How to Maximize Warehouse Space with No Extension

May 26, 2023
14 min

To maximize warehouse space, companies often invest in automated guided vehicles or robots or implement as many traditional storage-maximizing practices as possible. Sure, these methods are essential in warehouse space planning. But they will all go down the drain with no software to track and manage the results.

Let’s find out how an off-the-shelf warehouse management system can optimize warehouse operations and when opting for custom warehouse management software is a smarter decision.

Top Issues Specialists Encounter in Warehouse Space Management

Top Issues in Warehouse Space Management

Top Issues in Warehouse Space Management

Inefficient Storage Practices and Poor Layout Organization

With the vertical and floor spaces overutilized and products placed in hard-to-reach spots, safety hazards, long pick-and-pack times, damaged goods, and delays will come forth. Meanwhile, the underutilized space (resulting from poor warehouse capacity planning and demand forecasting) leads to increased operating costs and wasted resources.

Along the same lines, poor layout organization like underoptimized picking paths and dock areas also reduces employee’s productivity and storage capacity.

Inadequate Inventory and Order Management

If a company doesn’t perform inventory analysis and demand forecasting (especially for seasonal products), stockouts or, on the contrary, overstocking will crop up. With the former comes lost sales and dissatisfied customers, while the latter reduces the available space and drastically increases operational costs.

At the same time, the lack of real-time inventory visibility leads to poor order processing, hence delays and high shipping costs.

High Labor Costs

On average, labor costs take up to 50% of all operational costs. And the worse the warehouse space management is, the higher the labor expenses. All because disorganized spaces and swamped-with-goods aisles impede the movement of workers and equipment like forklifts and pallet jacks.

Additionally, the lack of technological investment (robotics and management systems) results in disorganized workflows that otherwise would have been performed automatically.

Suboptimal Material Handling

One of the core warehouse management issues, poor material handling stems from underoptimized warehouse layouts, the lack of proper equipment with add-on features like GPS tracking and barcoding scanners, and the inability to gather and analyze data like order picking accuracy and cycle time.

With the issue persisting, a warehouse experiences longer order processing times coupled with increased labor and equipment maintenance costs.

Time-Consuming and Paper-Based Warehouse Management Operations

Paper-based operations lead to longer order processing times and low data connectivity. They make real-time inventory tracking impossible and jeopardize data security (how can one restore the data if the paper stack is stolen or burnt by fire?)

The Most Effective Traditional Warehouse Space Optimization Techniques

Use Pareto Analysis to Classify Goods According to Value and Number

According to the “80-to-20″ Pareto rule, 80% of the effects stem from 20% of the causes, meaning 80% of the revenue is generated by 20% of the top-selling products.

It’s easier to find out how to maximize storage space in warehouse once you’ve identified the products which bring the greatest value to your product portfolio, hence the ones you should focus on.

Calculate the value of each product, list them in descending order, define the cumulative value, and use a Pareto chart to graphically represent it.

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Apply a Low-Storage Method (Lean Production Model)

Developed by Toyota in the post-second-war world, the lean production model is implemented to cut resource waste, reduce operating costs, and increase warehouse storage capacity.

One of the model’s components is a Just-In-Time approach, implying that a company produces or stores goods according to ongoing customer demand.

Though the model cuts the excess storage, it comes with a higher risk of understocking in times of supply delays.

Partially Implement Dropshipping and Cross-Docking to Warehouse Operations

Drop-shipping is a non-storage practice where a retailer purchases goods from a third party and sends them directly to a customer. Meanwhile, cross-docking is when a company receives goods at a warehouse, but instead of storing them, sorts and ships them to customers immediately.

Manage Your Excess and Obsolete Inventory with the First In, First Out Approach

One of the warehouse space optimization techniques and an inventory management approach, FIFA is about ‘getting rid’ of the oldest goods first before proceeding with the newer products and ensuring that the excess goods don’t expire or fall into the obsolete category.

Reduce Overstocking with Backordering

Turning to backordering is a great warehouse space-saving idea that implies the production or ordering of products from a third party is triggered only after a customer places the order.

Backordering is surely an efficient practice to solve warehouse space problems. However, a company runs a risk of delays in supplies and production, hence highly unsatisfied customers.

Introduce Consignment and Vendor Inventory Management to Reduce On-Site Storage

Consignment allows suppliers to sell goods to the retailer but keep the ownership until the retailer actually sells products to customers. A company can optimize warehouse space since the approach prevents the buildout of excess and obsolete goods.

Meanwhile, vendor inventory management is when a vendor has direct access to the company’s inventory data and manages it on behalf of the retailer.

