The Effectiveness of Slotting in Warehouse Operations

Chandra Kumar R | 1 March 2023

Warehouse slotting, velocity slotting, re-slotting – these are all commonly used terms when referring to SKU optimization. What does it mean and what does it look like for warehouse operations?  Put simply, velocity slotting is an organizational strategy that utilizes storage zones within a warehouse to store products by pick frequency. It’s impact stretches to positively impact costs, inventory performance and satisfying customer service level agreements, to name a few.

Let’s take a deeper look at the effectiveness of slotting.

Types of Slotting Strategies

In warehousing, slotting is the practice of assigning the best storage location for each SKU (stock keeping unit) in the warehouse to optimize order fulfilment. This is done to ensure that the most frequently used SKUs are easily accessible. In practice, the SKUs that are moving out fastest are placed in more accessible locations and slower SKUs are moved back to less accessible locations. 

The SKUs in a warehouse that have their own ordering frequency also known as "velocity,” one of the most important characteristics is the frequency of touches for a specific SKU. It means each time interaction with the location is required by a conventional picker, AS/RS robots to access a SKU stored to be picked for an order, put away a receipt, etc. As physical touch activities go, the one that gets the most attention is order picking. So not surprisingly, most slotting is focused on improving the efficiency of order picking.

Slotting’s Impact on KPIs

Slotting has a significant impact on many KPIs (key performance indicators) in a distribution centre, including productivity, shipping accuracy, inventory accuracy, dock-to-stock time, warehouse order cycle time, storage density, and automation levels. Many warehouses still have improper slotting practices.

Productivity

The placement of inventory is perhaps the most most critical element in the efficiency of the entire operation. Unit and case pick distribution operations invest between 50 and 70 percent of a warehouse labour budget on the outbound order process. Consultants and other experts have estimated that 50 percent of the activity performed by workers assigned to these tasks is the travel between pick locations.

Slotting is also essential for AS/RS (Automated Storage and Retrieval Systems) to maximize efficiency, to achieve the required throughput and use the automation to its best capability. This can be as simple as assigning storage locations based on SKU dimensions and velocity. By minimizing the time required to access fast-moving SKUs, slotting can increase productivity and facility throughput.

Seasonality

If the inventory in any warehouse has any degree of seasonality, if there are weekly/monthly campaigns for promotional item fulfilment, if you have new SKU introductions into your facility frequently, you could benefit substantially from proper slotting of your automation systems and forward pick areas.

Warehouse Operation Task Integration

Slotting tasks can be integrated with other warehouse operation tasks by your warehouse management solution, so re-slotting does not require you to stop the other tasks and disrupt operations. When integrated with workforce management systems, the expected savings and ROI (return on investment) can be computed prior to accepting the slotting plan. This will allow you to determine if the slotting plan will be effective and provide operational benefits.

Key Features in Slotting

1. Balances pick velocity with travel distances, ergonomics, and equipment constraints for optimal workload efficiency and safety. 
2. Compares the cost of re-slotting to the economic benefits achieved to compute the true ROI of the slotting plan.
3. Integrates with replenishment activities to dynamically re-slot, minimizing disruption and cost replenishment supports multiple strategies to tailor replenishment to product, location, environment, and slotting needs. 

Overall operational costs, customer service levels agreement, inventory performance and inventory carrying costs are all impacted by slotting optimization. When replenishments become too frequent, handling costs increase, picking is less productive, product damages increase, service levels suffer, and turns are reduced. A well-designed inventory slotting plan will optimize space utilization and minimize the time and effort required to efficiently receive and store incoming products, increasing productivity and greater facility throughput.

Could Your Warehouse Benefit from Slotting Optimization?

1. Does order picking time account for more than half of your pick or replenishment labour time?
2. Picking rates are not as expected? Do you run into challenges with service level agreements?
3. Do your pick and replenishment productivity levels decrease when you enter a new season?
4. Are you implementing a new software solution for warehouse management?

If the reply is ‘yes’ for any of the above, then your warehouse and operations can be optimized by slotting.  With careful analysis, Bastian Solutions can help determine if velocity slotting is a good fit for your organization. Contact us to learn more.

Author: Chandra Kumar R