Is Your Inventory. Causing You HEADACHES? The positive impact of slotting your inventory correctly

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1 Is Your Inventory Causing You HEADACHES? The positive impact of slotting your inventory correctly

2 Is Your HEADACHES? Inventory Causing You The positive impact of slotting your inventory correctly By Jack Peters, Vice President of Analytics and System Design, AHS and Steve Curfiss, Industrial Engineer, AHS There are many components that must be managed in a distribution facility to make certain it runs as efficiently and cost effectively as possible. When things aren t running as smoothly as they should, everyone s attention is typically directed to the most common processes such as receiving or order fulfillment. It is possible there may be a deeper root cause that may not be obvious that the storage of product within the facility is creating inefficiencies that negatively impact work processes. See these problems in your facility? Low productivity Congestion in aisles Frequent stock-outs Poor floor / space utilization Damaged product shipped to customer Aged product Work related injury These are all problems that could be attributed to poor slotting. Don t worry, they could be correctable at minimal cost by simply understanding the impact of slotting. What is inventory slotting? Slotting means placing SKUs in your warehouse in a specific location, or locations, to minimize the effort to fill orders and replenish the location when required. The objective of an efficient slotting plan is to maximize efficiency of the workers while at the same time minimizing the total cost of handling each unit. The importance in a goods-to-person system is to ensure SKU s are located properly to balance transactions through the system. Typically, the system software handles the location and distribution of SKU s based on transaction history. Slotting can certainly be an important factor in person-to-goods fulfillment processes and to a lesser extent in a goods-to-person system. 2

3 What to consider (factors that affect slotting strategy) There are many factors to consider when determining a strategy for slotting. The first step is to develop an understanding of the product characteristics such as physical dimensions, weight, and demand requirements at the SKU level. An understanding of the order fulfillment process, including packing requirements, is also necessary when developing slotting strategies. The physical dimensions and quantity of all storage locations must be available (preferably an AutoCAD layout of the facility). Once this information has been analyzed and understood, a slotting strategy can be developed taking into consideration factors such as: 1. Family grouping of product 2. Seasonality 3. Conveyable or non-conveyable? 4. Velocity 5. Desired inventory level in active 6. Ergonomic factors 7. Packing requirements (weight, size) 8. Software capabilities How do I slot my inventory? There are several methods to slot inventory ranging from very manual processes to sophisticated computer software models. Each has its pros and cons. Manual Slotting Manual slotting is the least sophisticated slotting method. It normally involves a person(s) reviewing a snapshot of the current storage profile looking for locations that are empty or have transitioned from fast movers to slow movers. They will then make decisions as to how to re-arrange SKU locations and slot new SKU s in empty locations. - Inexpensive - Does not require external software capability - Relatively easy to train someone to slot - Difficult to manage effectively - May not take into consideration velocity factors - May not optimize the utilization of the storage space - May result in less efficient order fulfillment and replenishment processes 3

4 Spreadsheet Slotting Spreadsheet slotting is also considered a manual slotting process but with consideration towards important slotting factors that pure manual slotting typically does not consider. Spreadsheet slotting will use formulas to identify the proper storage location type based on factors such as demand, physical dimensions, and desired replenishment frequency. Identifying a specific location to slot a SKU can be done with spreadsheet slotting, however, it is most effective at identifying location type. - Inexpensive - Does not require external software capability - iders critical factors to optimize each location s utilization - Identifies opportunities to re-configure storage to maximize space - Relatively easy to determine new requirements as SKU s change - Developing the formulas and logic may be difficult - Does not identify the specific location for a SKU to maximize efficiency - Results are less effective than a software solution Software Slotting Slotting software is the most accurate way to determine how a facility should be slotted. It is also typically the most expensive and complex method. Slotting software will require data file inputs of key pieces of information such as product dimensional characteristics, order files, and facility layout including location sizes. The software will require some user interaction to determine how locations are viewed in terms of desirability. A repetitive process is then used to zero in on the most optimal slotting solution. - Typically produces the most effective results - Provides specific locations for each SKU - Re-slotting is easy (assuming the physical locations have not changed) - Provides a graphical 3D view of the slotting efficiency and a spreadsheet output of each slotted location - Software can be expensive - Software slotting initially takes longer than the manual processes - There is a learning curve involved in using the software - May require a specialized PC to run the software 4

5 Summary Slotting is an important consideration when evaluating ways to improve labor efficiency. When done effectively, slotting can reduce the travel time related to the picking activity and better balance picking and replenishment labor. It can also eliminate congestion within aisles and ensure that worker ergonomics are taken into consideration. You need to first understand if your product storage strategies are causing some of your headaches. We can help you to make this assessment! Contact our material handling experts at AHS, LLC for help! Results Labor savings up to 15% Improve inventory visibility Mitigate stock-outs Reduce inventory carrying cost Reduce product damage Improve inventory turns Fewer worker s comp claims Call us at or us today at info@ahs1.com. 5