Warehouses are an essential component of the supply chain, used for buffering the material flow, stock consolidation and value-added-processing. Operation managers typically do a good job of filling their warehouse but initially assigned storage locations might become sub-optimal over time, due to seasonal fluctuations in demand, short product life cycles or high inventory levels. Fragmented storage is a particular issue in order picking environments, where the optimal storage location of a product is not only dependent on its turn-over rate but also on the storage locations of items that frequently occur in the same picking job. In practice, operations managers are forced to periodically reorganize the warehouse to keep it operating efficiently. This process is generally done manually without any decision-support tool. In this paper we introduce an optimization approach that automatically reorganized item locations. Results are evaluated using a simulation model that simulates the picking and transport processes in the warehouse.