Space utilization is one of the major principles of material handling in warehouses. The utilization of optimum space in warehouse improves the operational performance, efficiency and productivity in warehouse. Storage strategy selection has larger impact on operational performance including space utilization. Cost effective solutions, FIFO control and traceability for pickers as well as management regarding stocks were incorporated as the voice of customer in QFD. The solution identified from QFD was plotted in a pareto chart. Floating location rack was implemented by arranging stock dynamically. Visual management board was designed in AutoCAD 3D modeling and a logical link for assigning product location was programmed in Microsoft Excel. The ultimate results were improvement in space utilization from 51% to 81%. The new methodology helped to eliminate 30% free space that existed earlier. Effort has been made to improve stock picking and management. FIFO control has been incorporated along with visual management board. The new cost effective solution resulted in a saving of Rs. 68, 15000.