Finally, your business is growing. However, current processes and systems in the warehouse seem inadequate to keep pace. More capacity is clearly needed. But the key questions you need to answer are: how much, and when will it really be needed?

The first step here is to develop capacity requirements. Ultimately, that first step will also be the primary driver of the project cost. In other words, it deserves more than a cursory statement such as, "Let's plan for sufficient capacity to meet our peak in 2009."

Of course, you'll get into the traditional questions. What is the projected rate of growth? How does demand on the elements of capacity change during the year, the month – or the day?

Are you projecting growth because the entire market is growing or because of a new product plan? Or is it because you need to demonstrate growth to the shareholders? Probably some of each, but not all at the same rate.

Forecasting them separately facilitates discussions of the probability of hitting the targets. It is amazing how, when compounded over several years, a small change in growth rate impacts the life of a given capacity.

But, having a rational way to discuss the future still leaves many capacity questions unanswered.

That's why you have to break warehouse capacity requirements into three distinct categories: inventory holding, throughput, and stock-keeping unit (SKU) count.

It's easy to be fooled by optimism regarding improved control of inventory and SKU growth. But marketplace realities often foil the plans. It's best to look at your real track record over the past 3–5 years and accept it as the best indication of our ability to manage them.

Ideally, capacity would be infinitely variable, and added just as it is needed. Up to a point, for manual processes, throughput capacity can be linear, accommodating growth by gradually adding staff until the congestion gets unmanageable. For more mechanized processes, there may be a possibility of adding capacity in phases.

Storage of inventory, on the other hand, will require more space, assuming that we have already done the best we can with storage density and slot utilization. Pre-planning building expansion by defining an expansion wall and properly arranging functions inside will minimize rearrangement when the time comes.

For each operation, there are logical capacity increments. It's also good practice to plan the transition from simple picking processes to more complex batch processes as the volume projections grow.

Sometimes, peak requirements are extreme as in back-to-school, special promotion and Christmas-related businesses. Because these peaks are often at the heart of the business, you cannot fail to meet them. But, installing sufficient capacity for an extreme peak 5–10 years away creates a system that is significantly underutilized 90% of the time.

It is exciting when you look forward to a bright future. But planning design requirements for capacity is more than a marketing forecast. It has a complex interaction with process planning and facility design, too.