Five Benefits of Warehouse Slotting Optimization

Posted by Gerry Poe

warehouse management systemsWarehouse Slotting provides strategy and optimization of material pick-bin locations based on the main business drivers. Seasonality, sales trends, industry flex, and satisfying your customer's adapting to change.

For Example:
  • Why do you see inventory items in a store on the end-caps or strategic locations on shelves?

  • Why does it cost suppliers more discount-allowances to the store for those items to be located on an end-cap instead of the middle of the shopping aisle?

    They are visible, easily picked up, and are more likely the buyer will purchase them.

You can give your customers what they want, faster and more efficiently.

Five key warehouse slotting optimization benefits:

1)  Picking Productivity – Characteristically a picker's time is spent:

  • 55% traversing the warehouse
  • 15% searching for the location
  • 20% waiting in the queue
  • 10% is spent pulling products from bin locations

2)  Pick Accuracy – Most mistakes made are at the pick face. Typically where teamwork is required the primary measurement of performance is picking rate. When order pickers focus on speed, the accuracy reduces. Consequently, warehouse slotting can reduce sources of confusion of order pickers, such as: similarly wrapped items side by side or similarly characterized parts adjacent to each other and minimize the possibility of confusion thereby increasing the pick accuracy.

3)  Replenishment Efficiency - A result of successful slotting is standardization of the pick face majority of product measurements being stocked for the picking. Hence, the labor required replenishing the product storage locations is significantly reduced.

4)  Workload Balancing - Knowledge of your high, medium and low moving items with their respective bin positions permits production and operations manager the capability to spread the workload uniformly among the warehouse operators.

5)  Ergonomics and Safety - Product slottings result in identifying high moving items with their respective storage locations. Additionally, the analysis results in these SKUs being placed in a storage area at an average working level, around waist high. For this reason, warehouse operators are less prone to accidents or physical stress and therefore, generally happier and more productive.

An Inventory Slotting Scenario:

In most warehouse or distribution centers, warehouse management personnel spend significant amounts of time each day running back and forth across the shop floor unloading, stocking, and picking. Reducing this travel time can result in increased pick productivity, faster shipping times, and significant labor cost savings for the company.

Inventory-slotting is a core strategy for reducing travel time on the warehouse floor. Slotting, within warehouse management processes, analyzes inventory movements and purposefully reassigns the bin position of stocks for greater movement efficiencies. Most ERP systems allow for a discovery report (Inventory Exception) revealing what moves and what does not. Most ERP does not take it to the next level of suggesting “rearrangements” enabling faster shipment and picking times that lower the cost-per-box.

Using inventory slotting processes allows warehouse managers to view inventory movement and sales history to see what’s hot and what’s not in warehouses, bins, and subsequently lots, and serial numbers. Inventory slotting, based on a variety of criterion placing stock in the best location, enhances customer delivery performance and reduce costs.

Inventory Slotting mechanisms, developed for warehouse managers and employees, supporting the need to know more about inventory to measure product movements for better forecasting, planning, and improved customer service.

Inventory Slotting helps identify what’s happening in the warehouse with suggested assignment of inventory, so warehouse workers travel the least possible distance to pick orders.

What is the bottom-line goal? - Paying for warehouse crews to pick more orders in less time.

How Inventory Slotting Functions

Slotting a warehouse or distribution center takes a look at the physical space and determines what area should hold the fast moving inventory – those items that are the fast movers. Bins and shelves in this area could be identified and labeled as the “Red-Zone”.

Determine which items and quantities (capacity or min/max) are stored in the new Red-Zone (BIN) based on the size of the zone and size of items, considering volume and spatial considerations.

For example, the materials manager may determine that the Red-Zone is capable of holding the top 50-100 fastest moving items. By using product movement analysis, materials managers identify stock in the red-zone. Analysis using historical sales data presents suggestions for bin/warehouse reassignments. Repeating these processes to determine zones outside of the red-zone, including the items they ought to contain.

Item Ranking: Items ranked by movement volumes between fast and slow movers allows optimization based on correct current and historical data. These products individual rating opportunities enable managing stock locations for optimal picking and delivery of orders. Allowing cost savings while improving customer delivery demands.

Analysis results should allow for the development of slotting movement tasks to take advantage of these relocation benefits. For example Warehouse Suggested Transfers from current-bin/location to target bin/location for all stock codes within the selection criterion range.

Inventory warehouse/bin allocation based on Activity Exception (Slotting), while complex in nature, the process of executing slotting can be a classic series of relocation movements. Which results in productivity increases, allowing faster ship times and enhanced customer service, having a positive impact on your bottom line?

Reasons to adopt Slotting for your warehouse:

Ease of use, ease of picking, ease of packing, ease of sorting, ease of labeling, time-savings, all of these are cost savings, ROI building, and TCO reducers.

i.e.: Justification for rearranging your inventory, regularly, based on what is moving and what is not. Cost-per-container packed can be reduced by a high percentage if you are willing to accept the “system’s” control.

Perform an Operational Review

An operational audit is a starting point. Functional assessments to identify needs for help recognize potential improvements in processes, warehouse layout, space management, productivity, and freight analysis. Your objectives are to lower the cost per order, increase storage capacity within the distribution centers, lower inbound, and outbound freight costs while improving service levels and turnaround times.

Because these costs represent the largest expenditures,
the areas of greatest potential savings are:

  • Direct labor
  • Indirect labor
  • Outbound freight
  • Inbound freight
  • Occupancy
  • Packing materials

Consider adding more illustrative power to your material planning by utilizing Inventory Optimization and other enhanced features of ERP systems already in use to help increase turns and improve procurement decisions.

Learn more about  Warehouse Management Software Options

Tags: ERP, Supply Chain Management, Warehouse Management, WMS Slotting

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