While warehouse slotting sounds like a simple problem when described at a high level, it can be quite challenging to solve.
Simply explained, warehouse slotting is when you arrange items within a distribution center into specific slot designations with the intention to increase productivity. In general, items (i.e. SKUs) and slots (i.e. locations) are prioritized by some defined criteria, then married or paired up per those criteria, while also taking into account any constraints the items and slots are subject to.
The way items and slots are prioritized are limitless and completely up to the person taking on the initiative and building the slotting strategy.
Noting that item and slot prioritization combinations and desired goals are almost limitless, warehouse slotting optimization becomes an increasingly complex challenge to conquer. Many companies desire to achieve numerous goals while also ensuring they adhere to necessary restrictions for safety as well as SKU-specific attributes like product fragility, flammability or value. When building a slotting strategy, competing goals and necessary restrictions inevitably require trade-offs.
A common example of competing goals that many companies face is the desire to slot for item/SKU velocity while also putting heavier items first within the pick sequence. Why would you want to create slotting rules to include both of these scenarios? How are these two goals competing with each other?
Let’s start with SKU velocity.
SKU velocity describes how frequently and quickly an item (or SKU) is being picked over a designated period of time. A common warehouse slotting rule included in many strategies is to take the highest velocity items, aka fast-movers, and place those items in prime locations that are easy to pick or are in prime locations near the loading dock.
Placing heavier items early in the pick sequence or pick path helps selectors pick items within the warehouse such that a more structurally sound pallet can be built. With heavier items placed on the bottom of the pallet, a solid foundation is created.
Both goals are important: putting fast movers near the loading dock reduces travel time for pickers which contributes to increasing selector productivity and helps minimize travel time and associated costs, while putting heavier items at the beginning of the pick sequence works to support building more stable pallets, reducing product damages that happen during transport. These two objectives may not necessarily align; for example, putting heavy items first might mean placing a slow-moving, heavy item in a choice slot near the shipping dock instead of a fast mover. The art of building a slotting strategy is balancing the competing goals to achieve the most benefit.
Let’s start at the beginning: Data is key.
First, let’s discuss item data. If you intend to consider item orientations when placing your items, which can greatly help in warehouse space management, you will need all three dimensions of the slotting units:
If you do not have these dimensions, using the volume of the product is possible, but not advisable. Utilizing liquid cube analysis commonly causes SKU assignments to slots that are not compatible in size. Considering all three item dimensions and the slotted orientation is a much better approach to ensure the SKU will fit appropriately and that full space utilization for the slot is achieved. Note that if an item is allowed to slot in different units (cases, inners, eaches), you will need all packing unit type measurements as well.
The demand for an item and each picking unit is also necessary to begin a slotting optimization initiative. Forecasted demand is often helpful as well, especially if you have good forecasted data for seasonal or promotional items as a better slotting decision can be made for those items using a forecast, which is likely going to be more helpful that historical data in some cases.
Depending on the goals and objectives for the project at hand, additional data may be helpful and/or necessary as well.
Finally, worth noting is order data. You likely will want to know the expected improvements from a reslot or measure potential slotting scenarios against one another in terms of KPIs like lines per hour and total travel distance, to do this a simulation must be run, and, using actual order history, is a great way to calculate expected returns.
The need to reslot items is driven by two factors: changes in demand and changes in product mix. Your operations’ variability on each of those factors will determine the magnitude of moves needed to keep your slotting solution sustainable. Changes in demand can be caused by promotions, seasonality, and product life cycles to name a few. Changes in product mix can include seasonal items, new item introductions, item deletions, and promotional items. These changes can be referred to as destabilizing events. If a warehouse reslots efficiently, benefits such as reduced selection and replenishment labor can be achieved until the next destabilizing event, at which point sustainable slotting, also known as maintenance moves, or another reslot will need to take place.
The amount of moves you should make between destabilizing events will depend on the payback associated with the moves. In order to get the most value out of your moves, it makes sense to prioritize them and to not consider making moves that don’t meet certain minimum criteria such as:
For more information regarding the timing of a reslot versus when to perform sustainable slotting moves, check out our Warehouse Slotting: Moving Product With Purpose in the Distribution Center whitepaper which highlights the benefits, mechanics and timing of a reslot versus slot maintenance/sustainable slotting.
One common way poor slotting is misdiagnosed is thinking you are out of space. Often a walk down the aisles reveals that many slots are half or less full, indicating the space is underutilized. The warehouse is not out of space, just out of slots. Exploring the use of smaller slots for slower items makes sense when in this situation.
When operators indicate that replenishments are too high there may be opportunity for better slotting. Often this means there is opportunity to swap fast moving items in small slots with slow moving items in larger slots. This example is illustrated below.
In this example making a few clever swaps can greatly reduce replenishment efforts.
Also, keep an eye on dust levels. An item covered in dust in a premium slot is likely mis-slotted. For more visual cues signifying a need for a warehouse reslot, check out the Solutions at WERC webinar, Slotting Optimization: Identifying Needs and Sustaining Benefit, here.
A general technique for measuring whether a slotting opportunity will likely require slotting optimization software to be addressed efficiently is to consider the SKU count and number of inventory turns. Warehouses with large SKU counts and a high number of inventory turns are obvious good candidates for slotting and advanced slotting software as these operations will be more complex and attempting warehouse slotting with excel will prove to be difficult and not be able to provide as much benefit. Here’s a list of SKU count & inventory turns and the associated opportunity for advanced slotting software: