Do you have too much warehouse space? Chances are you are either out of space or getting close to it. It happens all the time… inventory (and other stuff) tends to expand to fill the amount of available space. When you do run out of warehouse space there are many options to consider including expanding your warehouse, building a new facility, or leasing outside space. Alternatively, there are many proven, low-cost concepts you should consider to improve the utilization of your existing space.

Random vs. Dedicated Bins

There are two primary material storage philosophies…fixed or dedicated bins and random or floating. In dedicated bin storage, each individual stock-keeping unit (SKU) or item is assigned a specific storage bin. A given SKU will always be stored in a specific bin and no other SKU may be stored in the bin, even though the bin may be empty. Dedicated bin storage is analogous to a classroom where each student is assigned a specific seat.

With random storage, any SKU may be assigned to any available storage bin. An SKU in bin A one month might be in bin B the next and a different SKU placed into bin A. Random bin storage is analogous to the assignment of rooms in a hotel. When a guest checks in they are randomly assigned a room (based on the guest’s pre-defined criteria).

The amount of storage space required for an SKU is directly related to the storage philosophy. If dedicated storage is used, a given SKU must be assigned sufficient space to store the maximum amount of the SKU that will ever be on hand at any one time. For random storage, the number of items on hand at any time will be the average amount of each SKU. In other words, when the inventory level of one item is above average, another item will have a below-average level; the sum of the two will be close to the average.

Often the storage philosophy chosen for a specific SKU will be a combination or hybrid based on where the SKU is in the storage process. A grocery store is an excellent example. Dedicated bins are used on the store shelves where the consumers can easily find what they are looking for, and not stored (on purpose) in any other bin (promotions excluded). In the back storeroom, however, the excess stock is usually stored randomly, wherever there is a bin. Because the combination storage bin is based on a mix of fixed and random storage, its planned inventory level falls somewhere between the fixed and random quantity.

Choosing one storage philosophy over another means making a number of trade-offs between space, accessibility, and material handling efficiency.

The use of space in a dedicated bin model is poor because space for the maximum amount of inventory that will ever be on hand is allocated, although actual on-hand inventory will normally approach the average inventory level. Therefore excess empty space and bins are common in dedicated storage. Random storage is extremely space-efficient because the space requirements are only 15% above the average amount of inventory expected on hand.

The material in dedicated storage has excellent accessibility. Blocked stock is not a problem because each bin contains only one SKU and the bin of each item is known (remains constant). Accessibility to stock in random storage can be good but requires more management especially if a materials tracking system is not in place or kept up to date. Without good management or a tracking system, using random storage will result in blocked stock, lost material, and eventually obsolete inventory.

Dedicated and random storage score equally well for material handling. With either, inventory is typically handled during the put-away process and then again during picking. Combination storage is typical of a forward pick and reserve storage strategy requiring a replenishment flow. This replenishment adds another product touch as inventory is moved in smaller loads from the reserve (random) bins to the forward (dedicated) bins for picking.

In summary, dedicated storage trades space efficiency for better inventory accessibility and vice-versa for random storage. Combination storage trades material handling efficiency for middle-of-the-road efficiency in space and accessibility. Which is best for your operation is unfortunately not a clear-cut decision and will depend on several other factors. The only general conclusion to be made is the poor use of space in a dedicated bin strategy is a big negative. Compared to the use of space in a random strategy, a dedicated bin strategy will generally require 65-85% more space. With the escalating cost of money, land, and construction, few companies can afford to design fixed-bin storage warehouses. This factor alone can justify the investment in technology to help manage a random storage warehouse.

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