Capacity Analysis: 7 Steps to Follow
For warehouses, distribution centers, and order fulfillment operations, there is no more certain way of putting the brakes on business growth and expansion than reaching (or nearing) maximum capacity—whether in terms of space utilization or throughput.
If you believe your operation to be approaching capacity, your immediate thought might be to consider either an expansion of your existing facility or a move to a new facility. But before either of these costly options is pursued, an important question must first be asked: Are you using your existing space as efficiently as possible? Are you truly at (or near) capacity, or are there ways to optimize your space and prolong the longevity of your existing facility?
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Conducting a capacity analysis can help you answer these, and other, important questions.
Not sure what a capacity analysis entails? Below, we discuss the most important factors that should be taken into consideration during any effective capacity analysis.
Understanding the Present
The first step in a capacity analysis is to understand the current state of an operation and answer the question: How do things currently exist?
1. Data
As with any analysis, every capacity analysis should start with a deep dive into the existing business data. Some of the most important data buckets to consider include:
- Item/SKU Data: Understanding the types of items that your facility processes and their general characteristics is critical to evaluating capacity, especially as it pertains to storage. Important data points include the number of active SKUs, dimensions and physical characteristics of each item, and storage and handling requirements of each item, including Ti-Hi (the number of boxes/cartons stored on a layer, or tier, and the number of layers high that these will be stacked on the pallet).
- Order History: Just as item data is necessary to understand the physical characteristics of your inventory, order history data is necessary to understand how orders are processed. Constructing an accurate average order profile (number of items per order, shipping KPIs, etc.) is critical.
- Existing Throughput: How many orders are processed over the course of an average day? What are typical peaks and valleys for your operation? Do you experience substantial seasonality, or are order volumes generally stable year-round?
2. Facility
What is the existing footprint of your facility? What is the clear height? Are there structural considerations (columns, etc.) that must be accounted for? How does the facility itself impact the way that product flows through your facility?
Additionally, are there relatively easy solutions that can be put in place to reclaim lost space, for example by leveraging storage racks that make better use of vertical space, or moving office space?
Are you optimizing your vertical cube by changing the shelf levels in your pick modules? Most shelving systems contain over 70% of wasted space. Can this be optimized? Utilizing simple automation such as Vertical Lift Modules (VLMs) and Vertical Carousels can be a fast and easy way to save up to 85% of otherwise wasted space for many applications. Does a mezzanine make sense? A trusted integrator partner can help you determine the ROI of these and other methods and technologies.
3. Workflows
Identifying opportunities for optimization first requires a thorough understanding of how inventory currently flows through your facility. How do you receive inventory? How is it handled, slotted, and stored? How many touches does the typical item or order receive?
In addition to answering these questions, current systems and layout must be taken into consideration, which should include an evaluation of:
- Racking configuration
- Receiving and putaway
- Replenishment
- Inventory management
- Picking strategies
- Packing and shipping requirements
- The number of personnel
- The number and frequency of work shifts
- The various technologies supporting the operation and their layout in relation to each other
This analysis should be applied to both inbound as well as outbound product flow.
Accounting for the Future
Once the present circumstances of an operation are fully understood, it is important to also determine, as well as possible, any plans for the future of the business and operation, as these plans should influence any recommendations that arise from the analysis.
Four areas that are especially important to consider include:
4. Demand and Inventory Forecasting
A shift in sales can impact capacity in a number of ways. You might need more space to handle increased levels of inventory, for example, or a new process capable of meeting higher throughputs.
The more accurately you can forecast your sales and inventory needs into the future, the better you can anticipate your capacity needs and act now to invest where necessary.
5. Shifting SKU Profile
The introduction of new product lines, the expansion of existing product lines, and the retirement of product lines or individual products all have the potential to impact your storage requirements and workflows, and as such any planned changes to your SKU lineup should be noted as a part of your capacity analysis.
6. Additions or Changes to Service Level Agreement
If you currently only ship orders, but have plans of implementing value-added processes such as kitting, gift-wrapping, on-demand embossing, faster shipping options, etc., these plans and the effect that they will have on your workflows must be accounted for.
7. Changes to Labor
If you have planned substantial changes to your workforce, these changes must be reflected in your capacity analysis. Increasing or decreasing the number of workers you employ (or the number of shifts that they work) has the potential to dramatically shift your workflows and throughput capacity.
Using Analysis to Guide Decisions
An effective capacity analysis should provide you with the insights and recommendations that you need to take your operation to the next level.
Whether by making adjustments to the ways in which inventory is handled and stored, changing the workflows and processes underpinning your operation, or implementing new technologies and equipment, there are likely ways for you to increase your capacity and efficiency within your existing facility. By providing a fresh set of eyes, a trusted systems integrator can help.
