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The Art and Science of Warehouse Slotting Optimization

The Art and Science of Warehouse Slotting Optimization


This article discusses a critically important distribution center process that the vast majority of distribution operations do not effectively manage which is warehouse slotting. Quite simply, slotting is the process of organizing how items are physically positioned within the warehouse for order picking purposes.  The title of this article refers to slotting as part art and part science and indeed this is very much the case.  This article discusses why slotting is important, the pros and cons of random slotting versus fixed slotting, the type of productivity gains companies are experiencing due to optimized slotting, and how to think through a simple slotting exercise for your distribution operation.  This topic is truly worthy of a book so we can really just skim the surface of this topic within this article but hopefully the reader gain some insight on key slotting issues along the way.

Why Is Slotting Important?

The purpose of slotting is to ensure the following:

  • Products are assigned to the most appropriate storage medium / fixed equipment type.
  • Products are assigned to pick locations throughout the warehouse to optimize total labor efficiency including order picking, putaway, and replenishment labor functions.
  • To ensure good ergonomics for all aspects of product handling.
  • To support the output of customer-friendly orders.
  • To minimize product losses due to damages resulting from placing heavy merchandise on top of lighter, crushable merchandise.
  • To enable the finished output of the pick process to be a high integrity shipping container (e.g. pallet, tote) to minimize product damage during transport.

A well-slotted distribution center will always outperform one which has limited effort put towards this important process.  The vast majority of distribution centers do not earmark sufficient time or resources to manage slotting and to this day it remains one of the greatest sources of low hanging fruit.

For companies that take slotting seriously, there are several off the shelf software applications dedicated to optimizing slotting.  For many companies, the poor-man’s approach using Microsoft Excel is more than adequate and we will discuss an approach to slotting with Excel further on in this article.

Random Slotting Versus Fixed Slotting

The first question is to answer is whether or not to pursue fixed versus random slotting.

  • Fixed slotting implies that items are assigned to fixed bin locations for picking purposes. Typically, each fixed pick slot is configured with a minimum and maximum quantity for the assigned item within the warehouse management system.  When orders are released for picking, if the inventory in the fixed pick location will be depleted below the pick slot’s specified minimum quantity, then a replenishment task is invoked to refill the pick location from reserve inventory.  The reserve inventory is typically managed on a random basis and is usually stored close to the pick slot within overhead storage locations.
  • Random slotting implies that items are not assigned to fixed pick locations, rather they are assigned to zones of many pick locations.  When the inventory in a pick slot is depleted, the item is picked from a new location within its assigned pick zone.  The intent is to reduce work spent performing replenishment of pick slots because incoming receipts may be putaway directly into empty pick locations within the pick zone.  Although the need for reserve inventory may still exist in this environment,  the number of replenishment hours will be reduced because many putaways go directly into the pick locations.  One downside to this approach is that the pick lone is typically longer than in a fixed pick environment because at any time many items will have more than one pick slot location assigned to them.

Whether you choose one approach versus the other may be a function of the warehouse management system you are using within your facility.  Some WMS applications are designed around the assumption that random slotting or fixed slotting is the de facto methodology to operate the picking function.  Not many WMS applications support both approaches.

Speaking frankly, the vast majority of companies use a fixed slotting strategy because this has historically been the way to operate.  Random slotting may provide a stronger fit in certain types of operations.  Some examples follow to illustrate why this topic is a little more complicated than it may seem at first glance.

  • A hair care products distributor ships 30,000+ different SKUs which are concurrently picked and packed into shipping cartons by the order pickers.  Products range from large format 1.5 Litre shampoo bottles to expensive hair brushes to smaller cosmetic products.  With random slotting in place, the pickers often spend time repacking the boxes during the picking process because a large format bottle does not easily fit into the box unless items that were previously picked into the box are removed to make room for the larger bottle.  Order pickers end up having to repack most of the boxes that are being picked into which adds minutes to the pick process.  The net result is a 50% picking productivity penalty that is gained when the company switches to a fixed picking environment.
  • Grocery distributors use fixed slotting to organize their pick lines because of the diverse range of case weights and sizes that need to be concurrently picked and then palletized.  Products are organized to ensure that heavy cases are positioned at the base of the pallet and light cases are positioned at the end of the pick line so that they end up on the top of the pallet.  Family groups are used to divide the pick line into store-friendly categories (e.g. canned goods, glass goods, liquid & powder soaps, cereals, paper products, light crushables, etc.).  Case heights are used to sequence taller cases through to shorter cases to ensure that solid pallets are constructed during the pick process to minimize pallet instability which results in product damage during transit.
  • Parts distribution operations with tens of thousands parts across a wide range of shapes and sizes can be randomly slotted such that similar groupings of parts are assembled within a zone and such that A, B and C items are segmented to minimize travel time for stock movement and picking.  Keeping faster velocity items (based on outbound customer order frequency) in the golden zone of the warehouse (i.e. at ground level and towards the front of the warehouse nearest the shipping the dock) greatly helps to reduce overall travel time.  Random slotting within zones can be very effective in this environment because most products are very slow moving and for many items, one year’s worth of stock movement is in a small shelf bin location.  The key to gaining productivity is to strategically slot the A and B items to be quickly accessed at floor level and close to packing and shipping.
  • Many mass merchants have product lines that come and go with seasonal changes.  Many of these companies are also faced with the situation whereby there is not enough pick locations at ground level for the variety of products being distributed which forces them to resort to vertical picking.  In general, it is always less expensive to pick orders at ground level versus having to rise vertically with any type of man-up vehicle.  My rule of thumb is that it costs 3 times more labor dollars to pick an item vertically versus picking the same item at ground level.  Thus random slotting may make sense for companies that need to frequently move inactive items out of the pick line such that the SKUs being selected at ground level are always the items that are truly active.  This approach ensures that the length of the pick line is perpetually minimized and that order picking is performed at ground level as much as is possible.

