9 Tips for Improving Warehouse Efficiency (2026)

Your warehouse operations touch nearly every part of your business. Improving warehouse efficiency helps products move through your facility quickly and accurately. It also helps control costs by eliminating wasted space, minimizing manual labor, and reducing errors that lead to returns or re-shipments.

Small workflow improvements can produce large gains. A 2025 Descartes report found that BW Retail was able to improve labor efficiency by 45% to 60% after implementing a warehouse management system (WMS). Employee onboarding also dropped from several weeks to less than 20 minutes.

This guide covers how to improve warehouse efficiency while also preparing your facility for higher order volumes. 

What is warehouse efficiency?

Warehouse efficiency measures how well a facility uses its labor, space, and systems to fulfill orders. Higher efficiency lowers fulfillment costs and prevents shipping errors that can lead to returns. When customers receive the right order on time, they have a better experience after checkout.

In warehousing, efficiency measures:

• Labor required per order
• Time needed to fulfill an order
• Order-picking accuracy
• Inventory accuracy
• Warehouse space utilization
• Fulfillment cost per order
• Return rates caused by warehouse errors

The US Bureau of Labor Statistics found that labor productivity in warehousing and storage fell by an average of 7.4% per year from 2019 to 2024. This means the industry produced less output for each hour worked. Tracking how much labor each order requires is the first step to improving your own warehouse operations. 

Metrics to help you measure warehouse efficiency

Warehouse efficiency covers more than speed. An operation can ship orders quickly, for example, but still lose money due to inventory errors or poor space utilization.

A warehouse management system (WMS) records much of this data as inventory moves through the facility. Here are some key performance indicators (KPIs) to consider tracking: 

Picking accuracy

Picking accuracy is the percentage of orders picked without an error. The formula is:

Picking accuracy = (Correctly picked orders / Total orders picked) x 100

Low accuracy points to a problem during item selection or verification. Barcode validation can help prevent the wrong SKU from being packed. According to a 2025 Warehousing Education and Research Council (WERC) report, best-in-class picking accuracy should be around 99.68%. 

Order cycle time

Order cycle time starts when an order enters the system and ends when it ships. The formula is: 

Order cycle time = Total processing time / The number of orders fulfilled

WMS timestamps show how long orders spend at each stage. If completed picks sit at the packing station, for example, you know that the delay comes after picking. 

Inventory turnover

Inventory turnover measures how quickly a business sells and replaces stock. The formula is:

Inventory turnover = COGS / The average inventory for the same period

Low turnover points might mean you have excess or slow-moving stock. A very high rate can signal that inventory levels are too low to support demand. Compare the result with prior periods and replenishment data before changing purchase quantities.

Dock-to-stock time

Dock-to-stock time measures how long an inbound shipment takes to become available in inventory. The clock begins when the shipment arrives and ends when the goods are stored and recorded in the WMS. The formula is:

Dock-to-stock time = Total receiving time / Receipts

A long cycle points to a receiving or putaway delay. Compare timestamps to determine where goods are waiting. According to the WERC report, best-in-class dock-to-stock time is below 3.5 hours.

Storage utilization

Storage utilization compares occupied storage space with total usable capacity. The formula is:

Storage utilization = (Used capacity / Usable capacity) x 100

A low percentage means the current layout leaves capacity unused, whereas a warehouse near full capacity may suffer from congested aisles and longer retrieval times. Slotting fast-moving products closer to picking areas can reduce unnecessary travel.

Labor productivity

Labor productivity tracks the number of orders fulfilled per labor hour. Compare the results across shifts or workflows to find where the same work consumes more time. The formula is:

Labor productivity = Orders fulfilled / Labor hours

Low productivity can indicate an inefficient picking method. You’ll want to compare warehouse productivity with picking accuracy before making changes. Faster work doesn’t improve warehouse performance if errors increase.

How to improve warehouse efficiency

Use your warehouse KPIs to decide what to fix first. Find the metric furthest from its target and trace it back to the process causing the problem. 

For example, if dock-to-stock time is too long, review how incoming goods are received and stored. Measure the same KPI periodically after making changes to see whether performance improved.

Here’s how to improve your warehouse efficiency. 

1. Improve layout and slotting

Review the layout when order cycle time is high or labor productivity is low. Picking data can show which stock keeping units (SKUs) generate the most warehouse travel. Place fast-moving products near packing stations and assign each SKU a clearly labeled location.