Replace Manual Processes with Automation

And we don’t mean only investing in robotics. All the methods we´ve listed above can be implemented with a touch of software that speeds up warehouse processes and reduces operating costs.

With automation, you can perform a Pareto analysis in a matter of seconds, monitor inventory levels in real-time for backordering, dropshipping, or cross-docking, or delegate the entire product management to vendors.

Now let’s check out what software for warehouse management is, the core types, and how it can save you time and eliminate waste.

What is Warehouse Management Software?

Warehouse management software or WMS is a type of software used for the automation of warehouse processes such as receiving the goods, storing, pick-and-packing, and sending them to a customer. It helps warehouse managers track inventory and orders as well as manage labor and material handling.

How to Maximize Warehouse Space with Software for Warehouse Management?

Use the Software to Optimize the Warehouse Layout

Warehouse management tools with 2D and 3D visualization features help warehouse managers get a good grasp of the building dimensions, the location of storages, and aisle layouts.

Based on the data input, the software creates blueprints, allowing users to manipulate the elements and make better decisions on how to optimize warehouse space.

Implement Real-Time Inventory and Order Tracking

Most software used in warehouse management allows users to streamline warehouse processes with barcoding, a feature that provides immediate insights into the product name, price, and its in-house location.

With tools like warehouse management systems, users can track stock levels and item availability. The software sends automatic inventory alerts when the inventory levels drop drastically, or the excess items fall into the risk of turning obsolete.

With real-time inventory tracking, the data is stored and can be later used for report generation and forecasting.

Streamline Pick-and-Pack Processes to Cut Labor Costs

Some warehouse management tools come with built-in navigation features. Other are stand-alone or baked-in voice-picking systems. All of them are a ‘warehouse Siri’ that guides workers to the location.

With such solutions, picking times get shorter, and workers can simultaneously perform other tasks (for instance, lifting or inspecting the goods) as their hands are free.

Improve the Management of the Material Handling Equipment

To optimize warehouse operations, use a digital solution with features like GPS tracking to gather data on who, when, and how uses the equipment. After you analyze the data, place the robotics closer to the locations where it’s used most often.

Meanwhile, monitor your supply chain in real-time. When you’re prepared for the arriving goods, you can easily schedule the staff and free up the equipment to reduce pick-and-packing times.

Omit Paperwork with eDocument Workflows

ESignatures are often a part of warehouse management software. They eliminate the pen-and-paper necessity and reduce data errors. Additionally, users can create templates for receiving goods, assigning pick tickets, and shipping orders.

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Types of Software for Warehouse Management

All-in-One Warehouse Management Systems

Often considered a one-stop solution, a once-and-done warehouse management system includes the basic functionality that covers the entire production, ordering, and shipping cycle.

Such a system serves as a stand-alone cloud-based platform where users store and manage their data, communicate with vendors, and track the supply chain in real-time.

The goal of an all-in-one tool is to streamline all warehouse operations without the need to integrate it with other tools, making it a misfit for companies with legacy systems.

Third-Party Logistics Management Systems (3PL)

As the name says, 3PL solutions make a perfect match for companies providing logistics services. They help users adopt eDocument workflows for the management of carrier contracts, bills of lading, invoices, receipts, and other traditionally printed documents.

3PLs ensure faster delivery times so the delayed or returned goods don’t take up the warehouse space. With client portals and instant communication features, providers are always aware of when the need to adjust the warehouse space strikes.

Types of Software for Warehouse Management

Types of Software for Warehouse Management

Enterprise Resource Planning Software (ERP)

ERPs go above and beyond the basic features of a standard warehouse management system. What differentiates them is a higher focus on customer relationship management and financial operations.

These solutions can help users maximize warehouse space by providing real-time visibility to inventory, adding clarity to the financial operations, and helping users stay in touch with their clients 24/7 in case the need for space adjustment arises.

Inventory Warehouse Management Software (IMS)

IMS comes in two types: a perpetual IMS that automatically updates inventory data in real-time once a transaction happens, and a periodic IMS that requires a user to manually gather the inventory data and later feed it to the system for processing.

With inventory warehouse management software, users can identify fast-moving and slow-moving items, prevent excess stocks, and track item movements with barcode scanners and radio frequency identification readers which IMS integrates with.

Transportation and Warehouse Logistics Software

Used for the management of transportation and logistics operations, these solutions offer real-time shipment tracking, route planning based on factors like weather and traffic, and carrier management (tracks carrier performance and assists in managing carrier contracts).