Hopefully, these examples illustrate that there is no “best way” to manage the order picking process because each distribution operation is unique and needs to be studied before developing a solution to optimize warehouse labor productivity.

What Type of Productivity Gains Are Companies Experiencing Due to Optimized Slotting Efforts?

To answer this question, there are two types of companies that should be queried.

  • First, the experienced logistics consultant can provide an unbiased perspective to identify the potential productivity benefits associated with optimized slotting.  Often, the consultant will develop creative ideas that go beyond the slotting question.
  • Second, the experienced slotting software solution provider. Numerous companies claim to have some flavor of slotting as a module within their WMS solution offering and many of these slotting modules are quite frankly overly simplified.  There also exists several specialized slotting software firms that solely focus on slotting and these companies are the ones that are worth talking to for an honest assessment of the “size of the productivity prize”.  The smaller boutique software firms that make their living optimizing warehouse slotting will have good experience to offer on this subject.

The productivity gains associated with any investment into a warehouse operation will always be a function of the starting position of the firm’s distribution operation.  In other words, a company that is starting from the position of being world class due to operating in a well-engineered and highly sophisticated environment will always find it more difficult to achieve productivity gains than the  company that has a highly basic operation where there has been little or no science applied to the organization of the facility. For this reason it is difficult to generalize about the productivity gain from optimized slotting which will be different for each operation.

Having said this, as a general rule of thumb, companies that focus on managing the slotting optimization process will generally experience a 5 - 20% labor productivity increase for the order picking function at a minimum.  It is important to keep in mind that order picking typically accounts for 40 - 60% of the labor hours in a distribution operation so this is the one area where productivity gains can make a solid contribution to reducing warehouse labor expense.

How to Think Through a Slotting Exercise for Your Distribution Operation

One common misperception is that an expensive slotting package is needed to manage the slotting process.  While this may be true for some companies with larger distribution operations, slotting can be performed with Microsoft Excel for many small and medium sized distribution operations.  Here we take a look at how this can be done.