Warehouse slotting decisions also need to account for product size and order frequency. Review placements as demand changes so that yesterday’s bestsellers don’t occupy the most accessible locations indefinitely.

2. Improve inventory management

Inventory management determines how much stock you hold and whether that stock is available when an order arrives.

Use ABC analysis to rank SKUs by their annual usage value. High-value A items receive the closest control. You can use cycle counts to check those products more frequently than lower-value stock, reducing the need to pause operations for a full inventory count.

Set reorder points using sales velocity and supplier lead time. Update it before seasonal inventory demand changes so replenishment reflects the expected order volume.

Real-time visibility is critical as inventory spreads across stores and warehouses. With Shopify, store owners can track quantities separately at each location, choose which locations stock each product, and configure how orders are routed for fulfillment.

3. Streamline order picking

Match the picking method to the work moving through your warehouse: 

Picking accuracy and orders per labor hour show where your process could improve. Slow but accurate picking usually means that workers are walking too far or waiting for work, while fast picking with frequent errors points to weak product verification. WMS data can help narrow the problem to a shift, zone, or order type.

A 2025 Scientific Reports study examined order picking in robotized warehouses. Its experiments found that planning order assignments and travel paths together reduced completion time and travel costs. 

That research might have focused on automated systems, but it shows why picking routes shouldn’t be evaluated separately from how work is assigned.

4. Standardize receiving, packing, shipping, and returns

Map each warehouse process from the first physical handoff to the final WMS update. The map will show where goods sit untouched and where workers repeat the same task. It can also uncover inventory updates that happen late or outside the system.

Use the map to create a documented process for each workflow:

• Receiving. Check deliveries against purchase orders before putaway. Update inventory when goods reach their assigned location.
• Packing. Verify the order before sealing the package. Use the same packing instructions for each order type.
• Shipping. Confirm the label before carrier handoff. Record the shipment in the WMS at the same point each time.
• Returns. Inspect returned products once. Record whether each item can be restocked before moving it.

These controls reduce errors that can follow an order beyond the warehouse. In a 2025 Descartes study, 66% of the 8,000 consumers surveyed reported a delivery problem.

While not every delivery problem begins in the warehouse, consistent processing reduces preventable issues before an order reaches the carrier.

5. Implement a warehouse management system and warehouse apps

Before implementing new warehouse software, check to see what your existing system can do for you. If you’re a Shopify store owner, you can buy and print labels from the Shopify admin. Businesses with two or more active locations can also use order routing to decide which location fulfills each order.

A robust warehouse management system adds more control inside the facility. Demand continues to grow: MarketsandMarkets projects that the global WMS market would grow from $4.57 billion in 2025 to $10.04 billion by 2030.

If you end up wanting a WMS, look for features that address your bottlenecks: 

• Barcode scanning. When you scan products when they enter the warehouse and again during picking, you create a record of each movement and catch incorrect SKUs before packing.
• Real-time inventory tracking. Inventory quantities update as stock moves, so that warehouse teams can see what’s available without waiting for a manual count.
• Pick-path guidance. The WMS can arrange picks in an efficient sequence so that workers spend less time crossing the same aisle.
• Replenishment alerts. The system flags low stock in a picking location so that workers can refill it before new orders are delayed.
• Reporting dashboards. Warehouse data is collected in one place, which means managers can follow picking accuracy or labor productivity and see whether a process change worked.

Apps can fill a specific operational need when Shopify’s native tools no longer cover it. ShipHero adds inventory and warehouse management capabilities, for example, and Easyship enables multicarrier shipping.

6. Use Shopify inventory and order routing data

Shopify routes orders using the inventory data and fulfillment rules in your admin. That process relies on accurate stock counts, correct location settings, and routing rules that match how the business operates. 

Pay close attention to these parts of the setup:

• Inventory records. Shopify tracks available stock at each location, but warehouse counts need to match those records so the system knows where an order can be fulfilled.
• Fulfillment locations. A Shopify location can be a store or warehouse, but only locations configured for online fulfillment contribute stock to the online quantity.
• Order-routing rules. Shopify order routing ranks the locations that can fulfill an order. The default setup limits split shipments before considering the customer’s market and distance from the location.

