Thursday, November 19, 2009

Affecting Warehouse Efficiencies, Part 3: Slotting

Last week, I talked about the three main categories of warehouse efficiencies. These were operational, stocking, and fulfillment efficiencies. In this series of four posts, I am presenting the levers available to an organization to enhance these warehouse efficiencies. There are four main levers to target and affect these efficiencies. These levers being Labor, Inventory, Slotting and Product Flow. Each of the four posts discusses one of these levers and expands upon the functional capabilities that must be developed to enhance warehouse efficiency. In Part 1, the role of Labor was covered, part 2, inventory management was covered, today's topic is Slotting.

Slotting:

Slotting is the science of placing the products inside the warehouse. In all warehouses, there are bound to be locations that are closer to the receiving or shipping docks, convenient to access or easier to reach. As the number of such locations is relatively fixed, it would make sense to utilize them for products with the highest velocities. Slotting is the ability to judiciously determine the best placement of products in the warehouse based on different product attributes such as their demand, planned promotions, dimensions, weight, volume, orientation, affinity, co-placement constraints, crushability, and so on. While some of these attributes are static in nature, other like the demand and planned promotions change with time. The capability to optimally slot a warehouse increases the stocking as well as operational efficiencies. At its best, it should be achieved dynamically so that the routine warehouse activities of receiving, putting-away, picking, and shipping are continuously result into an optimally slotted warehouse as the demand patterns change.

  1. Maximize Warehouse Cube: Slotting necessarily fulfills two necessary functions. The first capability consists of analyzing the products to be warehoused and determine the size, type, and number of locations that would best serve to maintain the desired inventory levels. This maximizes the warehouse cube and helps in planning the correct number of racks, carousels, active and reserve locations, floor-space, and so on.
  2. Maximize Warehouse Operations Efficiency: The second capability of the slotting function is to continuously monitor demand patterns, past and projected, and direct new receipts to most optimal locations by dynamically selecting locations based on product and demand attributes. This helps in maintaining a warehouse that is always optimally slotted for best operational efficiencies. If a slotting solution cannot provide a dynamic slotting capability, it still can add a lot of value to slot when demand patterns or product mix changes, and execute the warehouse activities to attain the optimal placement of products. In the latter case, the solutions typically provide the ability to analyze the cost of additional activities against the expected benefits of re-slotting the products.

Slotting optimization directly enhances the operational and stocking efficiencies in the warehouse. Indirectly, it may also improve the fulfillment efficiency by ensuring more accurate location records for the products in the warehouse.

In the fourth and the last part of this series, I will talk about the opportunities to enhance warehouse efficiencies through flow analysis and planning in the warehouse that is a primary lever to drive the operational efficiencies.

© Vivek Sehgal, 2009, All Rights Reserved.

Want to know more about supply chain processes? How they work and what they afford? Check out my book on Enterprise Supply Chain Management at Amazon. You will find every supply chain function described in simple language that makes sense, as well as see its relationship to other functions.

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