  • First you will need data.  If you can obtain a dump of an outbound order file at the order line level of detail then this is always a good place to start.  Obtain a representative time period of orders (e.g. 1 most recent month) and collapse the file down to the item level so that one record exists for each actively ordered item during the time period.  Establish a counter to capture the frequency of order lines and pieces that each item was ordered during the time period.
  • Sort the list of items in descending order line sequence so that the items with the most order lines are at the top of the list.  Now create a cumulative order line counter and assign the items accounting for the top 50% of order lines an “A” velocity ranking, the next 25% a “B” velocity ranking, and the bottom 25% a “C” velocity ranking.  All other actively stocked items that had no movement during the time period are assigned a “D” velocity ranking. It is the “D” items that are candidates to move out of the active pick line if your operation has a lack of pick facings at ground level.  The same type of product velocity ranking can be assigned on the basis of cube velocity if this is a more pertinent measure to use such as in a full case operation.
  • Assign each item to a family group that is logical to your distribution operation.  Items are typically assigned to a family group on the basis of material handling characteristics such as product size, shape, weight, dimensions, handling requirements, fragility, value, etc.  A family group is intended as a way to group like items together within a common warehouse zone (e.g. such as keeping all high value items in a security cage). Similarly, if some items are only ever ordered by one customer, then a family group could be created for these SKUs so that these items are logically grouped together in the warehouse.  This way, the order pickers need only pass through this zone to pick orders for this one customer.  
  • Assign items to storage media types (e.g. racks, flow racks, shelves, etc.).  It is helpful to have each item’s cube and physical dimensions to perform this process but in general, broken case SKUs will usually be assigned to shelving locations or flow racks whereby broken case items with medium to high cube velocity are assigned to flow racks and slower items are assigned too static shelving units.  Full case items and palletized items are generally assigned to selective racks whereby the picking elevations may be configured for one-level, two-level, or three-level picking.
  • Obtain a listing of all eligible pick locations within the warehouse sorted by zone, equipment type, and bin location sequence.  It helps to have a CAD layout of the building at this point so that you have some form of geographical representation of the warehouse.  The zones established in the operation are assigned by you and they are really meant to correspond to your family groupings.  Since you now know how many items belong to each family group and storage media type, you can begin to assess the sizing of your zones to accommodate the SKUs being slotted into each zone and therefore the number of pick facings required.
  • You will need to either manipulate the physical layout of the warehouse or the assignment of SKUs to equipment types within each zone - to enable a marriage of SKUs to locations such that a sufficient number of empty locations is equally dispersed across all zones for the introduction of new items.  A percentage of empty slots should always be provided in each zone as a function of the number of new items that are typically introduced over a rolling 4 week period.  New item introductions should be researched before getting started on the slotting process to ensure you provide enough flexibility for the addition of new SKUs to the operation.
  • For full case zones, be sure to sequence the warehouse slotting of family groupings in order of heavy to light such that the heavier product families are always picked before the lighter more crushable families.  Within each family, try and sequence taller cases before shorter cases if order pickers are picking cases to pallets in order to build a solid pallet.  For this reason, heavier products with solid packaging that move in layer or near layer quantities are always good or position at the start of a pick line because the provide a good base to the selection pallet.
  • In full case picking operations where aisle widths are wider than 9 feet, it is a good idea to keep faster moving cases to one side of the aisle and slower moving cases to the other side of the aisle to minimize the travel distance associated with aisle cross overs.  If the hit frequency in the aisle is high (e.g. 1 out of every 4 - 6 locations requires a pick transaction) then moving to a Z-Pick or U-Pick numbering system may be of benefit rather than a conventional X-Pick location numbering system. 
  • For broken case zones where SKUs are assigned to shelving units or flow racks, keep the faster moving items in these zones assigned to pick locations that are nearest to high traffic cross aisles to minimize the amount of travel distance required to travel into narrow picking aisles. Family groupings can and should be established within these zones to ensure like items are grouped together which could be a reflection of how customers order these products or how they are incoming by source of supply. Be sure to keep taller cases from being placed at higher levels of shelving for flow racks because it is hard for short people to reach up and over the lip of the box to grasp at the contents.  By keeping shorter cases on the topmost picking levels the operator can achieve better pick rates because it is easier to access the carton contents.
Flow Rack Golden Zone
    • At all times, assume that the sweet zone for picking is between the chest and the knees such that the fastest moving SKUs should be positioned for ease of access within this height range relative to the floor.  Slower moving SKUs should be slotted outside of the sweet zone and if the slow moving SKUs are heavy then they should be slotted lower down rather than higher up (i.e. it is a good practice to keep 30 LB cases or more from being slotted above chest height).
    • At all times, keep the slowest velocity SKUs slotted to vertical storage locations in the event that there are insufficient pick facings at floor level for all active SKUs.  Ideally the “C” and “D” items are those that are picked from vertical storage locations because these will cost $3X to pick versus $X for the items slotted at floor level.
    • At all times, ensure that the final result of your slotting effort does not cause aisle congestion.  It should be standard procedure to study the percentage of order lines being picked from each aisle once the initial slotting is done.
    • Once all of the zoning and product family/velocity rules are developed for your operation relative to the points addressed above, then it is time to marry items to locations by performing the slotting process.  Sprinkle open slots either at one end of each pick zone or evenly throughput each zone, whatever your preference is.  Then align the items to equipment types/zones by assigning each item to a location and presto, you now have a slotted warehouse.  It may not be 100% optimized, but it will be much more productive than an operation that has had little or no science put into the slotting process.

    Slotting is all about getting the details right and it usually takes a person who understands the products to do this type of work.  A good order selector understands the products but may or may not have the ability to implement a good warehouse slotting effort.  A good consultant with experience in slotting can help your firm achieve its productivity goals with an easy-to-implement and simplified slotting optimization and maintenance program.

    Marc Wulfraat is the President of MWPVL International Inc.  He can be reached at +(1) (514) 482-3572 Extension 100 or by clicking hereMWPVL International provides supply chain, logistics distribution consulting services including slotting optimization. Our services include: distribution network strategy; distribution center design; material handling and automation design;  supply chain technology consulting; product sourcing; 3PL Outsourcing; and purchasing; transportation consulting; and operational assessments.

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MWPVL International Inc. is a full-service global Supply Chain, Logistics and Distribution Consulting firm. Our consulting services include Supply Chain Network Strategy, 3PL Outsourcing Strategy, Distribution Center Design, Material Handling Systems, Supply Chain Technology Advisory Services (WMS, TMS, LMS, YMS, OMS, DMS, Purchasing, Slotting),  Lean Distribution, Transportation Management, Distribution Operations Assessments, Warehouse Operations Consulting and much more.