Commercial / Industrial Warehouse Set-Up - The 5 Common Mistakes

Real Estate Sales Representative with Century 21 Miller Real Estate Ltd. 4793863

Finding Your Ideal Commercial / Industrial Building - Part IX

Welcome back for your newest installment, The 5 Common Mistakes of Warehouse Set-Up.

Continuing from the previous post, locating an ideal commercial/industrial building in your preferred geographical location is a large part of the challenge. Once selected, then its set-up and efficiency of operations come more fully into play. Some additional words on that subject are offered in this post.

When an organization is setting up a brand new warehouse or re-organizing an existing one there are many questions (strategic & tactical) that need to be addressed. Some of the questions are relatively obvious and have fairly straight forward answers, however there are many other questions that get missed or left for later since there is 'no time or money to deal with them now'. This can be a mistake that leads to series of other issues or problems that could have been easily avoided with just a little proactivity/planning.

Below are 5 common mistakes or issues that are often overlooked or ignored, often to the detriment of the organization when bringing a warehouse up to full capability. This list is not complete and we will address some more issues in subsequent posts, nor is the list in any particular order other than all 5 tends to relate to the same types of issues.

#1 Using Incorrect Equipment

This particular problem tends to occur when management, or the project team making decisions, do not fully understand their options or potential aids. For instance, most warehouses will have forklifts, but the type of forklift can be very important. To start with, what type of engine should it have? Currently the most common are Propane or Electric, though there are many different types in both categories.   Which is best for your uses? Also, what size and lifting capacity do you need? How high should they reach? What types of forks should they be equipped with (standard, platen, clamp…)? Should they be standard, narrow aisle, pivot, man-up…? These types of questions (and many more) can, and should, be applied to any other type of equipment in the warehouse.

Why is having the correct equipment important? In order to optimize speed, manpower, utilization, etc. it is important to have the right equipment for the job. If you were boiling spaghetti noodles for supper you would use a pot rather than a frying pan, but if you only had a frying pan you could use it and accept that it is not going to work as well or provide the optimum results. Another way of looking at this is the old saying “when the only tool you have is a hammer all problems start to look like nails”.

You can use almost any type of forklift (or other equipment) but using the right type in the right place will help to optimize your process!

#2 Ignoring Technolgy

This issue is similar to the previous point but I want to draw specific attention to it. It is still a question of whether we have the right equipment but in this case the right equipment may be something entirely different. For instance many warehouses are using barcodes and readers to locate and track material in the warehouse but would an RFID system be better? There are many advantages to RFID but one in particular is that it can be tied into your production control systems to automatically ensure that the right material is used on the production line. If you are mixing chemicals together, adding a load cell to the area along with RFID would give you an accurate measure of how much was used, what was used, when, and in which batch. Also by tying this information back into your control system you can develop a history of each product and material which can be invaluable from an Inventory Accuracy or Quality Assurance point of view.

With new technology coming on line almost daily, is there a better way to do the process? Almost definitely: YES! For instance, Augmented Reality (*) can be used to improve the pick/pack process, help with training, or even to help production assemble a product. Potentially, this could even replace the assembly instructions for purchases that need to be assembled at home, by accessing the website through your home computer and using a pair of smart glasses. By use of the smart glasses the computer could identify each part by shape, highlight them as needed and show how they fit together -- no more assembling pieces backwards or upside down !!

(*) Superimposes a computer-generated image on a user's view of the real world, thus providing a composite view.

Keeping up with technology is never easy but this is becoming more and more critical in almost everyone’s job. What technology is out there that can help you optimize your processes and competitiveness?


#3 Concentrating on square footage rather than cubic

It is easy to tell if floor space is being used (Floor Level -- Square Footage), but often people do not look up nor are they trained to think three dimensionally (Actual Space Available -- Cubic Footage). Just as with the game Tetris, looking at the available space three dimensionally can lead to much better space utilization thereby reducing costs and optimizing other resources. Using the proper racking types can also vastly improve density usage of the space. For instance, using a pneumatic bulk racking system can fit far more material into a specific area while also enforcing a FIFO usage system.

Combining a well-designed racking system together with the complimentary support equipment (e.g.: narrow aisle equipment and auto-locator software) might seem expensive at the beginning but operation cost reductions due to optimized processes will often lead to amazingly short ROI times.


