It is not uncommon for warehouse operations and order fulfillment to lose efficiency in the picking process over time. Pick footprints tend to become larger and order picking becomes slower, driving up the cost per pick. As picking and packing grows, the available storage locations decrease, and new SKUs are slotted wherever space is available.
In addition, products tend to end up in less optimal locations. SKUs with higher velocity are located farther away from packing and shipping. Another problem is having a heavy item being stocked up high. By not having SKUs in optimal locations, travel times increase.
What is Warehouse Slotting?
Warehouse slotting is the process of assigning and storing items in optimal picking locations based on various criteria, such as unit velocity, size weights, and family group for instance. In addition, warehouse slotting should determine the amount of inventory to be stored, and the type and size of storage location.
Warehouse Slotting Strategy
Slotting is one of the fundamentals within the supply chain that all operations must stay on top of. For many, it is set aside because it is a time consuming task, however, the longer it goes the worse the problems become. In the warehouse or distribution center, slotting typically resides with the inventory management department.
Inventory management must assess new items that are sourced, to determine how they should be slotted. Older items that are discontinued should be evaluated to determine what changes should be made to the stock locations. At times, this may require a change to the warehouse layout.
There are sophisticated 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 and hand holding these systems require.
Benefits of Warehouse Slotting
Here are a few of the many benefits to effective slotting:
- Decrease order fulfillment and operational costs – As much as 60% to 75% of the picker’s time is travel, which can add up to miles per day in large companies. Effective warehouse slotting can reduce travel time significantly, lowering the cost per unit picked.
- Improve storage capacity – By correctly sizing pick slots based on product cube and sales velocity, you can improve space utilization. This can delay the need for expanding warehouse space, or a warehouse move. This process also reduces inventory in pick slots for slow moving SKUs, further reducing the picking footprint.
- More efficient picks - Slotting in warehouse operations should include items that tend to always ship together near each other can improve the order picking time. Additionally, swapping out seasonal items in optimal locations for less than optimal locations helps improve efficiency no matter the time of year.
- 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. This includes not having a heavy item too low or too high. You'll improve order cycle time, 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. This process of organizing SKUs can be as simple as separating colors to break up the SKUs or separating the sizes so they are not all together.
Create A Warehouse Slotting Analysis Report
The first step is to create a report which will allow you to analyze product movement for a period of time, generally a season or a year. This should be done from the order file, by analyzing unit velocity. Sequence the report by product, showing unit sales highest to lowest. This information should be readily available in any warehouse management system (WMS).
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 the unit velocity 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 still holds true - meaning 80% of the sales come from 20% of the SKUs. This 20% of SKUs should be the primary focus in any warehouse.
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. If you can generate the analysis, it is better to have the number of times an item was picked along with unit sales. This information can help eliminate congestion when mapping out where items will be physically slotted in the warehouse.
Applying Warehouse Slotting Results
After creating the analysis, determine how your warehouse needs to be slotted. 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.
- Inventory 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 - There are two important aspects. Crate variable-sized slots based on a product’s cubic dimension. Forward pick areas if at all possible should store 4 to 7 days of unit sales. This reduces replenishment trips and congestion.
- Employee safety - Is your lack of effective slotting causing your pickers to make picks that 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 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 to better use the available space. The same goes for hazardous products being stored in separate spaces.
For warehouse operations to continually benefit from slotting, the slotting analysis needs to be done regularly. Slotting needs to be addressed and changed based on product SKU velocity and the number of “touches”. Treat slotting review and potential reslotting as a critical process just like you do inventory accuracy. Be sure to determine who you will task with this responsibility to continually get the benefits.
Warehouse slotting is one activity that most warehouses do not spend enough time on a regular basis. Start out with this analysis, gain the benefits, and then research the costs and benefits to move to a more automated application.