3 Most Common Hidden Costs of Wasted Warehouse Space

We’ve analyzed the financial impact of inefficient storage—and we’re here to help you maximize your warehouse with Montel’s intelligent storage solutions.

All warehouses walk the line between stocking enough inventory to be resilient to fluctuating demand and optimizing it to lower their carrying costs as a percentage of their total operating budget.

But is your warehouse constantly experiencing stockouts, overstock, and spoilage? Are your operating costs far higher than you think they should be? Let’s examine three hidden costs of wasted warehouse space and how Montel’s custom high-density storage solutions for warehouses can expose and eliminate them.

Hidden Cost No. 1: Excess Inventory

According to the latest figures, warehouses hold about $1.32 worth of inventory for every $1.00 in revenue, with the average industry carrying cost hovering around 25 to 30 percent of total inventory value.

How much of your carrying costs are tied up in excess inventory? Unlike buffer stock, which helps warehouses weather spikes in demand, excess inventory is just dead weight, leftovers from an overzealous forecast, or otherwise unsalable goods.

That said, a lack of market savvy is only part of the problem; your demand projections are only as good as your inventory transparency. Without it, not only will you struggle to realign your inventory with what your customers want, but you introduce other knock-on effects that will bleed your capital dry.

Hidden Cost No. 2: Underappreciated Labor

From 2023 to 2024, the average annual salary of a warehouse staff member rose by $2,252.00, and as such the cost of picking and packing a single item rose 7 percent.

Nothing in warehousing and logistics is accomplished without a capable labor force. Capital tied up in managing excess inventory, or suffering from its losses, cannot go toward mitigating the top cause of turnover in warehousing and logistics employment: low pay.

Moreover, even the best warehouse workers will struggle with inventory in an unoptimized warehouse space, and these shortfalls compound an already expensive and complex problem:

• Picking and returns management: Digital commerce necessitates a returns management process as precise and efficient as standard picking practices. However disorganization and decentralization slows picking times and raises the costs per pick. The same is true for returns.
• Training and daily duties: Imagine training an employee on how to pick at an inefficient warehouse, how often they’ll need reminders or assistance from coworkers, or how often they will just outright make mistakes.

Hidden Cost No. 3: Loss from spoilage or damage

As wide-reaching as excess inventory and underutilized workers are for a warehouse struggling to better use its space, losses from expired, damaged, or stolen goods are avoidable losses that, if left unchecked, become unforced errors in your improvement plan.

In 2022, the average retail shrink rate grew to 1.6 percent, accounting for $112.1 billion in losses. Underutilized storage spaces or traditional storage equipment can make your business more susceptible to any kind of shrinkage. Perhaps many warehouses don’t consider their racking part of a loss prevention strategy, but traditional storage, with its open aisles and fixed, unadjustable hardware, can easily lead to unexpected stock depletion, mistakes in forecasting demand, and further waste and expense.

Maximize Warehouse Space with Montel

Montel’s custom high-density storage systems for warehouses strengthen businesses against the hidden costs of inefficient storage.

Industrial mechanical-assist or a powered mobile rack allows for consolidating your inventory into a smaller footprint with equal or greater capacity than traditional static racking. Other benefits include:

• Easier inventory tracking
• Smoother picking and return operations.
• Greater security thanks to remote security and on-rack safety features.

Check out how other warehouses partnered with Montel to not only maximize their storage, increasing their capacity while decreasing their storage footprint but also eliminate all the little ways waste creeps in and siphons away their successes.

• Struggling against many small cost inefficiencies, Airbus invested in a single solution to address them all: powered mobile racks strong enough to stock airplane parts and intelligently designed to save space while doing so.
• Miller Industries consolidated its manufacturing storage under one roof, saving its staff time and its towing vehicles wear and tear between picks.
• Need a blueprint for increasing your capacity while protecting your cold storage warehouse against spoilage? Check out the SAFERAK 32P-powered mobile racking system for Immunotec.

For more information on mechanical-assist or powered mobile racking systems for warehouses, reach out to your local Authorized Montel Distributor and ask about our free no-obligation consultation, including 2D and 3D layout renders.