“A place for everything and everything in its place” – Benjamin Franklin
Benjamin Franklin was on to something here! This centuries-old advice couldn’t be more relevant in today’s warehouse or fulfillment center, where product slotting plays a more critical role than ever in facility optimization. Warehouse slotting is arguably one of the best tools for maximizing available space and output. By taking a strategic approach to inventory organization and SKU velocity, slotting will maximize space, decrease travel time and decrease search time.
What is warehouse slotting? Slotting is a process that optimizes the placement of product inventories in the warehouse based on Item popularity (pick frequency) and Cubic Movement. Slotting strategies are aimed at increasing the utilization of two key warehouse assets: space and labor. Slotting considers the physical characteristics of the inventory and velocity to place inventory in “right-sized” locations. Physical characteristics include dimension, weight, environmental concerns, stackability and fragility.
Velocity refers to demand throughput based on seasonality, popularity and commonality. With that data, a slotting application will define the best storage location for each SKU to minimize the labor associated in putaway, replenishment, and picking activities while maximizing space utilization. The result of all this efficiency stretches far beyond the dock doors to your customers with increased customer satisfaction and repeat business.
Slotting a Path to the Golden Zone
The highest variable in warehouse operational costs is labor. If you can implement a strategy that not only maximizes your costly cube space but helps you reduce labor costs by between 15% – 30%, it’s a home run. Additionally, by establishing strategic SKU slotting, you can likely achieve the following advantages:
- Increase putaway and picking productivity (less travel and search)
- Reduce replenishment cycle times
- Balance workloads across zones, aisles and pick areas
- Increase employee safety
- Maximize storage capacity
- Reduce product damage
- Improve overall inventory management
- Reduce fulfillment cycle time and improve customer service
With a strategic slotting plan, the goal is to establish the Golden Zone i.e., the ideal location to store inventory to optimize picking. The fastest-moving items are concentrated closest to the packing area to reduce travel and promote quick picking. As inventory turns get slower the stock is positioned further from the packing area.
Implementing Warehouse Slotting
Depending on the complexity of your inventory mix, slotting methods can vary from a manual periodic process to an integrated, system-driven, dynamic real-time process. Slotting software tools are highly beneficial in enabling the most effective strategy and some leading WMS suppliers even offer integrated solutions.
Regardless of the method, the basic algorithms require similar inputs:
- Item master data (the physical attributes)
- Vendor receipt data
- Customer order data
- Growth forecast data
- Inventory and storage capacity data
Choosing the Most Effective Slotting Strategy
The slotting method you choose will depend on inventory type, turns, and fulfillment needs. The right approach will succeed in reducing travel time and related expenses such as labor and equipment costs. However, be careful to consider bottlenecks in the pick area. Sometimes, it is advantageous to implement your slotting solution in conjunction with an order picking strategy such as wave, batch, or zone picking to optimize productivity and storage space further.
- By Commonality: Locate items near each other if they tend to be commonly ordered together (reduce travel time between picks).
- By Size: Locate items of like size together (standardize forward pick location size).
- By Popularity: Locate items of similar velocity together (fastest movers put in best locations to optimize travel, search and reach).
- By Inventory Cube Sold: Like item cube moved stored together (standardize forward pick location size).
- By Vendor: Locate vendor line together (reduce putaway efforts).
- By Store Aisle: Locate store aisle items together (reduce sort and putaway efforts at store).
Slotting examples – pick location determined by cue movement and physical item characteristics.
Slotting variations include the use of other metrics to rank items besides Cube Moved per Time Period:
- Cube-Per-Order-Index (CPOI), by Heskett in 1963, which ranks items based on the ratio of cubic volume over the order lines.
- Cube-Order-Index (COI), by Kallina in 1976, which is the ratio of the item’s storage space requirement (cube) to its popularity (number of storage/retrieval requests for the item).
- Receipt Throughput can be used similar to pick cube throughput to provide “A – E” Items inbound rankings to optimize putaways.
- Quantity Received** over “Z” time frame x Cube of Item** Include future forecasted purchases
- Viscosity is the number of picks divided by the square root of cubes picked.
- Replenishments-per-Period can indicate poorly sized locations.
- “In Season” and “Out of Season” item velocities established to handle recurring seasonal items.
XMAS7648 Christmas Wreath 7648 In Season (10/01) “A” Out of Season (01/01) “D”
- “Pick Travel” charting and “Storage Heat Maps” are other graphical methods to identify poorly slotted items.
Like any plan implementation, success is predicated on the validity of the input data… good data = good results, bad data… ineffective implementation. That said, there are several key parameters to be mindful of when establishing a slotting plan.
- Accurate inventory dimensions – bad dimensional data kills slotting
- Avoid liquid cube calculations – avoid using theoretical cube only. Slotting rules must validate that any product dimensions will not exceed location type dimensions
- Nesting is good – consider adjusting on “nested items” storage cube requirements
- Space does not equal time – avoid assigning all Items the same pick space, give them the same time supply pick space
- Location flexibility is key – designing your slotting system with the flexibility to accommodate for changing SKU’s or space needs to be able to prepare for changing SKU velocities and future growth
- Traffic jamming – overloading an aisle or work zone with too many “A” movers can create a severe workload imbalance
- Monitor replenishments – measure slotting success by monitoring replenishment counts
- Too many – poorly sized pick locations or changing item velocity (picking interrupts may be occurring and excessive effort is spent on replenishment)
- Too few – oversized pick locations (pickers are traveling past non-value-add inventory, extending pick times)
Best Practices to Maintain Optimal Slotting Strategy
Count on one thing in the world of material handling… change. Because we all know that things are constantly changing, it is best to examine your slotting strategy every 3-6 months at a minimum. Include accurate sales forecasting factored in with historical data and be sure to include any seasonal expectations. Additionally, a slotting analysis should be performed any time a major warehouse event happens (facility consolidation; new product line addition; major new customer added; company merger).
On a monthly basis (or weekly if necessary), monitor “A” & “B” mover available pick locations. When running low, review which “B”s should become “C”s. Also, monitor “C” and “D” pick line hits monthly to identify any changes to warrant moving them into “A” or “B” locations.
Apex – One-Stop-Shop for Slotting Solutions
As a family of material handling and storage companies, Apex is uniquely positioned to address your facility space, storage, and fulfillment needs. Our team of experts contributes a combined 500 years of material handling know-how to solve customer challenges every day.
The Apex Companies experts will begin with a review of your individual SKU data: dimensions, weight, and quantity, and velocity. Then we design a slotting strategy that will optimize your space, most effectively utilize your team and meet your organizational goals. We strive to use as much of your existing storage and processing equipment as possible. We also have access to an extensive new and used pallet racking inventory supply that allows us to deliver the most cost-effective solution. Call Apex today to discuss your warehousing challenges and order processing needs.