Proper Slotting Can Reduce Warehouse Costs

Aug 30, 2010 11:16 PM  By

Slotting, or determining where each item should be located, is one of the most overlooked aspects of running a warehouse. If your distribution center is trying to control or reduce costs and meet customer expectations, proper product placement is essential.

An effective slotting program will help ensure that you have the right product in the right location when you need it. Slotting should enable you to optimize material handling and storage capacity utilization. That means you’ll have enough room in the pick slot to meet picking demand and to minimize worker picking and travel time.

The potential benefits of slotting are many. They range from reducing labor and material handling costs, product damages and injuries to faster order turnaround time and better control and utilization of assets.

To get started with a product location program, you need to gather some basic information. The following list covers much of the data required to effectively slot products:

  • Number of active SKUs
  • Shipping unit cube
  • Average and peak unit sales per week by SKU
  • Cube movement per week by SKU (average and peak)
  • Not inventory on hand
  • Unit weight-level selection and sequence in pick line
  • Special handling or storage requirements (if any) by SKU
  • Products that need more security; perishables; hanging garments; oversize items
  • Order profiles
  • Lines and units per order; single-line orders
  • Distribution of multiline orders-number of orders by order type (lines per order)
  • Picking methods used
  • Ship-alone SKUs-stored in a separate zone
  • Any kitting requirements
  • Any assembly requirements
  • Any value-added services

To assign properly sized locations, most warehouses need a variety of location types with different cubic storage capacities. You can also use multiple facings within one type of storage media to accommodate some variations in requirements.

There is rarely a clear distinction between slot size allocations, since many items are slightly out of the range of capacity available in one type of storage location. Examples of typical types of storage capacities are as follows:

  • Pallet rack
  • Floor
  • Flow rack
  • Drive in or drive through
  • Wide-span shelving
  • Bin-storage shelving
  • Miscellaneous special type item locations

After you’ve created locations, you’ll need a numbering schema. The most typical consists of the following in some form or other, along with the number of characters typically assigned to each. Most are alphanumeric in format.

You then need some type of logical and systematic process to complete the slotting process. Most start with a general location step followed by detailed, specific, discrete location assignments.

The first step is to determine the general area of the warehouse that would make the most advantageous location for the item. Consider both item and cubic velocity data.

After selecting the general area, you need to figure out the specific slot size and location for the SKUs. This is based on cubic velocity, and the desired number of storage days for the items. Many warehouses generally slot by category or family.

One of our clients, a major university, had to consolidate its warehouse functions into a smaller central location. After inventory levels were reduced as much as possible, the new layout required a detailed slotting process to use the space and operate efficiently.

The client’s first step was to categorize its product lines into families of product. Specific items within each family had different characteristics and required different size slots to keep the family together.

Using the criterion of storing seven days of average movement in the primary pick slot, the client calculated the number of each size pick slot. The entire family of product was then located in a prime position based on its overall usage and importance. Specific items went in in proper size slots based on cubic velocity and weight.

As a result of this exercise, the company consolidated multiple warehouses into less space and now operates more efficiently.

Curt Barry is president of F. Curtis Barry & Co., a multichannel operations and fulfillment consulting firm.