Considering material handling delay which occurs between storage and processing stations, we propose an algorithm to estimate the required storage capacity, i.e., number of aisles and number of openings in vertical and horizontal directions in each aisle, of an automated storage/retrieval(AS/R) system. Due to the random nature of storage and retrieval requests, proportion of single and dual commands is not known in advance. Two design criteria, maximum permissible overflow probability and maximum allowable storage/retrieval(S/R) machine utilization, are used to compute the storage capacity. Most of studies assume that storage capacity of AS/R systems is given, although it is a very important decision variable in the design phase. Therefore, the proposed model can be effectively used in the design phase of new AS/R systems.