It is best to use a combination of both.
Humanly understandable location descriptions are for humans and geographic coordinates can be left to computer software.
Racks, bays and tiers in warehouse shelving systems are normally indexed in a humanly understandable and memorable way such as numerically, alphabetically and/or by colour codes and so on. Items and their locations can easily be recorded that way by warehouse staff and entered into any database, including a GIS database.
eg. The item you are looking for is on a pallet number 2376 in Rack 3, Bay 4 and on the second tier. If there is a mixture of items on the pallets then pallet cards can be used to record what items are on the pallet, (a manifest). Pallet cards display id numbers visible to forklift operators and can be edited or replaced with an updated card when items are added or removed, and a duplicate sent to the office to update the database.
The warehouse can easily be drawn as a polygon in a GIS map and actual location of the shelving racks can be drawn in. Information about what is occupying each space can be entered as points approximating the actual geographic location of the items on the shelves and the details recorded in the attribute table.
I use Quantum GIS for something like that and it works great. In my case it's a shed full of road construction signs. When I do a search in the GIS database for an item, its location will be highlighted in the map and I can easily zoom the map to that precise location too if I want. The attribute table contains the tier number. It is even possible to track the location of signs in use out on the roads in the same map layer without any problems at all.