How to Set up a Warehouse: A Step-By-Step Guide

A 7 step process for how to set up a warehouse space that is both efficient and well suited to your specific business needs.

Are you a business that is ready to take the plunge and set up a warehouse for inventory storage, decreased shipping times, and overall cost savings? Whether it’s your first time setting up a warehouse or you need an upgrade, this step-by-step guide will walk you through everything you need to know to setup an efficient and smooth running warehouse.

From selecting the right location to installing management software and staffing appropriately, every detail matters when it comes to understanding how to set up a warehouse. There are 7 total steps involved, though different experienced warehouse managers may break them down in various sub-steps. Let’s get started!

two engineers discussing how to set up a warehouse

Table of Contents

Step 1: Determine the Amount of Required Space

It is important to decide how much square footage you need for your warehouse space. That way, you will know if the warehouse has ample space to meet the requirements for the amount of material or other processes you need to accommodate.

Additionally, knowing your warehouse space requirements helps you estimate the cost of rent, utilities, materials, and more. Space requirements play a major role in the overall warehouse layout (step 2) as well. So, it is important to take some time and think carefully about how much space you will need in your warehouse before you begin any implementation.

If you are setting up a headquarters for your business, you will likely also need dedicated office space, so take account of that when designing your warehouse.

A blueprint to determine warehouse layout, warehouse space, and warehouse storage

Pro Tip: Consider High-Density Pallet Racks

Different types of pallet racks greatly affect the cost per square foot to store pallets. Some configurations enable pallets to store at a much greater density than other solutions. For example, a four-deep rack with 8 pallet spaces high requires much less floor space per pallet than a single-deep rack with 4 pallet spaces high. You can quickly see the difference with our pallet storage capacity calculator.

Don't Ignore Future Needs

Something vital to consider when determining how much space you need is to consider your future growth goals. If you don’t plan for your future storage and throughput needs, you may find yourself looking for a new space again. Since the capital cost of building a warehouse is usually recovered over several years, failing to plan for the future can be a costly and critical mistake.

Step 2: Pick a Good Location

After you know how much space you need to run your warehouse, you can figure out where it should be located. As it is with nearly every other venture, location is key. At the very least, the size requirements you determined in step one may disqualify some locations from your list of options.

A warehouse location in along major highways

Why the Location of Your Warehouse Matters

You need to be sure that you are choosing a location that is accessible and convenient for your customers. If your warehouse is too far away, your customers may not be willing to go out of their way to get their products from you.

You also need to consider the cost of shipping. If your warehouse is located in a remote area, the cost of shipping may be higher than if your warehouse were located in a more populated area. This can impact your bottom line and may deter potential customers from doing business with you.

Another factor to consider is the climate. If the potential location of your warehouse is in a region that often has severe weather such as snow storms, this may cause frequent interruptions in your business. This will help to ensure that your products are stored properly and that they do not spoil due to the heat.

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Step 3: Designate a Warehouse Layout & Flow

A warehouse layout is important when setting up a warehouse because it can affect the flow of goods and workers. A well-organized warehouse can improve efficiency and worker productivity. There are a few different types of overall warehouse layouts:

  • Straight
  • L-shape
  • U-shape
A graphic illustrating the 3 types of order picking warehouse layouts

Each warehouse layout has its advantages and disadvantages. For example, a straight layout is good for high-volume warehouses because it allows for quick and easy access to all parts of the warehouse. However, it can be difficult to maneuver large items through it.

An L-shape layout is good for small warehouses because it uses less space than other layouts. However, it can be difficult to move goods from one side of the warehouse to the other.

A U-shape layout is good for medium-sized warehouses because it allows workers to move between adjacent aisles quickly.

Warehouse Flow Determines Efficiency

Warehouses not only need the right overall layout, but also an efficient flow of materials. This means taking into account the product types and quantities that will be stored. Not only the types and quantities of products but how they move through the warehouse. This involves thinking about the different sections that will be needed, such as packing and shipping, receiving, and storage areas.

The best warehouse layout includes a good directional flow from inbound and outbound docks and between warehouse aisles

Each area will need its own layout and a clear directional flow in and out. A receiving area layout, for example, needs inbound docks, a staging area, and an outbound section for materials to move to their next areas such as storage or manufacturing. A shipping area usually needs to be located close to the storage area and has packing stations.

Pro Tip: Utilize Layout Software

It's helpful to draw up your warehouse layout design in software specifically suited for warehouse floor plan creation. Tools like these help you visualize and allocate space for the different areas of your warehouse including storage spaces, and warehouse picking areas. If you plan on manufacturing, you can also draw up ample production space in your warehouse layout.

Step 4: Choose Necessary Warehouse Equipment

With your overall layout and flow in place, next, you need to know what equipment is needed for your warehouse space.