You can always review these settings when the fulfillment network changes. A new warehouse may need a higher priority, while a store with limited packing capacity may need to stop fulfilling online orders. Otherwise, you’ll continue routing orders according to an operating model that no longer applies.

Shopify Flow can automate work triggered by events in Shopify or connected apps. For example, a workflow can send an internal alert when inventory falls below a set quantity. 

These warehouse apps take it a step further:

• PULPO WMS adds warehouse-position tracking and guided fulfillment.
• Order Fulfillment Guru supports routing across suppliers or connected Shopify stores.
• Unleashed adds purchasing and inventory control across multiple warehouses.

7. Apply 5S and continuous improvement 

The 5S method provides a framework for keeping work areas organized and making problems easier to see. The National Institute of Standards and Technology (NIST) describes the five steps:

• Sort. Clear out anything the area doesn’t use.
• Set in order. Give every tool and product a defined location.
• Shine. Clean the area and check equipment while doing it.
• Standardize. Use the same setup and process across shifts.
• Sustain. Check the area regularly and maintain the standard.

The work doesn’t end when shelves are labeled and stations are clean. Write a standard operating procedure (SOP) for every warehouse workflow, so employees have one process to follow. Train teams when an SOP changes, then review the relevant KPI by shift. 

8. Train and schedule warehouse staff

A warehouse can have enough employees and still fall behind. Orders pile up when too few people are scheduled at a busy stage or employees can’t move into another role. Training and scheduling keep labor aligned with the day’s order volume.

A few practices make that easier:

• Write down how the work gets done. SOPs give every shift the same process to follow. Revise them when equipment or software changes.
• Train new employees in stages. Teach one workflow, observe the employee completing it, then move to the next responsibility.
• Cross-train before coverage is needed. Employees who know more than one role can move to the part of the warehouse where work is backing up.
• Build schedules from expected volume. Order forecasts show when more coverage is needed. Add overlap between shifts when the warehouse expects its heaviest workload.

Training also covers the physical demands of warehouse work. Occupational Safety and Health Administration (OSHA) identifies lifting and repetitive tasks as ergonomic risks. Workstations and storage locations can reduce unnecessary reaching or bending. For example, frequently picked items can be stored at a comfortable handling height.

Use the same safety and operating standards across shifts. Regular refresher training keeps those standards current and gives employees a chance to raise problems that are slowing down the work.

9. Plan for seasonality and scalable capacity

Use the sales forecast to estimate how much work the warehouse will receive. Then compare that volume with the stock on hand and the number of orders each shift can process. 

Delivery performance is a priority during seasonal periods. A Passport Global and Drive Research survey of 200 ecommerce leaders found that 57% named fast, reliable delivery as a top Q4 2025 logistics priority. Another 41% prioritized improving shipping cost margins.

Check whether your building has enough room for incoming products and packed orders. If several locations fulfill orders, review how much volume each one can take. Confirm carrier pickup schedules and return-processing capacity. Keep a backup option for the part of the plan most likely to fail.

International orders add another layer. Statista reported that 61% of cross-border online shoppers consider clear delivery charges very important before ordering. Half said the same about a simple returns process, while 36% prioritize fast delivery. 

Corporate gift studio Telescope begins preparing its team months before the holidays. “From front of house to back of house, we prepare our team mentally months in advance,” founder Chloe Sapienza says on an episode of Shopify Masters. The company also overlaps employee schedules during peak periods so an absence doesn’t delay processing.

Warehouse efficiency checklist: where to start

Pull your current warehouse KPIs before changing the operation. The largest gap between current performance and its target usually points to the first problem worth investigating.

Consider the following problems that show up in a warehouse: 

• Picking accuracy is low. Review product verification at the point of picking.
• Order cycle time is long. Find the stage where orders spend the most time waiting.
• Dock-to-stock time is slow. Check the handoff between receiving and putaway.
• Inventory records are inaccurate. Review cycle counts and WMS updates.
• Inventory turnover is low. Check reorder quantities for slow-moving SKUs.
• Storage utilization is weak. Revisit slotting before adding more space.
• Labor productivity is low. Measure travel time and compare work across shifts.
• Peak periods cause delays. Compare forecast volume with available capacity.

Choose one primary constraint and set a target for it. Make the smallest change that addresses the cause, then measure the KPI again. New software, equipment, or warehouse automation comes later, once the data shows that the existing process cannot meet the target.