WHAT SIZE WAREHOUSE DO YOU REALLY NEED?

IT COULD BE SMALLER THAN YOU THINK.

Rental rates in Greater Montreal continue to rise. Every square foot has a dollar value.
Which means that every pallet position has a price tag.

What if you could decrease your square floor area needs by 20%?
New racking systems are helping many companies to do this.

Realistically, an 80,000 square foot warehouse can hold the same number of pallets as a 100,000 square foot warehouse if the racking and forklifts have been optimized.

Here’s how…

DENSIFY, DENSIFY, DENSIFY.

1. Narrower Aisles
2. Deeper Racking Systems (up to 6 pallets deep)
3. Higher Racking

All 3 points above can get more pallets into your warehouse, but our focus right now is:

VNA System or Very Narrow Aisles

Our April blog explains how an efficient VNA system saves space.

Now we’re going to explore how VNA saves you money.

Return on Investment (ROI) and Warehousing

Obviously, a key issue for everyone in logistics.
From companies running a single warehouse, to Distribution Centres and Third-Party Logistics (3PL), a warehouse must be profitable.

When industrial property values increase, rental rates go up. So whether you own or lease, you want to make the best use of every square foot you pay for.

To fully optimize every square foot, you must:

FIT THE MAXIMUM NUMBER OF PALLETS POSSIBLE INTO YOUR WAREHOUSE.

When pallets are warehoused in the most efficient way possible, you will

• Decrease your floor area needs, and,
• Decrease your costs per pallet position.

Which of course adds up to a greater ROI.

This article focuses specifically on the area of your facility dedicated to pallet racking.

Consider that in a Bulk Distribution Warehouse the space dedicated to pallet racking could account for 90%  of your warehouse space, or even of your entire facility with only 10% of the overall square footage used for offices.

On the other hand, if you’re running a more specialized warehouse that includes manufacturing, cold storage, wholesale, retail or research and development, your dedicated warehouse area might be as low as 50% of your total rental spend.

Compare costs of warehouse racking systems

Scenario 1: Reach Truck Aisles based on a 9’ 6” Aisle Width

1. Take the yearly lease cost for your facility – (L).

2. Enter the total area of warehouse space dedicated to racking . Call it (A).

3. Find what percentage of your lease expense is accounted for by (A)
   If your total leased area is 110,000 ft²  and your pallet storage space (A) = 100,000ft²  ,
   (A) = 90% of your leased area. We’ll say $14 per ft²  .

4. Add your Operating expenses per ft²  (OPEX)  (say $3) to (A). Total: $17.

5. So if we use 100,000 ft²  as the storage floorspace and multiply by $17 we get:
   100,000 X 17 = $1,700,000.

6. Multiply $1,170,000 by 5 (5-year lease contract) and you get: $8,500,000.
   So with the numbers we’ve used, the total 5-year operating cost for a 100,000 ft²  warehouse with standard racking =  $8,500,000
    
7. Add the purchase cost of 3 reach trucks – $8,500,000 + $200,000 =$ 8,700,000.

8. $8,700,000 + Purchase cost of pallet racking $1,000,000 = $9,700,000

Result: 100,000 ft²  of storage space needed.
Cost: $9,700,000

Scenario 2: VNA 6’ Aisles using a Turret Truck or Swing-Mast forklift

Here’s how VNA can cut down your costs:

1. Take the yearly lease cost for your facility – (L).

2. Enter the total area of warehouse space dedicated to racking . Call it (A).

3. Find what percentage of your lease expense is accounted for by (A)
   If your total leased area is 110,000 ft²  and your pallet storage space (A) = 100,000 ft²  ,
   (A) = 90% of your leased area. We’ll say $14 per ft²  .

4. Add your Operating expenses per ft²  (OPEX)  (say $3) to (A). Total: $17.

5. Point 5 is where it all changes.
   Instead of entering 100,000 ft²  as in Scenario1, shrink your projected storage floorspace to 80,000 ft²
   Why? Because 80,000ft² using VNA is equivalent to 100,000ft² using conventional 9’6” aisles.
   80,000 X $17 gives us $1,360,000.

6. Multiply $1,360,000 by 5 (5-year lease contract) = $6,800,000.
   So with the numbers we’ve used the total 5-year operating cost for an 80,000ft² warehouse is $6,800,000.

7. Add the purchase cost of 3 new VNA forklifts: $6,800,000 + $500,000 = $7,300,000 (Yes, VNA turret forklifts are definitely more expensive) but wait…

8. $7,300,000 + $1,000,000 for racking = $8,300, 000.

Result using VNA: 80,000 ft²  of storage space needed.
Cost: $8,300,000
A saving of $1,400,000 from using 20,000 ft² less space.

It gets even better. See how ongoing expenses get cut by 17%.

Now for the Total Savings 

If all these calculations have your head spinning, go to our Resources Page and download our 2 white papers clarifying why VNA can save space and dollars.

Easier yet, get one of our consultants to help you to make an informed decision.

Give us a call: 1800-465-3695, or 514-457-5358.