Do you know what your warehouse capacity is?

A capacity breach in a distribution centre is a major headache. Detailed capacity modelling with growth expectations puts you on the front foot. It ensures you’re thinking strategically, planning for the future, and avoiding the pain of a network unable to service customers.

There are four types of warehouse capacity:

• Throughput
• Stockholding
• Pick Slots
• Stores

Throughput Capacity

At the heart of any distribution operation lies the warehouse’s throughput capacity. The maximum amount of units, cases or items that can flow through the facility within a set timeframe. When modelling it is best to split throughput capacity by temperature chamber or product type – ambient, chill, freezer, boxed clothing, hanging clothing, automated pick, manual pick.

Stockholding Capacity

Stockholding capacity is typically what people think about when you say the word ‘capacity’. It’s the total inventory that a building can hold and will nearly always be a concern during stock-build before peak outbound, or during very low outbound weeks. The stockholding capacity versus what the business wants to hold (days’ cover or weeks’ cover) will show how utilised the site is at any point in the year.

Pick Slot Capacity

All SKUs (stock keeping units) need a home. Pick slot capacity refers to the number of accessible locations from which products can be picked. Understanding your building’s pick slot capacity allows you to plan which SKUs go where. For example, when balancing a Hub & Spoke network – slow SKUs in the Hub, fast SKUs in the Spokes.

Store Capacity

The most abstract of the capacity types is store capacity. Usually this only proves to be a concern on stockless pick-by-line grids where each store needs a pick location, or in operations where each store has a fixed outbound dock door or sort location.

Modelling throughput capacity takes the most work. The building and its operation must be broken down into its infrastructural component parts. Calculating the throughput capacity for each component part requires operational rates, plus factors such as dwell time, peak hour in a day, and peak day in a week.

The weekly volume plan for the year is then used to show how utilised (as a percentage) each part of the building is during average week, peak week, or average week in peak month.

Once you know your capacities and utilisations, what then? Well, any good business will have a growth strategy. A plan that states “volume or SKUs or stores will grow XX% year-on-year, so in 2040 the network must be able to handle these numbers”. Scenario modelling for such growth leads to invaluable conversations about network design and strategy.

For example:

What happens to all 4 types of capacity at our Bristol site if we open 10 stores in the south-west next year?

Advanced Network Design software (AIMMS, Coupa’s Supply Chain Guru, or OptiLogic) is the natural next step in this type of analysis. Part of creating a network model in these software packages is inputting site capacities. Throughput capacity by product type, stockholding capacity and store capacity (where applicable), are required to constrain the model. Then the software can accurately optimise your volume flows and inventory.

Adding in DC fixed and variable costs gives financial outputs. Scenario modelling in Network Design software for growing your network (or maybe consolidating it) leads to informed, strategic decisions.

Mitigating capacity breaches ahead of the event is essential. Whether it’s dense pick slots, automation, better inventory management, or a new building that is required, first you need to understand what is going to break and when.

How can Hatmill help?

Hatmill specialise in Supply Chains and Logistics. Modelling buildings, automation, whole networks and the financial modelling that goes with it is part of our suite of expertise.