With the warehouse logistics software, users can also manage freight bills and payments and analyze key performance indicators like shipping costs and delivery time.

Warehouse Controls System (WCS)

The goal of a standard WCS is to help users get maximum control over the management of the material handling equipment and the inventory management system by integrating with both.

Based on the real-time data extracted from the IMS software, WCS improves the flow of the inventory and helps users get a good grasp of which locations are used most often and ones that might require optimization like narrow aisles and poor floor layout.

Core Warehouse Management Software Features

Features of Warehouse Management Software

Features of Warehouse Management Software

Inventory and Item Data Management

By and large, the lack of inventory management is the number one reason for disorganized and cluttered spaces. But with the help of the WMS with barcode and RFID scanners, one can increase warehouse storage capacity by ‘knowing’ the location and status of the inventory. Hence, users can easily categorize their products, prevent overstocking with timely stock and cycle counts, and initiate the sales of excess and obsolete goods.

Sales Management

If an IMS system is synchronized with sales channels, it can automatically update the inventory levels once a product is sold or backordered.

2D or 3D Warehouse Layout

Some WMS allow users to build design models to get full visibility of their space and adopt changes in a simulated environment before implementing them in real life.

Real-Time Product Tracking

One of the core warehouse management system features, real-time tracking provides users with real-time data on the product’s availability, characteristics, and location.

Automated Reordering and Simplified Purchase Management

Tools like ERPs and IMS can detect replenishment points and send auto-generated purchase orders to suppliers.

Customer and Supplier Databases

WMS stores contacts in one place, gathers data on customer behavior, and helps users identify the top-performing suppliers and highly valued customers.

Picking and Packing of Orders

Some WMS have baked-in voice-picking systems that help warehouse workers find the item’s location faster, therefore reducing delays and shipping times.

Shipping and Delivery Processing

WM solutions provide real-time visibility on shipping and delivery, timely informing both customers and retailers of possible delays.


Warehouse management systems like ERLs help users estimate the cost of materials, labor, and transportation as well as manage accounts payable and receivable, payrolls, bills, and generate invoices.

Auto-Generated Reports

Most WMS can generate inventory, order, receiving, and shipping as well as financial and performance reports. Learn how to build a custom reporting solution to streamline document management in our dedicated post.

Forecasting and Data Analytics

Some WMS offer demand forecasting, often a value-added feature. Whether a manufacturer or retailer (especially if a company relies on seasonal products), a company can benefit from a system that recommends optimal stock levels, analyzes business performance, and helps a company avoid the growing number of obsolete goods with the promotion of slow-moving items.

Third-Party Integration

A standard WMS like inventory warehouse management software must integrate with the company’s legacy systems, eCommerce platforms, business management software, and tools like barcode and RFID scanners.

Examples of Off-the-Shelf Software for Warehouse Management

Square Inventory

This free warehouse management software provides real-time visibility on inventory, sends alerts in the form of emails to users when a company runs short of items and allows them to easily import products with CSV spreadsheets as well as generate free inventory reports.

Retailers and eCommerce companies can move to a premium tool called Square for Retail which comes with a variety of pricing plans.


The company’s target audience is small businesses aiming to optimize their warehouse space and inventory tracking.

The free plan offers basic functionality that includes 100 entries, 1 user license, and 1 custom field. For more features, users must opt for advanced plans starting at $30 per month.

With advanced plans come unlimited barcode generation, search by scanning, low stock and summary reports, and quantity-based alerts.

Zoho Inventory

Zoho offers a variety of plans with rich functionality and is a good match for both small and large businesses.

The free plan includes 50 orders and 50 shipping labels per month and offers integration with one Shopify store and multiple eCommerce platforms.

With advanced plans, a user can manage up to 25000 orders and shipping labels per month in 15 warehouses with 10 automated workflows and Zoho Analytics.


NetSuite is an ERP system that helps businesses with multiple subsidiaries globally manage their financial operation, inventory, and orders by getting full visibility of the supply chain.

The final price for the product is based on the core plan plus additional functionality coming in modules (for instance, forecasting and analytics), and the number of the app’s users.


The all-in-one open-source development platform offers a family of apps that seamlessly integrate and cover all business operations.

The platform offers smart inventory management with add-on features like reporting and analytics and is suitable for companies with multiple warehouses that have adopted cross-docking and drop-shipping.

Why is Custom Warehouse Management Software a More Effective Solution Compared to Off-the-Shelf Systems?

ReadyMade Warehouse Management Solution vs Custom Warehouse Management Solution

Ready-Made Warehouse Management Solution vs Custom Warehouse Management Solution

Full Ownership of the Software

This means users have complete control over the updates and app’s features. They can modify the product in a way that suits their business goals and needs the best.

