Equipment Buying Guide: Slotting basics

If your picking efficiencies are in free-fall, perhaps you should consider playing the slots—warehouse slotting that is.

By Sara Pearson Specter, Editor at Large -- Modern Materials Handling, 2/1/2009

Whether you're managing a small facility or a large distribution center, whether you've got fast or slow moving product, there's a slotting strategy that's right for you.

Simply, slotting is the optimal placement of product SKUs within a facility to achieve a variety of different labor efficiency and picking productivity goals.

"These goals can include reducing travel time, putting heavy items at an accessible level, separating hazardous and non-hazardous materials, and grouping kitted items together to eliminate unnecessary searching," explains Peter Schnorbach, senior director of product management at Manhattan Associates (770-955-7070, www.manh.com).

Slotting can also improve accuracy by separating similar products to reduce picking errors. And by evenly dispersing products across multiple pick zones, it balances workloads and reduces congestion.

But determining how to best re-distribute product can be time-intensive—and something of a gamble if you're unsure of the optimal strategy to pursue. A number of slotting software modules are available to facilitate the process and can be tremendously helpful when following the fundamentals.

Fundamental slotting principles

Since your products probably already have a home, or slot, you'll need to determine if your warehouse is an ideal candidate for re-slotting. The facility most likely to benefit from product reorganization is large—at least 200,000 square feet, Schnorbach notes.

"The larger the warehouse, the more SKUs and the more value you'll get from re-slotting," agrees Steve Banker, supply chain management service director for ARC Advisory Group (781-471-1000, www.arcweb.com). "It's also a more manual operation using forklifts, pallet jacks and people pushing carts for picking activities."

Qualified to proceed? Here are some basic fundamentals to keep in mind as you embark on a re-slotting activity.

1. Start with quality master data. To slot a product into a specific location, it's important to know the dimensions of the product, how many of these products fit into a carton, how many cartons fit on a pallet, the dimensions of the pallet, and how high cartons can be stacked on the pallet. Accurate measurements are the only means to evaluate that sequence.
   "When starting a slotting process, companies often find that their master data are flawed, particularly around product dimensions," says Banker. "Using a cube dimensioning system is almost a prerequisite to make this work."
   Other details to know are pick velocity (slow, medium and fast movers), order variability, demand, seasonality and planned promotions.

2. Evaluate the return on investment (ROI) gained by each move before making it. Most slotting systems only look at the savings generated by doing a re-slotting based on pick velocity. However, it's important to also have a good understanding of the labor costs associated with moving products around, says James LeTart, director of marketing for RedPrairie (877-733-7724, www.redprairie.com).
   "Slotting software typically isn't hooked into a labor management system (LMS), but it should be," he explains. "Information from the LMS can be used to calculate both the cost and the benefit, so if you can't determine the ROI on a move, you don't know if you're doing the right thing."
   Although ideal slotting ROI is a business decision based on a company's unique goals and objectives, generally a 5% increase in picking efficiency is good, LeTart adds. "The typical ROI from a slotting system is a 5% to 15% improvement in pick efficiency over a non-optimized picking situation."

3. Consider your goals. A good rule of thumb for ideal slotting is to keep the fastest moving product in the most accessible locations for your pickers, adds Chad Collins, vice president of marketing and strategy at HighJump (952-947-4088, www.highjump.com). Further, to reduce overall travel time, look to locate the most frequently picked products closer to an outbound location, and evaluate the size and number of pick faces.
   "For something that moves very frequently, you should compare the options of either a very accessible large pick face or multiple small pickfaces," Collins says. "These are all tradeoffs and considerations that can be made by a slotting software tool."

4. Strategic slotting is an on-going commitment. To maintain the benefits of slotting, someone should be in charge of the process, analyzing it on a regular basis (daily, weekly, monthly, quarterly) to ensure the goals are met.
   "What typically happens after a re-slot is a facility will increase its picking efficiency up to 15%, and then that efficiency decreases over time," LeTart says. Then it's time to re-examine the slotting pattern to determine where order patterns have changed and what level of re-slotting is again required.
   "There should also be a commitment to getting the moves done," says Manhattan Associates' Schnorbach. "Companies struggle with this. They run a slotting program, come up with an optimal slotting solution, and have a hard time making the moves because they get busy."

Before

Using software to achieve slotting goals

For small warehouses with low numbers of SKUs, slotting is a process that can actually be managed with an extensive time commitment and a basic spreadsheet program, like Microsoft's Excel. But for a facility with a large number of pick faces and a vast quantity of SKUs—coupled with a volatile demand profile—a software tool designed specifically to optimize slotting is the best means to manage the process.

The software draws on data from a warehouse management system (WMS) and uses complex mathematical algorithms and metrics to evaluate the current situation and present move options in a matter of hours.

"It generates simulations because these decisions aren't black and white," says RedPrairie's LeTart. "You may have to make guesses about the velocity generated by new product introductions, seasonality factors or promotions. Slotting software lets you play with the variables and run multiple simulations."

"A software tool enables the warehouse manager to make decisions quickly," concurs HighJump's Collins. "Further, if the slotting system has visibility through the warehouse management system to all warehouse activity, when a re-slotting recommendation is applied those moves are automatically fed into the work queue itself." This enables workers to make re-slotting moves in a manner similar to replenishment moves.

But simply purchasing and installing slotting software is not enough. Although the software may be user-friendly, the user has work to do and decisions to make, according to Jeff Wetherell, director of software products and services at SI Systems (800-523-9464, www.sihs.com).

"Not only can slotting software be expensive, but there's a massive time commitment that needs to be made on the part of the user," he says. "Somebody has to develop the slotting strategy, somebody has to key it into the software package, and somebody has to have the discipline to use it and tweak it and run it."

Therefore, before investing in slotting software, ask for an evaluation that quantifies both cost and time savings. Then, ensure you receive adequate training on how to maximize the software's use. If a company finds that it lacks the time, expertise, ability or will to manage the slotting process, there are organizations that will instead sell slotting strategy as a service, Wetherell notes.

"The facility just has to provide the information from their WMS, and the service provider customizes the software to the operation and generates recommended moves as frequently as required," he says. "Slotting as a service means the other guy does all the work and you take all the credit."

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