Different kinds of equipment can greatly affect the efficiency of a warehouse setup. Warehouse storage equipment like pallet racks, shelving units, and other solutions for storage space help organize goods for better access and visibility. This helps workers quickly locate items as needed and reduces wasted time looking for items.

An overhead image of a forklift for warehouse equipment

Materials storage also requires the movement of materials. That means pallet jacks, forklifts, dollies, and other material-handling equipment are also necessary for your warehouse setup. Automated storage solutions such as conveyor belts and automated guided vehicles are a great way to make the movement of materials in your warehouse layout more efficient.

Note: Consider Automation

Warehouse automation is a great way to utilize technology to get the best possible use of your warehouse floor space, even for small warehouse spaces.

Warehouse safety is also important and requires the right equipment. For instance, pallet jacks help to move heavy loads safely while ladders provide access to hard-to-reach areas. Other safety items may include protective gear like gloves and glasses as well as fire extinguishers.

Finally, warehouse security is essential to protect both goods and workers. This may include CCTV cameras, alarms, or locks on doors or shipping containers.

Step 5: Implement a Warehouse Management System

It’s important to have a dedicated system to monitor and manage items in your warehouse. That’s because manually tracking inventory leads to all sorts of human error and labor hours. A digital inventory or warehouse management system (WMS) helps you keep track of what products are in your warehouse and when they need to be replenished by automating data entry and storage.

A WMS does far more than just store inventory information though. Some robust systems will guide you through the entire warehouse setup process so you can ensure you have the ideal warehouse layout. It can also help you quickly store, locate, pick, and track products from receiving through shipping. This ensures that products are delivered on time and helps reduce the costs associated with lost or damaged goods.

Not only that, but a WMS can also help streamline processes by analyzing high-turn SKUs and altering their position, or even picking pathways in the warehouse.

Ultimately, a warehouse management system can help you maximize the efficiency of your warehouse and ensure that goods are delivered on time. It’s a valuable tool for any warehouse operation.

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Step 6: Staff & Train Appropriately

Finally, it’s important to ensure your warehouse has the right staff to properly function. This includes having enough staff to manage operations efficiently as well as training them on the best practices for warehouse management.

Having a well-trained, knowledgeable team is essential for an efficient warehouse. You need staff who can quickly and accurately process orders, manage inventory, and ensure safety protocols are followed.

Investing in the right staffing solutions also helps reduce turnover rates so you don’t have to constantly train new employees. This helps keep your operations running smoothly and costs down.

The right warehouse staffing solutions can help you maximize efficiency in your warehouse, ensuring that goods are processed quickly and accurately while keeping costs down.

warehouse staff being trained on proper use of workspace equipment and equipment storage

Step 7: Monitor Efficiency & Implement Lean

Of course, the key to an efficient warehouse is ongoing monitoring. This includes tracking performance and making small changes as needed to improve efficiency and reduce costs.

One way to do this is by implementing lean warehousing principles. Lean seeks to streamline processes by minimizing waste, reducing cycle times, and improving quality standards. It looks at the entire system to identify areas of improvement.

For example, you may implement 5S, which focuses on effectively organizing and maintaining the workplace. Or you may use just-in-time (JIT) inventory to reduce inventories and speed up production.

By monitoring efficiency and implementing lean, you can ensure that your warehouse is as efficient as possible, helping to increase productivity and reduce costs.

Conclusion: How To Set Up a Warehouse

Setting up and managing an efficient warehouse requires careful planning and ongoing monitoring. While there are many things to consider, the key steps include finding the right space, investing in the right equipment, implementing a warehouse management system, investing in staffing solutions, and monitoring efficiency.

By taking these steps you can ensure that your warehouse runs smoothly and efficiently, helping you meet customer demands while reducing costs. With the right warehouse setup and management, your business can easily achieve its goals.

Staff deciding on efficient warehouse layout for equipment such as packing tables, warehouse aisles, and receiving and shipping areas

Bonus Step: Have a Contingency Plan - Third-Party Warehousing

While having an efficient warehouse is essential for business success, sometimes it is difficult to manage the process yourself. Outsourcing your warehousing processes is always an option you can consider.

By outsourcing, you can take advantage of experienced professionals who have already built out the layout, flow, software, people, and process to complete your tasks as efficiently as possible. Many times, the scale and capabilities of a third-party warehouse are less costly than building the solutions yourself. With the right partner who can scale with you, you don’t have to worry about having enough space for your growing requirements.

Free Warehouse Planning Tools

Warehouse Capacity Calculator

Need help figuring out the total volume of usable space in your warehouse? We built a simple tool to help you calculate that.

Pallet Storage Capacity Calculator

The pallet storage capacity calculator quickly determines the total number of pallets your warehouse can store based on rack configuration.

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