Warehouses have been using basic slotting strategies for decades to determine optimal location sizes and SKU placement within the warehouse. These warehouse slotting strategies have helped drive cost savings in many ways including reduced replenishments, more efficient travel paths, and optimized space utilization. Too often, though, warehouses will take the opportunity to slot during a facility design project but then not maintain slotting optimization regularly by re-analyzing shipment data. This results in missed opportunities to re-slot items into more appropriate location sizes or SKU location assignments.
What is Slotting?
Slotting is the process of analyzing and organizing warehouse storage capacity to maximize efficiency. Warehouse Inventory is organized by product characteristics like Stock Keeping Units (SKU), product type, item size, items bought together, and more. Analyzing this data is important for implementing a warehouse slotting strategy that is tailored to your sales and warehouse inventory.
Why Use Slotting In Warehouse Operations?
The benefits of slotting focus on warehouse operations and fulfillment, and can provide peak optimization in this area. Some effects of slotting include:
- Easy order Fulfillment: Slotting can make picking faster and reduces possibility for error by organizing inventory in the most intuitive way possible.
- Lower operational costs: Efficient organization makes work-flow faster and more cost-effective.
- Preemptive Planning: Slotting creates space to predict inventory needs, allowing businesses to stock up on what they need before they need it.
For more benefits of slotting, explore a case study of what successful warehouse slotting can do.
3 Reasons Why Re-Slotting Goes to the Wayside
Despite the benefits of slotting, businesses are finding reasons not to slot or re-slot their warehouses.
1. Bigger savings elsewhere
Some warehouses have stopped re-slotting because they have found bigger savings with the implementation of a newer Warehouse Management System (WMS), a Labor Management System (LMS), or they are optimizing their processes with new RF technology. These projects tend to come at a higher cost, with returns anywhere from 10-30 percent annually. These types of improvements also require more support and monitoring from the workforce to maintain the system’s performance, which affects how companies apply resources to optimizing savings across competing needs, including re-slotting.
2. Change in supply chain
Another reason some warehouses have stopped re-slotting is due to a change in their supply chain. For example, if a warehouse only shipped bulk quantities to storefronts but now is shipping smaller quantities to the customer’s door, picking operations from both quantities are in the same location, making re-slotting more challenging. Warehouses are meeting this challenge by separating items into two different areas: one area for single picks and another for case picks. This ensures that the picking process and location size can be optimized for both types of orders. There might also be a space constraint when deciding if two picking areas are possible. At this point, some warehouses have chosen to give up on their re-slotting efforts and look for savings somewhere else.
Some warehouses have seen so much growth in their business that they have not had time to implement any re-slotting strategies. This can also be the case when a smaller warehouse starts moving higher volumes of product, especially when they do not have technical resources to help in re-slotting efforts. With a high-growth rate, these warehouses simply do not have time or resources to optimize their location sizes and SKU placement.
Of course, there could be other reasons why a warehouse has not been re-slotted, or it could be a combination of any of these. Or maybe you do re-slot annually but are finding it harder and harder to slot effectively and maintain the optimal inventory level. It could be that you have a smaller warehouse and are not worried about how your items are slotted. If your focus is to reduce replenishments and improve pick productivity, there are a few basic, quick and helpful warehouse slotting best practices that include analyzing weeks-on-hand inventory and segregating items by velocity categories to reduce travel distances.
Get the low-down on the secrets retailers and manufacturers need to know about inventory optimization.
Warehouse Slotting Goals
From a slotting perspective, the term ‘weeks-on-hand’ refers to how many weeks of orders could be filled with only the inventory that is in the pick phase. Fairly standard practice is for warehouses to have one to two weeks-on-hand for the majority of items, but some can have lower levels in some instances.
When implementing a new slotting strategy, the goal is to understand the specific business needs while working within the constraints of your warehouse. For some warehouses with space constraints, it might be optimal to carry a higher weeks-on-hand inventory for faster-moving items and a reduced weeks-on-hand inventory for slower-moving items.
Other warehouses might choose to move slower moving items to other areas of the building and carry the same weeks-on-hand inventory for fast- and slow-moving items. Any strategies involving a larger weeks-on-hand inventory will reduce the number of replenishments, increase directed put-away to the primary location, and increase the availability of items for order fulfillment. This will also affect on the amount of travel involved in the process.
Reducing Travel Time
A primary goal of a slotting strategy is to reduce the travel distance in the pick path while working within the constraints of available space. The goal is to increase the pick density in the higher velocity aisles while reducing the wasted travel past slower-moving items. Slower-moving items can then be moved to less desirable pick locations of the warehouse while minimizing the amount of travel to these areas.
When possible, moving the fast-moving items closer to the receiving and shipping areas will also allow the reach truck drivers to travel a shorter distance when doing put-away tasks and taking orders to the outbound docks. This reduced travel path can play a part in getting items put away in a more streamlined manner and increasing the efficiency of your warehouse.
Improve Your Warehouse Slotting Optimization
For the development of your slotting strategies, let enVista engineers work with your team to design a tailored strategy for you. Our engineers will map out your processes in the warehouse, addressing any constraints in your layout or warehouse management system while meeting your short-term and long-term goals.
Our slotting analysis team leverages historical data to understand current warehouse performance and employs Pareto Analysis to determine which items are commonly ordered versus those that seldom leave the shelves. We then use warehouse slotting analysis tools to determine the optimal location sizes and SKU placement within the warehouse, leading to an optimal weeks-on-hand inventory, reduced travel time, and less time spent doing replenishment.
Thinking about re-slotting? Here is a white paper on the ins and outs of a successful warehouse slotting project, and learn how you can experience an increase of 5-10 percent savings annually.