How To Optimize Productivity and Space Utilization Through Warehouse Slotting

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Over the years, we’ve seen many different distribution operations, and one of the differentiators between average-class and best-in-class operations are those that include an active warehouse slotting program.

There are two key words in that opening paragraph: active and program. Both are tightly related. A slotting project is one that has a defined scope with a fixed start and end. A program implies an enduring effort. Active implies ongoing involvement and continuous improvement.

The benefits of a good warehouse slotting program are numerous. Productivity can be improved 10 to 20% or higher for picking and/or replenishing activities. Pick errors can be reduced. A safer, more ergonomic work environment can be created. Longevity of the storage capacity can be increased through better space utilization. The demands of daily operations are many and slotting too often becomes an afterthought. A thoughtful slotting program helps create a better work environment and increase operational effectiveness.

Slotting vs. Profiling

It is important to note that profiling and slotting are related but also different. Profiling is the grouping of SKUs by storage requirements and handling characteristics. Profiling categorizes SKUs to find the best general area within the operation to store the category or group. Examples of categories or groups of SKUs could include security items, temperature-controlled items, full case pick items, each pick items, etc., and it is necessary to understand the storage media required for each group.

Warehouse slotting includes the first step of profiling but then goes further to physically assign a SKU to a location. This is the last mile.  Profiling takes you to the ballpark, while slotting takes you to the correct field, dugout and position on the field. Profiling takes you to the parking lot, while slotting takes you to the exact parking space.

Strategy Is Key

A warehouse slotting program starts with the development of a slotting strategy that meets the business and operating requirements for the company. The slotting strategy develops the guiding principles and resources for a sustainable program. For example:

  • Does the operation have seasonal or inventory turnover aspects that need to be included and addressed?
  • Defining golden zone, ergonomics, keeping like size SKUs apart, grouping vendors for ease of putaway, mirroring SKU’s where high volume may create congestion, benefit of affinity slotting (grouping SKUs likely to be ordered together like flashlights and batteries), grouping SKUs ordered only by specific customer groups, etc. are all key to developing a top tier slotting program.
  • What will the picking method(s) be in each area and how congested are those areas expected to be? Certain slotting strategies support picking methods and/or levels of congestion better than others.  Pick-and-pass with a front-loading zone strategy and bucket-brigade picking with a balanced-volume zone strategy are frequently used in tandem, for example.
  • Developing safety protocols. How to handle sharp items (i.e. keep off upper shelves), two-person pick heavy items, machine required items, storing acids and bases away from each other, avoiding cross-contamination of food product (i.e. not storing chicken over beef), etc.
  • Are pick locations random or fixed? Are reserve/overstock locations fixed or random?
  • What aisle travel configuration is warranted? Cross-aisle, Z-Pick, Serpentine, etc.
  • What pick location minimum time supply is being targeted? Seven to ten days?
  • How do we handle dead SKUs? Keep in reserve or provide a pick location.
  • What changes do we see in our SKU mix and is there projected SKU growth? Will this growth come in the form of extensions to existing product lines or new product lines? If the latter, what will these new product lines look like (small items, large items, conveyable, non-conveyable, etc.)
  • Does our WMS include a slotting package? Does anyone know how to use it?
  • If our inventory mix is diverse (lots of different types of SKUs, with different storage and handling characteristics), are we tackling the whole inventory or merely a subset?
  • What group or person within the organization will own the program? How do we maintain ongoing accountability for success?
  • How are we going to maintain the program? Is there funding? Is their recognition by senior leadership of the value of a slotting program? How do we ensure ongoing success?

Not a One and Done

Distribution equipment like reach trucks or conveyors require preventative maintenance for peak performance. A warehouse slotting program should be no different. The environment changes constantly in a distribution center: new SKU’s, new channels (i.e. adding eCommerce fulfilment), acquisitions, and ongoing growth to name a few.

The initial slotting effort may have made perfect sense a few years ago, but changes like those listed above will quickly impact the quality of the program and lead to lower productivity and less effective space utilization if left unattended.

Oftentimes, there are instances where volume is lower on a given day or period. Taking advantage of the available labor to make a few strategic product moves can make a positive influence on keeping the program in tune. As we’ll discuss later, slotting software can help maintain a program and identify specific product moves that provide the biggest benefit with the least labor cost.

Good, Better, Best

A good program has dedicated resources, reviews inventory several times a year and makes specific product moves to help keep fast-moving SKUs in fast locations and slow-moving SKUs out of fast locations. Often this is maintained using off-the-shelf spreadsheets or database software analysis like Excel, Access or SQL. Ad hoc reports are developed and generated on a timely basis. Improvements require new coding or programming of the algorithms within the software.

A better program is like the above but augmented with a slotting software package from a top supplier with significant experience in the industry. The software may or may not be connected to the WMS. Top software easily accommodates techniques like three-dimensional rotation of an item to find the best fit for the SKU dimensions. Similarly, it supports only two-dimensional rotation for items that require “this side up” storage like liquids. Changes required are often executed through configuration changes rather than through new coding or programming.

