The second measure focuses our attention on how well we use the existing storage capacity, measuring the impact of our choices of material handling equipment, labor, methods, procedures, and systems support. This dynamic measure can yield different results as we change with the nature of the inventory, the methods and procedures, the information system support, and can help us monitor how well we are using the storage space available.
We calculate this measure as percentage use of the theoretical space available, described above. We can develop a space use percentage in several ways. Often we have to start with a manual method, until the cubic volume of the SKUs has been calculated and available in the computer system. The steps below describe a manual calculation method to use to begin:
1. Using the data from the first measurement ratio calculation, determine the theoretical cubic volume of each logical area of the warehouse. Logical areas could be individual rack rows, floor stack areas, etc.;
2. Estimate the current percentage fill of each logical area, e.g. 30% or 50% or 80%, etc. One can divide each area into rack rows and estimate the percentage for each row. Note, if you use the outside dimensions of the rack in calculating the storage capacity, even if every location in a rack row is occupied with full pallets, the row could never be more than 90% full;
3. Multiply the percentage occupancy of each area times the theoretical capacity of each area and then add the results together for a total cubic ft. of inventory. (inventory cube); and
4. Divide the calculated inventory cube by the total storage capacity cube to obtain a storage capacity utilization percentage.
This calculation also almost always yields a surprising result. Often the inventory volume percentage of the storage capacity is seldom greater than 50%. And consequently the inventory cube as a percentage of the building is almost always less than 15%. (50% X 24%=-12.5%) With an effective measurement system, you can control how effectively you use the storage capacity, by changing layout, storage aids and methods, operating methods, pallet size, pick method, forward pick location replenishment, and the use of a Warehouse Management System, etc.
If you establish a process of measuring and tracking your storage aid utilization throughout the year, at different points in the cycle of your inventory flow, I am sure you will discover both how others impact it and how you can react to better use this resource.
