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Warehouse Storage Myth Debunked - Equal Space Strategy versus Equal Time Strategy

 

Warehouse Storage Dilemma

Ask any warehouse manager how to stock a forward pick area and you may get one of these two methods:
  1. Allocate the same amount of space to each SKU
  2. Store an equal time supply of each SKU in the area
The first answer, known as the Equal Space Strategy (EQS), tends to ignore the differences in SKU popularity and size when stocking. Moreover, the second method is called the Equal Time Strategy (EQT)--appropriate amounts of each SKU used are stocked for use during the time before the next replenishment. Logically, it seems to be a better method because more popular SKUs are allocated more space. However, assuming is risky business, so let's take a closer look at these situations. I can show you with simple algebra that there is no difference in the number of restocks with the EQS versus EQT strategy. Thus, each method will theoretically have the same restock labor costs. I'll use the following variables so you can see how I come up with the numbers in the table.
  • i ,j, k = subscripts to distinguish SKU A, SKU B, SKU C
  • n = the number of SKUs you have in the forward pick location
  • Fi = rate of flow of the SKUs per year
EQS EQT
Allocation of Space 1/n fi /(?I fi)
Restocks for SKU n*fi ?I fi
Total restocks over all SKUs n*?I fi n*?I fi
For the sake of argument, I have one unit of storage shared by 3 SKUs with flows of 26, 3, and 1 unit per year, respectively.
SKU A SKU B SKU C Total
Flow of units per year (Fi) 26 3 1
EQS Allocation of Space in 1 unit storage 1/3 1/3 1/3 1
EQS Number of Restocks per Year 78 9 3 90
EQT Allocation of Space in 1 unit storage 26/30 3/30 1/30 1
EQT Number of Restocks per Year 30 30 30 90
For the EQS case, note that SKU B stays on the shelf longer than in the EQT case because it is not restocked from inventory as often. If expiration dates are an issue, EQS may not be the best choice. Both EQS and EQT strategy offer uniformity that can simplify warehouse management. If space management is an issue, EQS may be better, especially when old SKUs are being phased out and new SKUs introduced. Because all storage slots are the same size, a newly-arrived SKU always fits into a space in the fast-pick area. One needs to keep in mind that EQS demands erratic restocking frequencies, which may be difficult to manage. When you look at designing your restock method, don't dismiss either strategy based on restocking concerns. There may be no difference in labor costs! If you need assistance with SKU layout and re-stocking best practices, our supply chain consultants can help. Contact us at [email protected] or review our consulting services.

Reference: Warehouse & Distribution Science by J. Bartholdi and S. Hackman, August 19, 2014

Author: Lauren Noyes

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