In managing a warehouse or distribution center, the placement of inventory is perhaps the most critical element in the efficiency of the entire operation. Unit and case pick distribution operations invest between 50 and 70 percent of their warehouse labor budget on the outbound order process (picking, packing and shipping). Consultants and other experts estimate that fifty percent of the activity performed by workers assigned to these tasks is travel between pick locations.

A warehouse manager or consultant may devise the world’s most elegant slotting solution but unless it is evaluated and maintained regularly, costs may will begin to edge upward, slowly eroding profitability, because quite simply, nothing remains the same. Slotting is simply the assignment of a specific cube of space to a specific product or purpose. The question of when and how to slot – that is, to make or revise the slot plan of an existing warehouse or distribution center is not an easy one to answer.

One industrial distributor, for example, established a new facility and slotted it successfully under an SKU sequential number scenario. Unchanged fifteen years later, the operation nearly hit the wall as the distributor ran out of ways to slot its constantly growing and evolving product line. The initial excellent slotting model had continued to degrade with time.

The Warehouse Challenge:

Multiple analyses have demonstrated that merely slotting SKUs by velocity and distance from a preferred point can bring labor costs down by as much as 10 percent. Refining the slotting model to further streamline the picking process can yield still broader labor savings as well as increase available floor space and cube capacity with no additional capital investment.

Thus, slotting impacts deployment of the workforce, the allocation of available space, the service rendered clients or customers and ultimately, the profitability of the enterprise. In creating or modifying a slotting solution a matrix of factors apply that should be revisited periodically. Sometimes modest adjustments will be indicated; at others, major reconfiguration.

Among the strategic factors impacting slotting policy:

  • Product evolution and rotation – static, expanding and contracting inventory
  • Seasonality – predictable adjustments of stock quantities and positioning
  • Demand fluctuation – non seasonal influences on inventory movement
  • Labor force – staff utilization and costs
  • Warehouse geography – layout efficiency and the actual utilization of space

In order to create an effective slotting plan, data deriving from these and other factors items must be considered when determining where they are to be placed within the warehouse in order to achieve an effective picking process.

In velocity based slotting plans, for example, warehouse professionals usually subscribe to a 20-80 approach in which the fastest-moving 20 percent of the SKUs are placed in the most accessible, “least expensive” locations – those closest to the shipping door or preferred consolidation points. The other 80 percent are assigned their bin, case or pallet locations in descending order of accessibility, and ascending order of cost-per pick.

The logic relates to their cumulative cost for storage, replenishment, movement in and out of the facility, pick time and travel – essentially their relative share of all of the costs involved in their storage and handling. The degradation occurs when the various warehousing influences change and the slotting plan does not.

Slotting plans often are generated on a spreadsheet and because these tend to be difficult to manipulate, they are modified only rarely if at all. Changes tend to be minor because of the costs and cumulative implications: one move necessitates another, and so on. In the case of the industrial distributor, the solution was sticking with the status quo.

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