The best program includes all the attributes of the better program and has the slotting software integrated with or to the WMS. Such a program will incorporate a new SKU strategy providing a suggested location upon first arrival to the distribution center. Additionally, the program looks at existing SKUs that are out of stock but being received and will assign a new pick location if the current configured location is not optimal. This is called slotting on-the-fly and creates a free move—in other words, the item is put away into the best open location that provides more benefit than the previously assigned location and you are saved from having to do a manual transfer.

Top Tips

Cube Movement vs Lines or Hits – Use cube movement to determine the profile of a SKU. Cube will provide a best predictor of storage space required to meet the time supply. Number of order lines or hits should be used to determine where an SKU should be located (the slot). Consider a small but popular item like a thumb drive. The space to hold the time supply might be one cubic foot (12” x 12” x 12”). Clearly a small bin-shelf-type location would suffice. If this item was ordered multiple times a day compared to another item needing the same space but only ordered once per month, then the thumb drive should be given a more-accessible location compared the other item to reduce travel for pickers.

Hits per facing size – Consider two bin bays of the same size. One bay has five shelfs with three items per shelf totaling 15 SKU’s. Each SKU averages 24 hits per year. The bay itself averages 360 hits per year (15 SKUs times 24 hits per year for each SKU). Another bay has 10 shelves of small locations and slower moving items. Each shelf holds 6 items with the bay totaling 60 SKUs. Each SKU averages only 8 hits per year. The bay then averages 480 hits per year. Which bay should get the more prominent location? Conventional thought would place the slower moving items in a less prominent location. The hits per facing size would indicate the bay with 480 hits per year should get the more prominent location. Each facing is 36 square inches (6” x 6”) and yields .22 hits per square inch. The faster moving SKUs utilize a larger location facing with 144 square inches (12” x 12”) of pick face yielding .17 hits per square inch. Though the SKUs with the larger pick faces are faster moving, the bay with the smaller items will be visited more frequently due to the higher pick density per square foot of facing.

Congestion – It is always easy to lose sight of placing too many fast-moving items in a small area and creating a congested work environment. The slotting analyst should take care to understand the projected productivity and number of associates (pickers and stockers) that will be working in a given area. Will undue congestion be created? If so, spreading out fast moving SKUs may create a more productive environment.

The Future Is Hazy, but That Is No Excuse

As in all distribution design and optimization related programs, it is critical to consider what the future will entail. The difficulty is that no one has a crystal ball that accurately predicts what the future will look like. However, predictions must be made, and a cross-functional team of senior leaders should be included in shaping the future business and operating requirements that the slotting team must incorporate into the slotting strategy. Simple things like SKU growth are usually easy to predict, and sometimes past growth is a good indicator of the future. However, things like changes in the business strategy such as acquisitions or new product lines may make future predictions murky. The team may hear things like we need a flexible solution since we cannot accurately predict the future, but we know it will change. Involving senior leadership in predicting the future will create a better warehouse slotting strategy and help obtain buy-in and support from leadership through their involvement.

Put Slotting Software on Your Side

Bastian Consulting has partnered with OptricityTM in this goal, as we have found the OptiSlot DCTM slotting software package to be the most comprehensive slotting software tool on the market.  Optricity’s ability to incorporate their patented optimization processes congruently within customer-specific slotting constraints allows us and their customers to design and run more-efficient pick areas within warehouses.  Both in the designing and operation of these pick areas, implementing OptiSlot is our recommended way to quantify the improvement opportunity surrounding the concept of slotting.

Implementing an effective warehouse slotting program will increase picking and replenishment productivity, reduce pick errors, increase safety and ergonomics, and maximize storage capacity and space utilization. If you’re ready to take your operations to the next level and implement an active slotting program in your facility, contact us. We’re happy to put our expertise to work for you.

 

Michael Wells is a Senior Consulting Engineer based in Illinois. He has over 30 years of Leadership in consulting, industry, MHE manufacturing with over 100 companies developing effective solutions for complex operations focused on strong business case, cost reduction, quality improvement and revenue enablement. Experience includes: eCommerce, Specialty Retail, Automotive Aftermarket, MRO, Wholesale Hardware, Footwear Retail, Pharmaceuticals, Medical Supplies; Heath, Beauty and Cosmetics, Consumer Products, Industrial Manufacturing and Grocery.
Tyler Stratton
I am an Associate Consulting Engineer with Bastian Solutions out of Indianapolis, IN, and I work closely with clients on concepting and validating system designs through extensive data analysis and computer simulation efforts. I started at Bastian Solutions in 2016, and I spent over a year on-site as an Operations Engineer for our software group before transitioning to the Consulting team in late 2017. Currently, I support consulting engagement clients that are wanting to understand the potential benefits of automated solutions as well as existing Bastian Solutions clients seeking optimization of current operations.

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