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Smart Warehouse Setup: Zoning and Location Naming That Works

When setting up a new warehouse or improving an existing one, how you design your zones and name your locations is one of the most important decisions you can make. A clear structure saves time, reduces errors, and makes training new employees easier.

Let’s walk through how to set up zones, name your locations, and organize your warehouse so your team can move efficiently from receiving to picking to packing.

1. Define Your Warehouse Zones

Every warehouse layout will look a little different, but most can be divided into three core zones: Picking and Packing, Receiving (Inbound), and Overstock.

Picking and Packing

Your picking and packing stations should always be close together. This minimizes travel time and keeps the workflow tight.

Pickers can move through the picking area, load their carts, and drop them off at the packing station without unnecessary walking. After dropping off, they can grab a new cart and start again.

This layout keeps your team in motion and improves overall throughput.

Receiving (Inbound)

The receiving area should be as close as possible to your dock doors or bay doors. When products come off the truck, they should immediately enter the receiving zone without having to travel across the warehouse.

This speeds up inbound processing and reduces double handling.

Overstock

Your overstock section will likely take up the most space. Its placement should consider two key factors:

  • Accessibility from receiving: so new inventory can be stored quickly.
  • Accessibility from picking: so products can be replenished efficiently.

Overstock acts as your warehouse’s inventory backbone, keeping pickable bins stocked and ready.

2. Determine Zone Sizes Based on SKU Volume

How much space each zone needs depends on your product mix and SKU velocity.

  • High SKU count with slower-moving products: You’ll want a larger pickable area. This allows you to store more products in smaller quantities and reduces unnecessary replenishment.
  • Low SKU count with faster-moving products: You can use a smaller pickable area and dedicate more space to overstock. This avoids wasting space on empty bins while ensuring you always have backup inventory ready.

3. Create a Clear Location Naming Structure

A consistent location naming format helps your team find items faster and keeps your WMS organized.

A simple and effective structure looks like this:
Zone - Aisle - Bay - Level - Position

Use letters for zones and aisles, and numbers for bays, levels, and positions. This mix makes labels easier to read and understand at a glance.

Example:
A-A-01-01-01

Here’s how each part breaks down:

  • Zone: The main section of the warehouse, such as “A.”
  • Aisle: The specific row within the zone.
  • Bay: The rack or shelf column within that aisle.
  • Level: The vertical tier of the bay.
  • Position: The horizontal placement on that level.

This structure works across both pickable areas and overstock sections, whether you are managing bins or pallets.

4. Keep Labels Consistent

Use leading zeros for all numerical values (for example, 01 instead of 1). This ensures your WMS sorts locations correctly.

Without leading zeros, your system might send a picker to “1-12-1” before “1-2-1” because of alphabetical sorting. With consistent two-character numbers, your picking routes will follow the correct physical sequence.

5. Plan for Future Expansion

When naming your aisles and bays, leave room to grow. Many warehouses run into problems later when they need to expand backward or add new racks.

Instead of starting with Aisle A and Bay 01, consider starting at Aisle F and Bay 10. That gives you flexibility to expand in either direction as your inventory grows.

6. Optimize Picking Flow

How you name your bays can guide picker movement. One of the most efficient methods is the snake pattern.

Start at the beginning of Aisle A, move up, cross over to Aisle B, move down, then cross to Aisle C, and continue this pattern. This avoids backtracking and keeps pickers moving in a continuous loop.

To make this work, alternate bay numbering across aisles:

  • Aisle A: bays numbered 1 through 4
  • Aisle B: bays numbered 4 through 1
  • Aisle C: bays numbered 1 through 4

This creates a natural flow that your WMS can follow when generating pick routes.

7. Place Products Strategically

Your fastest-moving products should always be placed near the beginning of the picking area. This allows pickers to grab the most common items quickly and return to packing without walking the entire warehouse.

For these high-volume products, use larger bin sizes so they require less frequent replenishment. Slower-moving products can be placed farther away or on higher shelves.

The Bottom Line

Designing your zones and naming your locations might seem like small details, but they have a major impact on your warehouse performance.

A thoughtful layout makes picking faster, replenishment smoother, and training easier for new employees. Whether you’re setting up a new space or refining an existing one, take the time to structure your zones and names properly from the start.

Your future self, and your warehouse team, will thank you.