Warehouse Capacity Analysis - URGENT

🚨 Critical Finding: You’re Out of Space in 2 Months

Current State

Warehouse Metrics:

• Total: 30,000 sqft | Usable: 24,600 sqft (82%)
• Current: 2,500 pallets | 20,000 sqft used
• Utilization: 81.3% (already tight)
• Storage: Floor stacking (mostly 2-high)
• Density: 0.102 pallets/sqft
• Max capacity (current method): 3,075 pallets

The Problem: You’re already at 81% utilization, which means you’re running tight TODAY. With 12%/month growth, you hit critical capacity next month and overflow the month after.

Capacity Forecast (12%/Month Growth)

Timeline:

• ⚠️ 85% critical threshold: 1 month from now
• 🔴 100% capacity exceeded: 2 months from now
• 📈 12-month need: 9,740 pallets (4× current capacity!)

Solution Analysis

❌ Scenario 1: Do Nothing - Overflow Storage

• Year 1 cost: ~$192,000 (escalating rapidly)
• 5-Year cost: $1,200,000+
• Issues: Split inventory, operational chaos, inefficiency
• Runway: 0 months (problem immediate)

❌ Scenario 2: Lease Additional 15,000 sqft

• Investment: $75k setup + $1.17M/year rent
• Year 1 total: $1,245,000
• 5-Year total: $5,925,000
• New capacity: 4,612 pallets total
• Runway: Only 4 months before you hit 85% again!
• Verdict: Expensive band-aid that doesn’t solve the growth problem

✅ Scenario 3: Selective Racking (RECOMMENDED)

• Investment: $378,840 (one-time)
• Annual cost: $0
• New capacity: 9,379 pallets (+205% increase)
• Configuration:
  • 70% racking (3-4 high): 17,220 sqft
  • 30% floor stacking: 7,380 sqft
• Runway: 11 months before 85% threshold
• 5-Year cost: $378,840 (vs $5.9M lease)
• ROI: Pays for itself in 3.9 months vs leasing
• Year 1 savings: $866,160 vs lease option

🎯 Scenario 4: High-Density Racking (Best Long-Term)

• Investment: $640,830 (one-time)
• Annual cost: $0
• New capacity: 13,838 pallets (+350% increase)
• Configuration:
  • 65% high-density (push-back/drive-in, 5-6 high)
  • 15% selective racking (FIFO items)
  • 20% floor stacking (flexibility)
• Runway: 14 months (1.2 years)
• 5-Year cost: $640,830
• 5-Year savings: $5.28M vs lease
• Best for: Sustained high growth, homogeneous SKUs

Recommendation: Scenario 3 (Selective Racking)

Why Scenario 3 over Scenario 4?

Given your urgent 2-month timeline, I recommend Scenario 3 because:

1. Faster implementation: Selective racking is simpler, 4-6 week install vs 6-8 weeks for high-density
2. Lower upfront cost: $379k vs $641k (easier to approve quickly)
3. More flexible: Works with diverse SKUs, easier picking, better for variable inventory
4. Adequate runway: 11 months gives you breathing room to reassess
5. Immediate ROI: Saves $866k in Year 1 alone vs leasing

However, if:

• You have homogeneous SKUs (80%+ similar items)
• You can secure the $641k investment quickly
• Your growth will sustain beyond 14 months
• You want maximum long-term capacity

Then choose Scenario 4 for the superior long-term solution.

Implementation Timeline - URGENT ACTION REQUIRED

Week 1-2 (IMMEDIATE):

• Day 1-3: Get 3 racking quotes (selective or high-density based on choice)
• Day 4-7: Finalize layout design with vendor
• Week 2: Order racking materials (CRITICAL - 4-6 week lead time)
• Simultaneous: Begin inventory optimization to buy time

Week 3-6 (Lead Time):

• Prepare installation zones
• Plan inventory staging areas
• Coordinate with operations for minimal disruption
• Train staff on new system

Week 7-10 (Installation):

• Install racking in phases (3-4 weeks)
• Migrate inventory section by section
• Maintain operations during transition

Month 3+:

• Complete installation
• Monitor utilization weekly
• Reassess at Month 9 for next phase

Critical Path Item: ORDER RACKING BY END OF WEEK 2 or you’ll overflow before installation completes.

Risk Assessment

Risk 1: Growth Exceeds 12%/Month

• Impact: Hit capacity sooner than projected
• Probability: Medium
• Mitigation:
  • Monitor weekly, not monthly
  • Set 75% utilization as warning trigger
  • Negotiate emergency overflow agreement NOW as backup
  • If Scenario 3, consider upgrading to Scenario 4

Risk 2: Racking Installation Delays

• Impact: May overflow during installation
• Probability: Medium
• Mitigation:
  • Order materials THIS WEEK
  • Build 2-week buffer in timeline
  • Identify temporary overflow location (negotiate 3-month agreement)
  • Phased installation to maintain operations

Risk 3: Floor Loading Capacity Issues

• Impact: Can’t install racking as planned
• Probability: Low
• Mitigation:
  • Verify floor loading specs NOW (before ordering)
  • Get structural engineer review if uncertain
  • Most modern warehouses handle 3-4 high selective racking

Risk 4: SKU Characteristics Unsuitable for High-Density

• Impact: If choosing Scenario 4, may have picking inefficiency
• Probability: Low (only if Scenario 4)
• Mitigation:
  • Analyze SKU mix before committing to drive-in
  • Use hybrid approach (65% high-density, 15% selective)
  • Reserve selective areas for FIFO/fast-moving items

Bottom Line

Next Action: Get racking quotes THIS WEEK. You have ~6 weeks before overflow if you act now.

Success Metrics to Track

Post-implementation, monitor these monthly:

1. Utilization rate - Target: 65-75% steady state
2. Pallets stored - Track vs forecast (should match 12% growth)
3. Picking efficiency - Should maintain or improve vs current
4. Damage rates - Should not increase with racking
5. Months runway remaining - Recalculate monthly with actual growth

Review trigger: If utilization hits 70% before Month 9, begin planning Scenario 4 upgrade or additional facility.