#4 Planning for the wrong amount/type of inventory

Many companies are really not sure how much inventory they should keep which ends up in recurring shortages or massive levels of dead and slow-moving stock. In addition to this they don’t carry the right amount of safety stock or, in many cases, the right amount of MRO stock. All of these, combined with inconsistent inventory accuracy make it very difficult to design an effective warehouse layout, which then often leads to under-utilization in some areas and over-utilization in other areas. Analysis of historical patterns will usually point out the root causes of many of the issues but in the end most problems can be anticipated and proactively improved with some basic understanding and tool applications.

One of these tools would be cycle counting which is much easier to start in a new facility than one that is already in operation. A well designed & implemented real-time material identification and location system is another tool. Understanding your customers’ wants and needs is probably even more important than any other tool as there are direct relationships between things like expected lead times and required inventory levels. For example, if the lead time is long enough you may not need to stock the finished goods at all. Instead, you can assemble and ship product in time to meet the delivery dates. This could significantly reduce overall inventory as less finished goods are required and relatively less raw material will be required as well (for a more complete explanation on this check out DDMRP).

Always pay attention to what type and quantity of inventory you really need.

#5 Seasonality effects

If some or all of your inventory it subject to seasonality it can create a serious challenge in your warehouse design, as for part of the year you will be carrying large amounts of inventory as you start the season but very low amounts of that inventory during the off seasons. For that reason you often see companies trying to offer offsetting seasonal products (e.g. lawn mowers and snow blowers). Of course this works best if the offsetting volumes use the same amount of space and do not overlap their seasonality which, unfortunately, is rarely the case.

Dealing with seasonality can lead to some fairly creative solutions but planning proactively for these types of issues can save a lot of scrambling, wasted time and money over unplanned occurrences.


All of the points above share one thing in common – proactively planning and using the correct processes and equipment to optimize your processes will significantly reduce your ongoing cost thereby improving both your profitability and your competitiveness. In order to understand the requirements needed and to plan effectively in dealing with the anticipated issues you should understand what is driving your inventory, picking, and shipping requirements. Doing this and applying the right processes and equipment before a new warehouse begins processing material is much cheaper and easier than modifying processes on the fly. Working with professionals to help you address these issues and possibilities will make your life far less stressful as time goes by. Give us a call and let us help you help yourself!


Stay tuned for upcoming posts!


Part VIII - The 5S Keys to Success

Part VII - Warehouse Layout and its impact on site selection

Part VI - Production Flow and its Importance

Part V - Infrastructure / Accessibility - How Important is it?

Part IV - Cost Is It The Most Important Factor?

Part III - Size Matters!

Part II - Location, Location, Location!

Part I - Finding Your Ideal Commercial/Industrial Building


Contact us when making your next move!


Edward Drennan, P.Eng.  30+ years Industrial / Commercial Experience

Your Trusted Partner in Real Estate  (289)-838-5105


Ed White, CPIM CIRM CSCP CPF 6sigma – Jade Trillium Consulting

Making processes & organizations more effective   (905)-483-5984


Not intended to solicit buyers and sellers currently under contract with another brokerage

Comments (4)

Anthony Acosta -
Harry Norman, REALTORS® - Atlanta, GA
Associate Broker

Edward Drennan 

Thank you for sharing your information

Have a great day.

Jan 30, 2018 07:48 PM
Edward Drennan

Our pleasure Anthony

Jan 30, 2018 08:07 PM
Ed White

Excellent point Mark and we did touch on some of these points in earlier post in this series (such as Part 2 – Location). The key to your comment is Risk Analysis which is an integral, and critical, part of deciding what, why, where, and how. Obviously, you need to be very clear as to what needs (yours and your customers) this site is designed to meet but you also need to define and analyse all the risks involved as well. That topic (risk analysis) would make an excellent blog (or three) all on its own and we may address it specifically down the road. For now though I would just like to point out that when looking at risk, you do need to look at both sides – all the possible risks if you move forward with the new location and all the risks if you do not. Upon balancing the various risks you can then make a proper decision on what, where, and how. It is only at this point that the primary purpose of these posts comes into play – which is, how to ensure that the new facility meets all your defined requirements both now and for the next several years. After all, as you pointed out, this is an expensive investment and only so much money available so optimization is critical.

May 11, 2018 11:07 AM