
Spoiler: it wasn’t.
That realization launched a structured warehouse consolidation initiative. The team redesigned how materials flowed across the operation and evaluated several potential layouts through detailed warehouse layout optimization. Ultimately, the company consolidated the operation into a single campus, eliminated much of the inefficiency that had accumulated over time, and offset the entire projected lease increase.
As the new system stabilized, additional operational savings continued to emerge.
Experiences like this are not unusual. In many cases, warehouse optimization pays for itself simply by eliminating operational friction that organizations have gradually learned to tolerate. Read more about how we worked with our client on this project.
Best Practices for Smart Warehouse Optimization Planning
When warehouse transformations succeed—or fail—the difference usually comes down to planning.
It’s easy to think of warehouse consolidation or a redesign of an existing facility as a physical move: racks are relocated, inventory is shifted, and equipment is repositioned. In reality, the most important work happens long before anything moves. Here are the essential best practices to get started:
Start With a Full Operational Assessment
The process begins with understanding how the operation actually behaves.
- Demand patterns
- Bottlenecks and constraints
- Inventory levels, velocity, and seasonality
- Space and flow usage
- Picking strategies
- Slotting effectiveness
- Scheduling and S&OP alignment
- Material handling equipment utilization
Even small insights uncovered during this stage can have a major impact. In one of our projects at large packaging manufacturer, simply mapping SKU velocity and re-slotting fast movers reduced picker travel dramatically and contributed to a 15–20% productivity improvement.
These types of insights become critical inputs for warehouse layout optimization later in the process.
Use Scenario Modeling—Not Guesswork
Warehouse simulation and methods like 2P (Production Preparation Process) are essential to pressure-test different warehouse layouts and configurations. They help simulate key operational areas for each layout such as:
- Flow
- Staffing
- Equipment needs
- Travel paths
- Rack design
- Dock use
- Future growth
This approach often reveals solutions that weren’t initially obvious. In the earlier consolidation example, the project team evaluated eight potential layout configurations before identifying the best solution. Several early ideas looked promising on paper but revealed inefficiencies when tested through warehouse simulation.
By exploring multiple options, the company gained confidence that the final design would truly optimize warehouse operations rather than simply rearrange existing problems.
Building a Business Case: Connecting Design to Financial Results
Even when operational improvements are clear, leadership teams still need to understand the financial impact.
A strong business case for warehouse optimization examines:
- Space requirements
- Labor efficiency
- Inventory carrying cost savings
- Transportation reduction
- Lease differences
- Equipment implications
- Capital needs
- Ramp-up timelines
In our experience, companies that successfully optimize warehouse operations frequently achieve measurable results such as:
- 28% labor reduction
- Up to 30% less square footage required
- 5–25% reduction in working capital
- 5–15% decrease in supply chain costs
Once those connections become visible, the warehouse begins to look less like a cost center and more like a strategic advantage.
Plan for People and Inventory Early
Two factors commonly complicate warehouse consolidation initiatives if they are not addressed early: people and inventory.
- People: Layout changes can alter travel paths, workflows, and supervisory roles, impacting how employees work. Preparing teams for these changes early can facilitate a smooth transition and strengthen the workforce.
- Inventory: Managing inventory is crucial in warehouse layout optimization. Slow-moving and obsolete items can occupy significant space, potentially leading to inefficiencies if not addressed during the redesign process.
In several projects, organizations have recovered thousands of pallet positions simply by clearing unnecessary inventory before beginning a formal warehouse optimization effort.
- Technology Should Enable the Process and Design
Technology is increasingly central to warehouse operations, but the most effective implementations follow a simple rule: technology should enable good operational process and design, not compensate for inadequacies.
- Warehouse Simulation (e.g., Simul8) tools to model flow, space, and capacity
- Warehouse Management Systems (WMS) upgrades for slotting, picking efficiency, and accuracy
- Digital management systems (e.g., TBM’s Digital Management System) for real-time performance visibility
- Automation where ROI is proven: conveyors, AS/RS, scanning systems
- Industrial engineering tools (e.g., AVIX) for cycle-time and ergonomic analysis
- RF Tracking systems to eliminate time consuming transactions for receiving & shipping process
The goal isn’t adopting “cool tech”—it’s using the right tech to reinforce better flow and decision making.
One of our clients, global leader in pressure and temperature measurement equipment, implemented targeted automation after redesigning its warehouse and saw:
- 17% productivity improvement
- 43% fewer pick/pack errors
- ROI in 10 months
That’s what “technology as an enabler” should look like.
Warehouse Operations Have Become Too Critical—And Too Expensive—To Rely on Incremental Fixes
As supply chains grow more complex and customer expectations continue to rise, warehouse optimizations and consolidations have become strategic moves for manufacturers. When planned and approached thoughtfully, it often ends up with faster operations, lower operating costs, and greater flexibility to support growth.
And the companies that excel are the ones investing heavily in planning first—not fixing problems after the move.
If your operation is facing rising costs, inefficiencies, or a potential consolidation, the planning window is the most powerful moment you have. Use it wisely.
Next in the series:
Part 2. Turning Plans into Performance: The Discipline Behind a Successful Warehouse Optimization Implementation
Part 3. Technology in Warehouse Optimization: Turn Better Design Into Business Results
