A well-organized warehouse location system is the difference between a picker finding an item in 15 seconds and spending 5 minutes wandering aisles. It affects every operation in your warehouse: receiving, putaway, picking, counting, and replenishment. Yet many small warehouses rely on tribal knowledge - "the red widgets are somewhere near the back, third shelf I think" - until the person who knows the layout is sick or on holiday.
This guide walks you through how to design a logical location system using zones, aisles, shelves, and bins so that anyone can find anything, fast.
Why Location Management Matters
Without a structured location system, you get three problems that grow worse as your warehouse grows:
Slow picking. If pickers don't know exactly where to go, they search. Search time is pure waste. In a warehouse with 1,000 SKUs, even adding 30 seconds of search time per item adds up to hours of lost productivity per day.
Lost inventory. Products get placed in random spots and forgotten. During stock counts, you discover items that have been sitting in the wrong location for months. Meanwhile, your system shows them as out of stock because nobody can find them.
Training difficulty. Every new hire has to learn the layout from scratch by following someone around. With labeled locations and a system that tells pickers exactly where to go, a new person can be productive on day one.
The Location Hierarchy
Most warehouse location systems follow a hierarchy from large to small: zone, aisle, shelf (or rack level), and bin. Together, these create a unique address for every storage position in your warehouse.
Zones
Zones are the largest divisions of your warehouse. They typically represent different areas with different purposes or characteristics:
- Receiving zone: where incoming goods are staged and checked before putaway
- Bulk storage zone: where you keep pallets and large quantities of each product
- Pick zone: where you keep smaller, pick-ready quantities close to the packing area
- Packing zone: where orders are packed and labeled for shipping
- Shipping zone: where packed orders wait for carrier pickup
- Returns zone: where returned items are inspected and processed
In a small warehouse, you might only have two or three zones. That's fine. The point isn't to have many zones but to clearly separate areas with different workflows. Even a corner of the warehouse dedicated to receiving and labeled as "Zone R" is better than no zone at all.
Aisles
Within each zone, aisles are the corridors between shelving units or rack rows. Number them sequentially: aisle 01, aisle 02, aisle 03. In a small warehouse, you might have just two or three aisles. In a large one, you might have fifty.
Use zero-padded numbers (01, not 1) so that sorting works correctly. If you ever reach aisle 10, you don't want aisle 1 sorting after it.
Shelves (Rack Levels)
Shelves are the vertical levels within an aisle. Number them from bottom to top: level 01 is the floor or lowest shelf, level 02 is the next one up, and so on. Some warehouses use letters (A for floor level, B for the next up) to distinguish shelves from aisles visually.
Products on lower shelves are faster to pick because you don't need a ladder or forklift. Put your fastest movers at pick height - typically waist to shoulder level - and slower movers on high or low shelves.
Bins
Bins are the smallest location unit: individual positions within a shelf. A shelf might be divided into four bins, each holding a different product. Number them left to right: bin 01, bin 02, bin 03, bin 04.
Not every warehouse needs bin-level precision. If each shelf holds only one product, you can stop at the shelf level. But if you're storing multiple small items on the same shelf, bins prevent confusion and mis-picks.
Building Your Location Code
Combine the hierarchy levels into a single location code that uniquely identifies every position. A common format is:
Zone-Aisle-Shelf-Bin
For example: A-03-02-01 means zone A, aisle 3, shelf 2, bin 1. When a picker sees this on their pick list, they know exactly where to go without asking anyone.
Some guidelines for your coding scheme:
Keep it short. Long codes are harder to read and slower to type. Zone letter + aisle number + shelf number + bin number using 1-2 characters each is ideal.
Make it consistent. Use the same format everywhere. If zone A uses the format A-01-01-01, zone B should use B-01-01-01, not B/1/1/1 or B.1.1.1.
Use separators. Dashes or dots between sections make codes easier to read at a glance. A-03-02-01 is much clearer than A030201.
Print labels. Every physical location should have a printed label showing its code. Labels should be large enough to read from a few feet away. Include a barcode version of the location code so pickers can scan it for verification.
Assigning Products to Locations
Once your locations are labeled, you need to decide where each product goes. This is called slotting, and good slotting has a measurable impact on picking efficiency.
Put fast movers close to packing. Your top 20% of products by pick frequency (not just sales volume - a product ordered once for 1,000 units is different from a product ordered 500 times for 2 units) should be in the most accessible locations, closest to where orders are packed.
Store heavy items low. Anything heavy or bulky goes on floor-level or bottom shelves. This is safer for your team and faster to pick.
Separate similar products. If you have two products that look nearly identical, store them far apart. Adjacent placement of similar items is the number one cause of mis-picks.
Consider pick path. If your pickers walk through the warehouse in a consistent pattern (and they should), arrange products so they're picked in route order. This minimizes backtracking and travel time.
Maintaining the System
A location system only works if it stays accurate. That means maintaining the mapping between products and locations as your inventory changes.
Update on every putaway. When you receive stock and put it away, record the exact location where it goes. Don't just book it into the system and put it wherever there's space - that creates a gap between where the system thinks the product is and where it actually is.
Review slotting regularly. Products that were slow movers six months ago might be fast movers now. Review your pick frequency data quarterly and reshuffle products if the current layout no longer makes sense.
Handle empty locations. When a location is emptied, make it available for other products. Don't let empty bins accumulate in prime real estate while new products get shoved into awkward corners.
Do location audits. During cycle counts, verify not just the quantity but the location. Is the product actually where the system says it is? Location mismatches are just as damaging as quantity mismatches because they cause pickers to go to the wrong spot.
Starting Small
You don't need a perfect system from day one. Start by labeling your zones and aisles. Add shelf and bin numbers as you need more precision. The most important thing is to have a consistent system that everyone follows.
A simple location system that your team uses consistently will always outperform a sophisticated one that people ignore. Label your spaces, record your locations, and iterate as your warehouse grows.