The Right Place At The Right Time…

Why Continuous Slotting Is So Critical

By Don Savage, Senior Account Manager

Anyone would agree that slotting (the ideal placement of products in a warehouse) has an enormous effect on the productivity of a distribution center. In a typical picking system, it can mean the difference between 60 and 200 lines per man hour pick rates. Many integrators, consultants, and warehouse professionals spend considerable time deciding how to slot warehouses. In most cases, this effort is part of a new system design or a reaction to a new storage or picking technology. Although everyone recognizes the value of slotting at these times, few continue the process after the initial effort.

We are often called upon to analyze a customer’s operation or productivity because they are unhappy with the performance of their old system and believe that a change in technology or storage method will solve the problem. 75% of these customers have not done a slotting analysis of the current operation in a year or more. In most cases it has not been done since the system was installed. The task of reslotting has become so difficult at this point that they can no longer afford the time or interruption. New SKUs are slotted into new locations and old SKUs sit in the same location they were originally assigned, sometimes years before.

Not surprisingly, there is no growth in productivity (pick rates) and no improvement in order processing time. Typically, the situation gets worse as the company grows and ships more volume. As suppliers of distribution systems, we recommend that our customers re-slot their systems continuously.

The velocity and cube of most SKUs in any warehouse is constantly changing. In many operations, 20%-40% of the SKUs in place at one time will either be changed or gone within a year. Consider what can happen if only 6% of the total SKUs (30% of fast moving SKUs) are out of place.

• Assuming 20% of SKUs account for 80% of lines picked (standard 80/20 rule)
• 30% of the fast SKUs = 6% of the total SKUs and account for 24% of all lines picked

Using 30% of the high activity SKUs, only 6% of the total of that can affect 24% of the lines picked. The importance is magnified depending upon the picking technology. With shelving, the physical location is critical since it directly effects the walking time and pick rate. Fast moving locations must be tightly grouped in one area instead of scattered throughout the system. With fixed position systems like carousels, it is important to keep enough fast moving SKUs in the system to maintain pick rate. In both cases, SKU activity should constantly be measured so slotting decisions can be made. SKUs should be matched to storage locations and picking technologies that match their activity levels.

Slotting decisions cannot be made unless activity is being measured against previous data. Many operations measure the daily pick rate by zone and by operator. It is also common to measure the daily order processing and shipping volume. These are the typical measurements that most managers use to measure the efficiency of their operations. Slotting changes can have a significant impact on these measurements yet they are rarely factored in. We recommend that SKU velocity and SKU / order density per zone be tracked on at least a monthly basis. This is simple data to measure and track on a spread sheet.

• SKU velocity per zone (lines picked)
• SKU cube per zone (items moved)
• Orders processed (with that SKU)

As activity changes, SKUs should be moved to different locations or pick zones. For example, SKUs that slow down in high volume locations should be replaced with faster moving SKUs. This requires discipline because the month to month changes will not be that significant and no one likes to move items from one location to another. The slotting process can be handled in a weekly or monthly interval in the same way as cycle counts. This continuous method is far less stressful on the WMS, the operators, and on overall system productivity. The benefits are significant:

• Provides a true picture of the best possible pick rates achievable in each zone. You can now make better decisions if or when a change in picking technology is required. You won’t be estimating efficiency improvements if everything was "properly slotted."
• Balances the picking labor in different pick zones. This is because the slotting is based on recent SKU activity and would spread evenly across the pick zones. This allows accurate matching of order processing labor to the daily zone requirements.
• Intelligent proactive choices can be made about where to slot SKUs based on rate and order volume instead of reactive choices based on storage cube.
• Storage locations are kept optimized. Continuous slotting points out when to move a SKU to a different location or even a different zone. This frees up high volume locations for faster moving SKUs instead of letting them "die" in the original location.

Each operation has unique elements that affect the chosen slotting techniques. We recommend keeping detailed ongoing records of the system operation in order to track the various changes that are made. This is the only way to measure the effect of slotting changes on system performance.