Inventory Slotting: Striking A Balance

It's not always about velocity and cube.


A solution for a large office products company was deeper than combining pallets of the same SKU. The company picks full and broken-case products. It quickly opened up several hundred active carton pick slots by identifying slow-moving products with only several cartons in stock. With no new receipts on the horizon, it moved a few units to a bin. The balance was palletized with other slow-moving carton stock, mixed onto bulk pallets and stored in remote bulk locations.

The labor to break the pallet for future picks was more than offset by gaining valuable golden zone slots today. Mixing SKUs can be dangerous, so insure picking quality control is maintained. Having a flexible system to allow mixed SKUS per location and location velocity codes is critical.

Some companies have product velocity codes, a value of the inventory turn, or a combination of cube and inventory turn of the product. Fewer companies have formal location velocity codes or velocity-ranked zones and areas. A location velocity code prioritizes the accessibility and travel time to a pick location in your warehouse.

I recommend keeping it simple. Assign zones within areas that categorize prime picking. Prime zones are typically the first rack in the shipping zone, away from dead storage areas. Insure that you take into account vertical and horizontal travel time when assigning location velocity codes.

Velocity is not all that should be considered when assigning slots. Basic rules like using prime pick zones, with high volume picks, and placing your seldom-ordered products deep within your storage scheme are basic rules of engagement in the war on reducing inventory fluff.

Too often in this battle, a key indicator is omitted: labor and material handling. Labor is probably your top cost and must play a decisive factor. Slotting has a fundamental flaw if all the labor-related steps are not visible to the inventory control team.

Cubic velocity. Many inventory operations slot inventory based solely on cubic velocity. The concept is sound and works well with some operations, but with some product mixes there's a twist often overlooked. To calculate cubic velocity, simply take the metric dimensions of your SKUs and establish the cube of the product. Multiply that by a pick velocity factor.

A pick velocity factor is the number of visits a picker makes to a product's location for a given period of time. Keep that period of time standard throughout. Be careful how you define velocity. This code may differ from sales volumes if you bulk pick or run multiple waves. Don't forget put-away visits if your returns are high.

Ask yourself if it is always static across all waves If you are just starting out, keep it simple and just use sales volume. The result of these calculations is a cubic velocity code that tells you how much flowthrough space your product will consume over a given period of time.

Once you have these product velocity codes, rank the results and sort your SKUs by velocity code. Then marry your product velocity codes to your sorted location velocity codes. Consider creating an exception report that highlights the products that are stored in poor location velocity ranges. These are ideal relocation candidates.

If you use unique numbers across all locations and products, don't worry that the location velocity codes and cubic velocity codes don't match perfectly. The key is to always make them closer, not perfect. Also consider clustering products that are ordered and picked together.

The most common factor omitted in slotting strategies is material handling. Too often companies do not evaluate down-stream labor.

If you use cubic velocity alone, you will likely store heavy, dense products, next to light crushable ones with comparable product velocity codes. The result? Most every order having heavy products mixed with light products will have to be moved up to three times before it ships. They may have to re-handle heavy products to build more symmetrical and stable pallets that would protect fragile products from being crushed by the heavy ones.

Finding the right balance between location maintenance, material handling and optimizing your cube is a fine line. Make it part of your management plan to integrate reslotting as part of your weekly goals.

Try just 10 locations a week for a start. You will be amazed at the gains in both productivity and service.

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