Product Slotting: The Secret to Increased Productivity

Tuesday, June 03, 2008
By Norman Saenz, Jr., Associate Principal, KEOGH Consulting

The term “product slotting” sounds strange, but we do it everyday. At home, we might place our favorite book on an easily accessible shelf or store the most used cooking pots next to the stove. The same concept applies to organizing products in a distribution center. However, the challenge is bigger, and the impact is critical to the company's bottom line.

Effective slotting leads to improved warehousing including increased space utilization, reduced labor costs, and increased throughput. In many operations, improved slotting alone can increase picker productivity more than 20%. In addition, if product slotting is poor and improvements are not integrated into an advanced pick technology solution, the expected benefits may not be realized.

Product slotting involves the selection of location types/sizes and ends with assigning a product to the most efficient and effective location. In many distribution centers, a separate or forward picking area is set-up to process orders and a reserve storage area is used for replenishment. In this design, the greatest opportunity for efficient product slotting is in the forward picking area where the highest percentage of labor cost is incurred (over 40% in most distribution centers). There are opportunities for product slotting in the reserve storage area, but we will focus on the forward picking area.

There are many criteria to consider when optimizing the slotting of your products. Most of these slotting criteria will exist in every forward picking area operation:

• Satisfy customer requirements
• Increase picker productivity
• Prevent pick location stock outs
• Reduce/control replenishment labor costs
• Satisfy OSHA requirements
• Reduce product damage
• Reduce picker injuries
• Maximize space utilization

Establishing an efficient product slotting system in the picking area increases throughput and reduces picking and replenishment labor costs. In addition, effective product slotting leads to fewer injuries, improved space utilization and reduced product damage. Within given customer zoning, product family storage requirements, and OSHA requirements, the key factors in making the decision on product slotting towards satisfying the criteria above include: line velocity/order commonality, cubic velocity, and product characteristics.

Product Line Velocity / Order Commonality
The product line velocity refers to the number of trips to a product's location. The products visited the most often should be located on the most accessible picking level and be arranged to reduce travel distances. However, these items should also be effectively balanced across aisles and/or bays to reduce operator and product congestion. The considering of slotting items that are often picked together on orders close to one another is also a key slotting consideration.

Considering both individual product activity, along with order commonality can be tricky, but leads to big order cycle time reduction. The results of the line velocity analysis and consideration of order commonality impact slotting decisions regarding zones and methods, whether a product is picked from reserve storage (slow moving), layout/travel distances, and pick level assignments (ergonomics).

Product Cubic Velocity
The product cubic velocity refers to the amount of product picked from a location. This is calculated by multiplying the quantity picked by the product's cubic dimension. An important use of the cubic velocity is calculating the size and number of locations required for each product. This is also used to define the pick unit-of-measure as broken case, full case, and/or full pallet.

The desired days-on-hand per location is a critical component in defining these requirements. The minimum days on hand for a forward picking area should be five-days. The location size is defined based on satisfying the days-on-hand and the products dimensions. The days-on-hand value is multiplied by the cubic velocity/day to calculate the cubic feet of inventory to be stored in a pick location. This value is divided by the cube of the assigned location to calculate the number of locations required. The results of the cubic velocity impacts slotting decisions regarding pick unit-of-measure, equipment selection/capacity, and the location size and quantity.

Product Characteristics
As mentioned, the product dimensions play a big role in calculating the cubic velocity. Other product characteristics that impact slotting include stackability and weight. Stackability within the picking location and during picking (onto a pallet) should be factored into slotting to reduce damage. The heavier products should be picked first, so that they are placed on the bottom of the pallet. The product weight impacts the pick level assignment for ergonomic reasons and positioning in the pick path to reduce damage.

Summary
A lot of analysis work is required to define the right slotting assignments. To summarize, the major benefits of product slotting are increased throughput, reduced labor costs, and increased space utilization. The key ingredients to achieving this involve the following:

• Assigning fast movers to the most ergonomic level
• Placing heavy products on the most ergonomic level
• Reducing travel distance to fast movers
• Balancing the fast movers across aisles/bays to reduce congestion
• Picking very slow movers from reserve storage
• Sizing locations to satisfy required days-on-hand
• Sizing locations to reduce stock-outs
• Maximizing the location cube, resulting in less space required
• Arranging products based on stackability (for pallet building)
• Developing effective picking zones (category, customer, temperature, etc.)

Slotting assignments must be reviewed for effectiveness as new products are added and as the activity of products changes with seasonality. This may be daily, weekly, or monthly based on your product mix. The product slotting analysis can be done manually or be supported by a software program. As a rule-of-thumb, you might consider a software program to support your slotting efforts if your operation meets more than two of the following criteria:

• Has a pick area larger than 50,000 square feet
• Uses multiple pick equipment types
• Experiences fast to slow product activity
• Supports high order activity
• Currently using a forward picking area

Effective layout and slotting of products within your distribution facility is the key to improved warehousing. Developing an intelligent layout and slotting solution can make the difference between an efficient, cost effective facility and one that becomes a financial burden. Product slotting is an untapped opportunity in many operations, but with simple strategy changes great improvements can be discovered. Before investing in advanced technology within your picking area, make sure the product slotting strategy is an integrated part of the solution.

Story from the Materials Handling Industry of America website