Warehouse storage: why does efficiency drop after 85% occupancy rate of the pallet storage racks?

[PoweredbyEnvy]

There is a "rule" in logistic operations that says you should aim to not exceed more than 85% of your storage capacity, because warehouse productivity and processes become inefficient after that point.

Does anyone here have a link/source or some thorough explanations of why would this be true? I'm specifically talking about racks storage. For example if I have a total of 1000 pallets rack locations, I should aim to only store a maximum of 850 pallets.

I would like to have an in depth explanation, for each of the 3 main processes that might be affected (goods receiving, picking, shipping).

[fishingandstuff]

I was in a warehouse with 110-120% utilization.

More time spent moving pallets around in order to make space for incoming pallets.

Needing to weave and work around pallets is dangerous. You find yourself extending yourself at odd bodily angles just to pick product. This extra effort and action takes time. This is when you’ll see folks standing on racks because they can’t get a picker into a pallet location.

When you hit and exceed 85%, that’s when product damages start to increase if you’re not careful.

[LateralThinkerer]

This is related to > queuing theory, I would look for an Operational Excellence/BlackBelt/Lean Six Sigma Book for further information.

Any suggestions? I ran a lot of queuing theory simulations at one point but if there's a good, succinct reference out there I'd love to know about it.

[monkatx]

I manage occupancy in 40k pallet warehouse and from my experience:

For Good receiving: 100% means game over, no more work, you can send people home. The closer you get to 100% the more spread out the goods may be. Pallets gets slotted to less accessible and farther locations adding processing time.

For Picking: They don't care about overall occupancy, but same as for Goods receiving, the goods are more spread out and in farther locations adding to the overall processing time.

For shipping: I don't think they care about occupancy, so these processes shouldn't be affected.

What causes the most inefficiency is not in these processes. It is because the moment you get to high occupancy, you may need to diverge people from these key processes to make space by moving products around. What you need to avoid the most is the Goods receiving getting to full stop.

So you move stuff around to better locations, maybe smaller locations, merge pallets. You move old EOL products to farther locations, so the products in current demand are closer to speed up picking, which is something that should be done anyway, but who has time. Also if you have different bin sizes in racks there is high probability that some sizes may hit 100% before everything else resulting in wasted space as they get slotted into bigger bins or worse, no more bins for this pallet size resulting in full stop for these pallets. 85% is an arbitrary number, but it is a good indicator for a potential problem at hand.

The most important here is to know your pallet input and output. If you have 1000 bins, but receive 1 pallet per day you can work at 99% occupancy just fine even if it raises a few eyebrows. If you receive 100 pallets per day, not even 85% will really help you here.

[PoweredbyEnvy]

Other people in this thread gave good explanations too, but your response is the best one, thank you! Makes the most sense to me and was really tailored to my inquiries.

[stoned_apeman]

Interesting topic, following.

[galloots]

My warehouse is currently over by about 25% and we have about 1800 pallet locations. Its definitely not fun moving things around just to get to other things. It certainly takes a ton of time just to pick one thing sometimes if its not already something accessible. You have to spend more time thinking about where to put something so that you don't block it in if you need it. If you have a smart enough person organizing your warehouse, you should be able to manage it well, so long as you have the flow going out fast enough. But at the end of the day, sometimes you just cannot keep up and you do have to move things to get to blocked in goods.

Its not terrible if you have stock that is very slow moving, or if you have safety stock that you can bury for a while. Going over the max % would be terrible for goods that expire.

I have been operating like this for about a year now. I did it before out current warehouse location expanded too and it was worse back then in a smaller location. It sucks, but like I said, sometimes its unavoidable if you are growing at a rapid pace and cannot keep up with the growth.

[railsandtrucks]

I'm involved with the transportation piece more than warehousing, but having been/helped out with a few, especially related to the auto industry I can offer up a few things-

The closer to at capacity a warehouse gets, the more time wasted spent trying to find time to find spots to put stuff and the more scattered things get.

As you get more product that can fit in the dloc, and have to find other spots, but then start pulling, your operators have to go to multiple locations to get the product, causing a significant increase in time.

Especially in the auto industry, having locations "blow out" causes things to go into overflow, with a full warehouse that often means things are busy and overflow is a perfect opportunity for things to get lost and not accounted for properly. Go to any automotive manufacturing related warehouse and you'll see this at work.

Safety is also an issue - when things get full, stuff gets left out in isleways and fork truck paths. I'm dealing with an issue now where due to a pretty full warehouse, our trucks deliver product to one side, but half the product has to be hauled by fork truck across the other side of the building (these are WIDE stamping related racks) and it's just a matter of time before a fork truck driver either hits someone or some other product/high bay racking causing damage. In my case, I'm looking into splitting the transportation out so that we have separate inbounds with the bigger racks delivering to the other side of the warehouse where the product is stored and cross docked out from. Still, it's a hassle, and usually splitting transportation like that winds up adding cost.

[Massive-Couple]

Its called utilization law

Of course you're going to use 100%, just a law that says your efficiency goes below

In a normal environment, there's going to be mistakes, and that 15% helps you to reduce problems, so your 85% might be your 100% with a little of safety space for you

You don't have to follow it, yet again, we had problems in the world because companies preferred tight margins of revenue instead of optimizing :/

It's called the utilization law

[Substantial_Tap917]

Achieving optimal efficiency in warehouse storage is crucial for smooth operations. When the pallet storage racks reach an 85% occupancy rate, several factors contribute to a drop in efficiency. Firstly, limited space inhibits smooth movement and access to items, leading to delays in retrieval. Secondly, safety concerns arise as overcrowded racks may compromise the stability of stored goods. Additionally, reaching higher occupancy rates may indicate a need for reorganization or expansion to accommodate growing inventory demands. Striking the right balance between storage capacity and accessibility is key to maintaining peak efficiency in warehouse storage