Do You Need a Big Warehouse to Boost Profit?
What size warehouse do I need? We’re going to make a potentially controversial comparison in this blog post between the housing market and other businesses, so proceed with caution. We’ll discuss the size of a company’s warehouse. Of course, we originally wrote this about 11 years ago. So things might have changed. Since then, a little thing called COVID-19 happened. And then people started downsizing in quite a few ways. Thus, this information may be a little out of date. But it’s still worth talking about.
When Bigger Isn’t Better
For the last few decades, house sizes have increased dramatically in size while household sizes have steadily decreased.1 That’s a strange correlation. It seems like the fewer people there are in a family, the less storage space they would need, wouldn’t you say?
However, the same isn’t true of rental properties. For example, in large cities, the average rental property has gone down in size over the last 100 years. Because real estate is at such a premium in those areas. Like we said, though, COVID-19 might have changed all that. We’ll have to see how it affects rental prices in big cities. Especially now that fewer people have to live and work in the same place.
Returning to the first point, what is driving this trend toward bigger and bigger houses? Maybe it’s meant to create demand. One could argue that having a larger house but fewer people in it leads to a desire to fill the house with stuff. It’s a marketer’s dream! Your problem is you have too much warehouse storage space. So their job is to get you to fill it up with furniture, appliances, video games, home entertainment systems, and all sorts of other amenities. But you probably don’t need all that extra stuff.
How about analogy. If you serve a meal on a huge plate, you’ll feel hungrier than if you serve the same meal on a smaller plate. Whether it’s houses or dinnerware, we feel an overwhelming need to fill them. Unfortunately, doing this can lead to financial and/or health problems. Why is that? Because we might spend more and eat more than we should. Which can lead to poor results in both body and wallet.
Do You Really Need More Warehouse Space?
We’re not sure if there’s a similar trend in stores and warehouses where bigger is synonymous with better. We sure hope not. But the same principles discussed above apply to businesses. Even if you’re just looking at moving to a bigger location because your business has grown so rapidly, we recommend you think hard about whether or not you really need the extra warehousing space before you make a final decision.
First, consider these questions:
- Am I using my current warehouse space to the fullest?
- How can I improve my warehouse management?
- Is it worth the extra cost to get a bigger warehouse?
To find out your storage space utilization and if you’re using your warehouse space to the fullest, you can analyze your inventory. That will help you see how quickly you fill orders and if you keep too many products in stock. This analysis also helps you figure out how to manage your warehouse better. By reorganizing your warehouse and improving your inventory management, you can save a lot of space and put your money to better use.
It’s common sense to run a cost-benefit analysis on any business decision you make. If you decide your business is expanding fast enough that you need to invest in more office space or storage space, then go for it. But if you learn that you still have plenty of room to grow in your current location, don’t worry about making a change yet.
Cut Out the Fat
Whether you’re considering buying a new house, moving into a new warehousing space, or ordering a meal, think about what you really need more than just what you want. What price will you have to pay to enjoy an extra benefit? Can you live without it? By paying close attention to how you use what you already have, you can avoid a costly mistake.
So we recommend you try out a good warehouse management. Fishbowl is the No. 1 manufacturing and warehouse inventory management software for QuickBooks users. Sign up for an online demo of Fishbowl today to start seeing dramatic improvements in your warehouse.