How to Design Locations and Racks in your Retail Warehouse?

How to Design Locations and Racks in your Retail Warehouse?

Design a Warehouse Location System for Small Business Retail

In this article, I continue designing a Warehouse Location System for my Small Business Retail fulfillment operations. You can check out my previous articles about my sample retail warehouse design by following below links.

>>How to design your retail warehouse layout for your small business?

>>Warehouse Technologies to improve fulfillment process – Barcode Technology

Locations or addresses are the main components of a successful warehouse location system. Locations shape physical processes and provide easy access to inventory in the warehouse. The locations should be very clear to operators when they see the location codes on the mobile devices or paper tickets.

How to code your inventory location system

There is no perfect coding system for inventory locations. I will try to explain a simple methodology which I use for small business retail warehouses.

Location codes consist of three fundamental elements; sector, column, and level. (Some warehouses have only one level of locations). Sector, column (bay) and level codes can be made of numbers, letters or both. (A for first level and B for second level etc.) Letter and number combination is most commonly used in defining sector codes. For example, A-1 or B-02; where initial letter shows a zone, an aisle, a street or a block, following number shows the row or line number. I will use the same warehouse layout which I explained in my previous article.


You can apply below steps to start designing your warehouse location system:

Warehouse: If you have more than one warehouse then a code referring the warehouse must be added preferably as an initiative to the location code.

Section code: Define your sections according to the warehouse layout which you drew in the previous sections.

Inbound staging area: I suggest to use a simple numeric character for the inbound staging area. In our sample warehouse layout, the coding formula for inbound staging area can be “Section-Sequential number”. Eg. A-1.

Outbound shipment area: Similar to the inbound staging area, the coding formula for outbound staging area can be “Section-Sequential number”. Eg. A-2.

Back-to-back racks: Back-to-back racks need more attention. It is better to define aisles, levels, and columns for back-to-back racks. I used the “Section-Aisle-Column-Direction-Level” coding formula in my small warehouse. Eg. B-1-1-L-1 (Section B, Aisle 1, Column 1, Left side, Level 1), B-1-1-R-1 (Section B, Aisle 1, Column 1, Right side, side, Level 1)

Free areas: In our sample warehouse layout design, the coding formula for the free areas can be “Section-Sequential number”. Eg. C-1 and C-2

Value added services: The coding formula for the value added services area can be “Section-Sequential number”. Eg. E-1.

Packing desks: The coding formula for the packing desks can be “Section-Sequential number”. Eg. D-1,D-2,D-3.

Damaged product area: The coding formula for the damaged area can be “Section-Sequential number”. Eg. F-1.

Moving Locations: If you have locations that move in your warehouses such as totes, carts or racks on wheels or other items in your warehouse location system, you should use a code that identifies the function of that location. Eg if you have cooling racks for baked goods, you may want to code them as “COOL-1” or “COOL-2”. Or you may just use a code that identifies the card shape, e.g if you have a red tote you might call “FERRARI-1” rather than using the sector, column, level combination which might confuse pickers as they try to make sense out of that combination.


What is a location label and why do we need it?

In order to have an effective inventory management in your warehouse, every physical location needs to be separated by clear lines in your warehouse and every physical location needs to have a location label with a matching location code available on Inventory Management System. I have already explained different warehouse location types and how to code the locations in my previous article.



Inventory items need to be put away quickly for an efficient stock management process. Therefore, items should be put away in a way that leaves no question such as “to which location”. Location codes must be designed in a way that makes navigating in the warehouse effortless and smooth.

How to Print and Mount the Barcode Labels?

  • Make sure to have a label printer and suitable labels ready.
  • Thermal transfer printers require ribbons and print in the colored ribbon installed to normal label paper.
  • Direct thermal printers only print in black and only on thermal label paper.
  • Shelf labels are often white for good contrast with special color coding and arrows.
  • If there is no shelving system available in your warehouse location system and the inventory is being kept on the ground, inventory locations have to be separated from all sides by clear lines whereas location labels can be mounted on a carton sheet or a plate right above the location attached to a cable or a simple rope. In this case, at least a letter size paper should be preferred for both the person who reads it and high range scanning of the barcode.
  • Make sure that labels show the full code of the location and no 2 labels should be the same.
  • Labels should be mounted so as not to obstruct normal activity or get easily ripped off or damaged.
  • Before applying the label, make sure that the surface is clean. If you have any doubts about whether the label will stay for a long time, cover the label with clear packing tape.
  • If you are trying to apply a label to a wire rack, use the duct tape on one side of the wire so that the sticky side of the label and the sticky side of the duct tape will stick together with the wires in between.
  • If you need to use arrows, print a sheet of arrows using a word processor and then cut and tape the arrows on either side of your labels.

When location codes of two different levels are mounted in the same place between shelves, an arrow stating the direction of the location can also be added to the label.


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