What Is a Bin Location? How to Set Up a Warehouse Bin System for Small Manufacturers

You know the feeling. You need the drum of coconut oil you’re certain arrived last month, and you spend the next ten minutes opening box after box before finding it wedged behind the packaging stock on the third shelf. Ten minutes, times however many times a week it happens. On a production schedule, that’s genuinely expensive.

That’s the problem bin locations solve.

A bin location system isn’t a “warehouse thing.” It’s just a structured way of assigning every material a permanent address in your storage space. Once everything has a home, you stop searching and start finding.

What is a bin location in inventory management?

A bin location is a physical address assigned to one spot in your storage area that tells you exactly where to find or put away a specific item.

In large distribution centres, bin locations are sophisticated systems with barcode scanners and conveyor belts. For a small manufacturer, the concept is identical but the scale is completely different. You might have one stockroom, a few racks, and fifty raw materials. A bin location system still works, and it works well.

The goal isn’t complexity. The goal is that anyone in your production space (including you, at 6am before your first coffee) can find any material in thirty seconds without thinking about it.

Why bin locations matter for small manufacturers

If you’re managing more than twenty or thirty distinct materials, you already know the pain of searching. It gets worse as your range grows. A candle manufacturer might stock forty to sixty fragrance oils, ten waxes, and multiple packaging options. A small food producer running a seasonal line might have hundreds of ingredients on hand at once.

Without a system, you’re relying on memory. Memory is unreliable, especially when you’re tired, distracted, or handing work off to someone else.

Bin locations give you three things:

Reliable findability. You don’t need to remember where something is. You look it up. Your bin location reference tells you: aisle B, section 3, position 2.

Faster picking. When you’re manufacturing a batch, you work through a list of materials. If you know the bin location of each one, you can walk your storage area in order instead of crossing it three times.

Fewer mistakes. Searching for materials is where substitution errors happen. You grab the wrong fragrance because the label looks similar, or use the wrong lot because it was sitting on the wrong shelf. A system reduces that risk significantly.

How to design a bin numbering system

The best bin numbering system is the one your team will actually use consistently. Here’s a simple approach that works for most small production spaces.

Start with your physical space. Walk your storage area and identify the natural divisions: aisles or rows, shelving units or sections, and individual shelf positions. These become the three levels of your bin location code.

Assign codes to each level. A common pattern is letter-number-number:

• First character: the aisle, zone or row (A, B, C)
• Second character: the shelf or section number (1, 2, 3)
• Third character: the position on that shelf (1, 2, 3)

So a bin marked A-3-2 sits in aisle A, shelf 3, position 2. That level of detail gives you a precise, unmistakable location for every item.

Keep it short. Bin codes that run too long get abbreviated informally by your team, which defeats the purpose. Three to four characters is ideal.

Make it visual. Label your racks and bins clearly with printed or handwritten labels. The code on the shelf should match exactly what’s in your inventory software.

Document your layout. A simple sketch or spreadsheet showing which bin code corresponds to which physical location is invaluable when someone new joins the team, or when you come back from two weeks off and your memory is fuzzy.

How to implement a warehouse bin system step by step

Here’s a practical sequence for getting started:

Step 1: Assess your inventory. Group your materials by category (ingredients, packaging, components, consumables) and estimate how much space each group needs. This shapes your physical layout before you label anything.

Step 2: Decide your storage structure. Whether you’re using wire shelving, pallet racking, drawer units, or a combination, map out your zones before assigning codes. Changing the structure later means reassigning codes, which creates confusion.

Step 3: Label your bins. Use a label maker or print labels for consistency. Adhesive labels on the front edge of each shelf position work well. If your storage is temporary or modular, laminated paper labels with a hook are easier to update.

Step 4: Record bin locations in your inventory system. This is the step that makes the system useful beyond your own memory. Once bin locations sit in your inventory software, you can look up where any material is stored without walking to the shelf, and you can hand that information to anyone else on the team.

Step 5: Train anyone who uses your storage. A system only works if everyone follows it. Walk through the logic of your bin codes with your team. Put-away discipline, meaning returning materials to their assigned bin after use, is the habit that keeps the system working over time.

Bin location labelling best practices for small stockrooms

Labelling a small stockroom is different from labelling a distribution centre. A few things that make a real difference:

Use consistent label orientation. All labels facing the same direction at the same height makes scanning much faster than hunting for labels at different angles.

Include the material name on the bin, not just the code. In a small space you’ll often locate materials visually before checking a code. Having both the bin code and a short material name on the label (for example, “A-3-2: Lavender EO”) speeds up the process.

Differentiate materials from finished goods. If you store raw materials and finished product in the same space, use a visual distinction: different label colours, or a prefix letter (M for materials, P for products). This prevents picking errors where someone grabs finished goods for a new batch.