Scales Along with Your Business

As the business grows, custom warehouse management software adjusts to the fluid demands due to high customizability and functionality, providing top-notch management of multiple warehouses from one platform.

Customizable Functionality

Most custom warehouse management solutions are built with a modular architecture in mind. Users can add new modules and remove the new ones depending on the company’s needs.

Cost-Effective in the Long Run

Users don’t need to pay monthly fees as in case of the ready-made solutions. On the contrary, custom warehouse management software is an upfront investment that includes software development and implementation payments.

Exceptional Third-Party Integration

Most WMS are designed with extremely narrow integration with other products. Because of that, a company can’t properly integrate off-the-shelf software with its legacy systems.

Meanwhile, custom warehouse management software seamlessly integrates with other business management solutions like CRMs, accounting software, and IoT devices.

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When Should a Company Opt for Custom Warehouse Management Software?

Its Inventory-Related Calculations are Complex and Should Be Automated

Calculating the ratio of the expected vs sold inventory has the highest error rates in companies with large-scale operations. Sometimes, the calculation features of a ready-made solution aren’t enough.

Custom-developed software like ERP or perpetual inventory warehouse management software automates calculations like reorder safety points and safety stock levels to prevent the emergence of excess and obsolete goods that take up the warehouse space.

The Company Needs Real-Time Tracking of the Supply Chain

Unlike most off-the-shelf solutions, custom warehouse management software draws inventory-related data from multiple places like CRMs, accounting, and sales systems (provided by seamless third-party integration), hence offering more accurate inventory tracking in real-time.

The Company is a Manufacturer with Complex Production Cycles

For instance, in Make-to-Order production cycles, products are manufactured only after a customer has placed an order. Here, the risk of delays and postponed orders might disrupt the supply chain.

Another case is when a company might need enhanced quality control for specific products, involving complex testing and multiple inspections, or is a retailer that sells seasonal products, hence is supposed to plan is production cycles in advance.

Retail and Wholesale Companies with Frequent Supply Chain Disruptions

Manufacturers that rely on overseas supplies may experience frequent chain disruptions, therefore experiencing the need for demand forecasting to prevent understocking and overstocking.

Another case is wholesalers whose operations fully depend on the transportation logistics quality. If the quality is low, a company experiences delays, in a result of which the excess products clutter the warehouse space.

Purchasing New Materials Includes a Multitude of Indicators to Be Considered

For some companies, the gap between the highest and lowest points in ebbs and flows is too wide, which means that a company is in dire need of software with enhanced demand forecasting and complex metrics.

Other indicators which a company might be struggling to evaluate and might need a comprehensive solution to do so are lead times, quality standards, and supplier performance.

What is the Average Cost of Warehouse Management Software Development

To get off on the right foot, learn the stages of the custom software development process and the hourly software development rates in the country you’re going to outsource from (if you prefer this option).

The core stages are project planning, UI/UX design, development, quality assurance, and integration. The realization of each stage will require hiring different professionals; therefore, the total project costs will be the sum of the costs paid for each stage based on the number of hours devoted to the project completion.

What Makes Ascendix a Qualified Partner in Warehouse Management Software Development?

During 16+ years in real estate, we’ve helped brokers, owners, venture capitalists, and property managers automate their daily tasks with technology and upgraded their labor-technology strategies.

Why Ascendix?

  • We’ve spent almost two decades in real estate as seasoned custom software developers and the authors of 17 products;
  • Our confluence of skillsets lets us stand out among other companies who offer only ready-made solutions or solely focus their practice on custom development;
  • We can build a wide array of digital solutions, including floor plan software, reporting and document management systems, and custom CRMs among many others;
  • Ascendix can build software for your company, test it, implement and integrate it with the legacy systems, or audit and fine-tune the solution your business has already adopted;
  • With 5 offices located in different countries, we deliver solutions globally at reasonable rates.

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What is software for warehouse management?

Software for warehouse management is a digital solution that helps eCommerce, manufacturing, and retail businesses optimize their warehouse operations, namely, inventory and order management.

Why are storage costs reduced under a perpetual inventory system?

Storage costs are reduced under a perpetual inventory system due to real-time visibility into inventory associated with higher data accuracy and automatic inventory level updates.

How to make a low-cost inventory storage system?

To make a low-cost inventory storage system, identify the type and the amount of inventory to be maintained as well as the bottlenecks in warehouse operations. Further, choose a ready-made warehouse management system or opt for a custom-developed solution if the workflows are complex.


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