With labor being one of the largest costs in the fulfillment center, managing efficient picking operations is paramount to controlling costs. Fulfillment and distribution operations need to look at ways to reduce picker travel time while increasing the order throughput. Excessive steps and handling of products will not allow operations to run as effectively as it could. One way to drive down costs and increase picking throughout is to consider utilizing a hot pick zone within the picking footprint.
There are two objectives to setting up hot pick zones. The first is to segregate the fastest-selling items and locate them in the most advantageous position possible relative to packing and shipping. The second is to provide the SKUs with the slotting space required to minimize the replenishment process for these high-velocity items.
Characteristics of hot pick zones include:
- A low number of SKUs - typically the top 5% to maybe 10% of the overall Pareto. The Pareto Principle (also called the 80/20 rule: more info below).
- Allows for high volume picking of items and orders within a small picking footprint.
- Focuses on orders that can be picked 100% complete within the SKUs slotted in the hot pick zone, or pick a high percentage of order lines in a zone pick and pass environment
- Can utilize a variety of storage media: conventional storage and shelving, carton flow racks, pick to light, or goods to person technologies.
- Is generally dynamic and should allow for items to move in and out of this zone - only the fastest turning SKUs should reside.
- Hot pick zones are generally closest to the packing and shipping lines so the orders can be quickly inducted and shipped.
Before you begin planning out a hot pick zone, you will first need to collect and analyze data that will assist with the hot pick item selection process.
Here are four considerations for hot pick zones:
It is important to understand how each SKU is projected to move from a velocity perspective. In many companies, this information doesn’t always make its way down to the operational team, but it is critical from a slotting perspective. For those companies that do not have a high SKU turnover, the historical view can be utilized.
Some companies have marketing departments that push certain SKUs in weekly promotions or work with the product development team to develop promotions to drive sales. The SKUs in these marketing promotions are perfect for dynamically moving in and out of hot pick zones as the marketing promotions change. For other companies, we look at the Pareto Principle or velocity for the SKUs.
The Pareto Principle commonly referred to as the 80/20 rule, simply states that for many outcomes, roughly 80% of consequences come from 20% of causes. In order fulfillment, this means that for most companies, 80% of the velocity typically comes from 20% of the SKUs. This ratio may change from company to company, but invariably, a small number of your SKUs represent a significant part of your total unit movement sales.
For the hot pick zone, we are most interested in those SKUs that make up the top 5% of all demand to possibly as much as the top 10%. For companies with a very large SKU base, the focus is typically on the top 5% to not require to have a large footprint. Businesses with smaller SKU bases can increase the percent of SKUs in the hot pick zone.
Most hot pick zones focus on smaller cube products, as the goal is to reduce the amount of walking while picking the greatest number of lines and units. This requires companies to collect the cubic dimensions and the weight for SKUs. For large cube products and ship alones, these areas should be slotted appropriately to maximize the picking efficiency. You will need to look at the cubic dimensions of products and determine which SKUs may be too large to fit within a hot pick zone.
One of the major benefits of a hot pick zone is being able to pick all lines and units for a large segment of orders – picked 100% complete. A large segment of orders could be anywhere from 10-20% of all orders within the hot pick zone. To do this, companies need to analyze how many orders are single line versus 2-line, 3-line, 4-line orders generally up to 5+ lines.
Once this data is collected, you will want to then analyze how many SKUs are picked on these orders – sorted by velocity. The objective is to determine the SKUs to be in the hot pick zone based on the velocity and the ability to satisfy the highest number of orders that can be picked 100% complete. You won’t be able to fully pick all single-line orders within this zone, or even the 2- and 3-line orders but you should be able to hit a high percentage of each of these order profiles.
Once you have identified the SKUs that you initially believe should be in the hot pick zone, you will need to determine how much picking storage is needed to support the picking plus sufficient stock on hand in the picking location. This is where the SKU’s characteristics discussed above come into play. The cubic dimensions (including case-level information) will be used to determine how much space is needed per SKU for the quantity within the pick location.
Most companies keep at least a 2-day supply on hand in the pick location to account for swings within the order volume on a day-to-day basis, and generally no more than 3 to 4 days of supply depending on the cubic space requirements. Any more than this and you risk the footprint becoming too large and defeating the purpose of minimizing the travel distance.
By keeping the days of supply lower, you will need to ensure that you can easily and efficiently replenish this pick footprint
The SKU’s characteristics will also help to determine the type of material handling and storage that should be utilized in the hot pick zone, as well as any potential technologies and the overall size and pick the path of the hot pick zone. If the footprint is too large, you can always scale back the total list of SKUs – or add more if the footprint can support additional SKUs.
If you are also planning to implement zone pick and pass, you will need to determine how you will transport these picks to the next zone. Will you simply utilize picking carts and wheel these to a staging area? Or will you consider utilizing picking robotics or conveyor to transport the picks? Either way, the flow of goods, people, and equipment will need to be considered.
Proper management of the hot pick zone is important. Once an SKU’s velocity drops, it is time to decide if the SKU warrants remaining in the hot pick zone – or if another SKU should take its place. In many warehouses, this area is somewhat fixed with the SKUs being assigned for an entire season. This type of environment will require less monitoring of SKUs than other businesses with high SKU turnover.
Slotting is crucial whether your product and order profile support a hot pick zone or not. If a segregated hot pick zone is not feasible, utilize slotting principles to create hot pick aisles at the beginning of your pick path to eliminate travel as best as possible to the other aisles beyond the hot pick aisles.
Whether you use a basic or more complex version of the concept, you can reduce picker travel time and increase overall distribution center efficiency.