Handle small items differently. Fragrance oils in small bottles, pigment samples, and small hardware all do better in labelled trays than on open shelves. Assign a bin code to the tray, not to the individual items inside it.

Review your layout when you add new materials. If a new material doesn’t fit in the existing A-row because it’s full, don’t just put it anywhere. Create a new bin code and update your records. Consistency is what makes the system trustworthy.

Bin locations for materials vs. finished goods

Most people think of bin locations as a raw-materials tool. The same system works for finished goods, and there are good reasons to apply it there too.

For materials, bin locations help with:

• Fast picking during production runs
• Receiving new stock into the right place
• Cycle counts and stocktakes, where you check counts location by location rather than all at once

For finished products, bin locations help with:

• Order fulfilment, so you know exactly where to find the right SKU when packing
• Preventing over-sells by keeping products in a consistent place, which makes you less likely to double-count or miss a unit
• Staging finished batches before photography, dispatch, or a wholesale pickup

If you sell across multiple channels (Shopify and Faire, say, or direct-to-consumer alongside wholesale), tracking finished goods by bin location also makes it easier to set aside stock for a specific channel without mixing it back into general inventory. That pairs well with proper multi-channel inventory management, where every channel reads from one shared stock count.

The two-bin inventory system

For businesses with smaller product ranges or limited storage space, a two-bin system is worth considering. The method uses two designated containers for each material:

• Active bin: the supply you’re drawing from right now
• Reserve bin: the backup stock waiting to be used

When the active bin empties, the reserve bin becomes the new active bin. The empty container is the signal to reorder. You only order when you see an empty bin, which keeps reorder decisions simple and visual.

The two-bin system works best for:

• Materials with consistent, predictable usage rates
• Items where running out would stop production
• Storage situations where visual cues are easier to manage than digital tracking

It’s less suitable for materials with highly variable usage, or for a business with a large number of SKUs where maintaining two containers per item becomes unwieldy. A producer with sixty fragrance oils and two containers each is managing 120 physical locations. At that scale the system probably creates more work than it saves, and a calculated reorder point will serve you better than an empty container.

For most growing production businesses, a digital inventory system with bin locations assigned to each material gives you more flexibility than the physical two-bin approach on its own.

Common mistakes when setting up a bin system

Assigning temporary bin codes. It’s tempting to put a new material “somewhere temporary” and add the bin code “later.” Later rarely comes. Discipline yourself to record the bin code in your inventory system the moment you put the material away.

Not maintaining the system after busy periods. After a major production run or a busy Q4, materials often end up back in the wrong places. Build in a short weekly or monthly put-away reset to check that everything is back in its assigned location.

Using bin codes that are too similar. A-1-1 and A-1-2 look alike at a glance, especially on small labels. Consider colour-coding sections, or using clearly distinct letters (A and C are easily confused; A and X much less so).

Not updating bin codes when you reorganise. If you move a shelving unit to a different wall, update your inventory software at the same time. Stale bin location data is worse than no bin location data. It sends people to the wrong place with false confidence.

Tracking bin locations with Stocksmith

Stocksmith records a bin location against both materials and finished products. Each record has three separate fields, Zone, Section and Position, which combine into a single code on the item: Z1-S4-33, or A-3-2 if you prefer letters. Use all three levels or just one, depending on how granular your space needs to be.

Bin location tracking is available on the Studio plan and above. It isn’t included on the entry-level Pro plan. See the pricing page for the full plan comparison.

Once a location is set, the code appears on the material record and in your stock level views, so you can look up where something lives without leaving your desk.

Two things make the system practical rather than just tidy:

Bin codes print on your tracking labels. If you print labels for materials or products, the bin code prints alongside the item details, so the label on the shelf and the record in your account can’t drift apart.

Bin locations show on your count sheets. When you run a stocktake, each line carries its bin location, which means you can count your way through the stockroom shelf by shelf instead of ping-ponging around it chasing a list sorted by name.

You can also assign several materials to the same bin location, which is handy when you store a group of related materials in one container. Locations can be set one at a time on the material record, or updated for your whole range at once through the CSV import and bulk update tools, using the Bin Location Zone, Section and Position columns.

For small manufacturers holding dozens of ingredients, fragrances or components across a stockroom or a retail space, this is the difference between knowing your stock and guessing at it. Tiana at Winding Wick Candles described the change after setting up bin locations for her Texas storefront: “I can say, ‘Okay, where is my apple fragrance?’ And it’s really easy to locate.”

If you’re pairing bin codes with QR code-based inventory tracking, the two work well together: some businesses put a QR code on the bin label that links straight through to the material record. For a deeper look at the physical labelling strategies that pair well with bin location codes, see our guide to labelling your material inventory locations.

Frequently Asked Questions