How to Improve Your e-Commerce Warehouse Slotting

   

warehouse-slottingSlotting is defined as the process of assigning SKUs to picking locations based on various criteria, such as unit sales velocities, size, weight, or family group - with the objective of improving operational costs, more efficient space use and customer service – and minimizing the replenishments. 

There are sophisticated commercial software packages that assist with warehouse slotting planning and maintenance. However, many warehouse operations are not ready for a fully automated system, the capital investment or the continual maintenance required.

However, almost every warehouse in any industry can benefit from applying some basic slotting strategies and best practices. This blog outlines a slotting analysis that any warehouse can do to gain many of the benefits without acquiring a sophisticated slotting system.

Benefits of Effective Slotting

Here are a few of the many benefits to effective slotting:

  • Decrease operating costs – As much as 60% to 75% of picker’s time is travel, which can add up to miles per day. Effective slotting can reduce travel significantly, lowering the cost per unit picked.
  • Improve storage capacity – By right sizing pick slots based on product cube and sales velocity, you can improve space utilization which often delays the need for expansion or a warehouse move.
  • More efficient picks - From better locations for advertised or seasonally promoted products, “hot pick” high unit sales products, and products that often sell together, effective slotting will make picking more efficient.
  • Improved ergonomics – Fast moving units should be placed in “golden zones,” which are locations that are easier to pick from, with no bending or reaching. You'll improve order cycletime, resulting from reduced replenishment trips, put away and picking time.
  • Accuracy – By separating similar products or SKUs that could be mis-picked, you'll improve picking accuracy.
  • Load and zone balancing of work, reducing congestion and contention for MHE.

Create Analysis Report

The first step is to create a report, or query, which will allow you to analyze product movement for a period of time, generally a season or year. This should be done in one of two ways:

  • Unit sales: From the item master file, analyze unit sales velocity. Sequence the report by product, showing unit sales highest to lowest; or
  • Frequency of ordering: Develop report as above so it can be sorted by highest item sales to slowest selling and show the number of orders the product appeared on. This will give you an idea of the number of trips to pick product.

For each SKU, calculate what percent of the total unit sales each item makes up. Once you have done this, create a cumulative percent of sales column. This column is a cumulative running total that will show you how many SKUs make up each 10% of sales. For most companies the 80/20 rule is still holds true -- meaning 80% of the sales come from 20% of the SKUs. These 20% of SKUs should be the primary location focus in any warehouse.

Obviously, from an order-picking efficiency perspective, the item that was picked a hundred times should be in a more accessible slot than products with little movement. Remember it is better to have the number of times picked rather than just unit sales. Consumer businesses can use unit sales because of the small order nature. Business to business may benefit more from number of trips if they have large pulls of same products.

Applying Slotting Results

After creating the analysis, determine how your warehouse needs to be reslotted. Where do fast sellers need to be stored to eliminate travel time and how accessible are these slots? Take into account potential congestion you may accidentally create.

  • Storage types and product characteristics. How does this affect your potential slotting? Are there changes to the layout needed to benefit from slotting?
  • Right sizing slots. Two aspects are important. Variable sized slots should be based on a product’s cube. Forward pick areas if at all possible should store 4 to 7 days unit sales. This reduces replenishment trips and congestion.
  • Employee safety. Is your lack of effective slotting causing your pickers to make picks which are ineffective or even dangerous? For example, are warehouse employees picking from a ladder or forklift when the items should be at lower levels or in forward pick areas?
  • Ship alone product. Large, oversized and products subjected to dim/weight will not be consolidated with other smaller items. Generally, they will require a separate pick ticket. Consider storing them in a separate warehouse zone or facility to better use space. The same goes for hazardous products in separate space.

On-Going Slotting

For warehouses to continually benefit from slotting, the slotting analysis needs to be done regularly.  Slotting needs to be addressed and changed based on product unit sales and “touches”. Treat slotting review and potential reslotting as a critical process just like you do inventory accuracy. Who in your organization will you task with this responsibility to continually get the benefits?

Slotting is one activity that most warehouses do not spend enough time on a regular basis. Start out with this analysis, gain benefits and then research the costs and benefits to moving to a more automated application.

 

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