Operations & Management: The ABCs of ABC Slotting

Old Glory implemented an ABC slotting program with the help of catalog management system Ecometry.

Warehouse management system reports can help you identify A, B, and C products

According to Oak Brook, IL-based trade group Warehousing and Education Research Council, about 50% of your pickers’ time at work is spent in transit. One way to decrease that transit time while increasing the number of picks per worker is ABC slotting.

Simply put, ABC slotting is storing the most-popular merchandise closest to the picking line and the least-popular items farthest away. To implement ABC slotting, you need to grade products A, B, or C based on each item’s sales volume.

Sounds like a no-brainer, doesn’t it? But Michael Wohlwend, practice manager of Toledo, OH-based supply chain consultancy E-Sync, says that surprisingly few catalogers engage in the practice.

Getting started

So how do you distinguish an A product from a B product? A good rule of thumb, Wohlwend says, is that if you ship more than 150 SKUs a day of a given item, it is an A product. Place these items near the picking line — typically at the front of the warehouse.

Your B products, which should be stored just beyond the A designation, are those for which you typically ship 60 or 70 SKUs daily. You could then place your C products near the back of the warehouse, since you most likely ship fewer than 10 SKUs a day of them. (Note: You may want to designate your largest or bulkiest merchandise C products as well, even if you ship more than 10 SKUs of them daily, simply to prevent them from taking up valuable real estate near the picking line.)

Most warehousing and catalog management systems will help determine these A, B, and C designations based on daily and monthly sales reports. Old Saybrook, CT-based rock ’n’ roll gifts cataloger Old Glory uses the eponymous catalog management system from Ecometry (formerly Smith-Gardner) to determine its ABC product slotting designations, says operations manager Dennis Williams.

After installing the system in August 1999, “the time and aggravation we have saved our employees made us more efficient,” Williams says. Using Ecometry sales reports, the $5 million cataloger now stores its fast-moving items, such as Grateful Dead and Jimi Hendrix T-shirts, up front near the packing stations.

Norwich, VT-based baking products cataloger King Arthur Flour uses CommercialWare’s Mozart catalog management system to determine its A, B, and C products, says inventory auditor Wendy Luce. King Arthur’s most popular sellers, which include mixers, five-pound bags of flour, and cooking utensils, are now located within the first four racks of its warehouse. This enables its pickers to concentrate largely on one area of the warehouse, Luce says, and “the process is much quicker for our pickers,” who can then go right to the packing station with the product.

Several software packages, such as FlowTrak from Streamsoft and Slot-It from Manhattan Associates, are specifically designed to determine your best-sellers and, more important, where you should store them in the warehouse to ensure proper flow. But these packages can set you back about $75,000, E-Sync’s Wohlwend says.

When it comes to the task of physically moving SKU locations to comply with ABC slotting, you might begin by rearranging as few as two or three SKU locations a day. This can help prevent totally disrupting your warehouse, Wohlwend says.

Proceed with caution

Speaking of rearranging, operations consultant Wayne Teres, president of Framingham, MA-based Teres Consulting, cautions that physically moving product locations in the warehouse is no small undertaking. “You must be careful because the more times you physically handle a product, the greater margin there is for error, namely in counting and entering in merchandise.”

What’s more, Teres says, you need to be on top of your daily or monthly sales reports. Otherwise, you may not realize that your C products have become A products. “This could happen when a new product debuts in your catalog, then suddenly becomes a hot seller, replacing the former best-sellers,” he says. And with some product categories, such as apparel, trends and seasonality can lead to almost overnight changes in sales status.

But those caveats shouldn’t automatically dissuade you from implementing ABC slotting. Provided that you are careful when rearranging your warehouse and handling merchandise, and that you stay on top of sales reports to ensure your data are accurate, ABC slotting may improve your warehouse efficiencies. Says Teres: “Anything that eliminates steps in the picking process is a good idea.”