Business

Planning Your Warehouse Storage Requirements

Planning Your Warehouse Storage Requirements

For any business that sells a product, warehouse storage is one of the most important factors to consider for both raw materials and finished goods. Efficient and well-organised warehouse storage that meets the needs of both the business and the customer enables you to streamline your manufacturing processes and get your product from your business to your customer as effectively as possible. This can reduce your costs, enabling to sell your product at a more competitive rate than your competitors and to maximise your profits.

Rent or Buy?

With the cost of warehouse storage rising in Canada one of the key questions for your business to ask is whether to rent or to buy your warehouse storage. This will depend on several factors, and there are advantages to each approach. It is important to know the needs of your business not just now, but in the future in order to have a considered and informed opinion on the correct approach to take.

The advantage of renting warehouse storage is the lower capital cost. There is no large outlay for the purchase of a property, but a monthly rate that allows you to spread the costs of your storage over time rather than upfront. This can also help with budgeting and forecasting as your fixed outgoings will be known in advance for the immediate future.

Renting warehouse storage also enables to you more easily increase or decrease your storage as the requirements of your business and your customers changes, without expensive capital outlay, as renting storage is usually charged by the square foot. The costs of storage in different areas and locations will vary.

Buying warehouse storage can also have advantages, in that as the property is yours, you may be freer to make necessary adjustments to the property to match your requirements than if you were renting from a landlord. You will also not be affected by rising rental prices and will have the value of a fixed asset.

If you own your storage, and some of it is unused due to fluctuations in your business, you may be able to rent out part of your storage property to another business, increasing your income-generating potential. The cost of warehouse storage rental is likely to increase due to current shortages in supply, so this can be a cost effective option in the long term if you are able to afford the capital outlay.

Shared warehousing, where you share warehouse storage with other businesses, is possible with either option and allows you to share the costs of warehousing.

Location, Location, Location!

Another key consideration for your warehouse storage needs is the location of your storage. For some businesses the obvious location (particularly for raw materials) is next to or at least close to the factory that makes the product, whereas for other businesses, you may require storage (or multiple storage units) closer to your customer base. It is important to understand the supply chain for your business and a) the costs of transporting your goods around and b) the costs of storing your goods in your place ready for shipping.

With Just in Time, ‘lean’ inventory systems, businesses try to maintain as small warehouse storage as possible, relying on efficient supply chains to deliver materials just before they are needed in the factory.

Various factors will need to be considered here:

  • What is the common lead time between making and selling (and therefore distributing) your product?
  • How long can your products remain on the shelf? For example, is it a perishable product such as fresh food or something longer lasting such as furniture?

Your warehouse storage location will also be impacted by how your products are transported to your customers. You may need easy access to an airport or a port, and therefore storage close to those locations is desirable, along with good road and rail links in order to keep your supply chain to the customer streamlined and efficient.

Your warehouse will also of course probably include the raw materials that you need for making the products that you sell. In this case, it is mostly likely that your warehouse storage will be closer to the place of manufacture, your factory or assembly plant. This enables you to minimise costs and move materials from warehouse to factory as quickly and efficiently as possible.

You will always need to ensure that you maintain sufficient stocks of raw materials in your warehouse, and accounting formulas such as Economic Order Quantity can help you to efficiently manage your inventory in this way. Accounting measures such as this enable to manage sufficient inventory levels whilst minimising the costs of holding more raw materials than necessary.

Storage Requirements

It is important to understand the physical requirements of what you will be storing in your warehouses. This is the same for both raw materials and finished goods.

If you are a manufacturer of food or drink products, then there will be requirements and regulations for storage of those materials, for example cold storage requirements.

If you are storing potentially hazardous products or materials/finished goods that need other types of temperature or humidity control then these also need to be considered. Here you may consider whether you have the skills and knowledge in your business to fulfil these requirements, or whether you would enlist the services of an outside party, for example a third-party logistics company, to manage cold storage on your behalf.

Where your product has specific storage requirements, your staff should be well-trained on the policies and procedures that will help to manage those goods within the warehouse.

As well as the specific storage requirements of your raw materials and finished goods, your staff should be well-trained in general warehouse management, and various courses such as first aid, forklift truck driving or the WHMIS certificate are appropriate courses to boost the skills of your workforce.

An efficient and qualified warehouse workforce will improve your warehouse storage procedures and boost the productivity of your business.

Summary

There are a number of factors that a business will consider when buying or renting warehouse storage, and implementing that storage into their business practices, which if considered carefully can improve the efficiency, productivity and profits of the business.

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