Abby Jenkins

Facility managers must constantly deal with increasing complexity. Their warehouses are dealing with more SKUs, and they’re under pressure to get them out the door faster. With warehouse slotting, facility managers can reduce costs and improve performance. They can do this without increasing their building’s footprint or expanding staff.

What Is Warehouse Slotting?

Three basic units combine to form the warehouse: items, pallets and slots.

The items are the goods warehouses ship. A slot is a shelf — or part of a shelf — where these items sit. A pallet is a frame designed to be picked up by a forklift. Workers pick items out of slots and pack them onto pallets. They are then loaded onto trucks via forklift and driven away.

Warehouse slotting involves planners determining the most efficient slot for items. For example, a facility manager might place a faster-selling item in a slot closer to the loading dock. That way, it loads quicker.

Warehouse slotting is complicated because each item has a distinct set of characteristics. Complications also occur because slotting items means dealing with overlapping priorities. Speed might be a consideration, but so is safety. If a business places all its fastest-selling items closest to the loading dock, the result might be top-heavy or unbalanced pallets. That could result in endangering workers and contributing to item damage.

Mastering warehouse slotting means weighing complex attributes and priorities. A good outcome has many benefits — increases in speed, safety, customer satisfaction and more. How can businesses make improvements?

Key Takeaways

• Warehouses succeed or fail based on their ability to improve speed and reduce costs
• Slotting processes are more than a way to get high-velocity items out the door quickly
• Warehouse slotting has the potential to improve top-line and bottom-line performance across the organization.

Warehouse Slotting Explained

Warehouse slotting represents an opportunity for managers because it is difficult to get right. Many warehouses don’t bother with warehouse slotting. Balancing priorities is tricky — there’s a temptation, for example, to just put all of the fast-moving items in slots near the loading dock and live with the consequences.

When warehouse managers balance their priorities, they can enjoy the benefits of increased speed while mitigating drawbacks. Meanwhile, if managers only try to maximize a single attribute, they might end up decreasing overall safety or creating problems — such as traffic jams — that are counterproductive to the ends they’re trying to achieve.

Creating an industry-leading slotting program involves managers who are willing to iterate rapidly, collect data and listen to worker feedback. The result is a facility that doesn’t just operate at the peak of efficiency, but helps the company out-perform its competitors.

Why Is Warehouse Slotting Important

Warehouse slotting is one keystone of an optimized warehouse. When done correctly, there are positive results at the top and bottom lines. Faster throughput creates operational efficiencies and improved handling, resulting in happier customers — leading to reduced churn and increased revenue. Here are some other benefits:

• Improved item handling
  A critical consideration in a warehouse environment is that items do not get damaged during shipment or storage. Good inventory slotting means items are stored correctly — perishable food is stored in refrigerated containers, for example. That means customers receive their items in good condition.
• Optimized storage
  It costs money to store items in a warehouse environment. Items slotted efficiently take up less space, which means you can store more items in the same area.
• Seamless fulfillment
  Warehouse slotting makes it easier for employees to pick and pack items. For example, you can reduce “traffic jams” by ensuring workers picking smaller items rarely have to wait while someone picks pallets using a forklift.
• Increased safety
  With warehouse slotting, facility managers can create an optimized pick order that places heavier items on the bottom of a pallet and lighter items on top. That creates a safer pallet — one that’s not unbalanced or top-heavy — while minimizing the risk of product damage in transit.

Avoid understating the importance of warehouse slotting. By completing an effective slotting process, facility managers can improve almost every aspect of their operations, extending past their department and into the business at large. Creating a slotting process means learning new terminology and making some tough choices, however.

Random Slotting vs. Fixed Slotting: What’s the Difference

One of the first choices facility managers make is between random or fixed slotting.

Fixed slotting

Fixed slotting means every item in the warehouse has a permanent bin location. The rating for each bin is for a minimum and a maximum quantity of its assigned item. If the bin becomes too empty, it triggers a replenishment order from reserve storage.

Random slotting

Random slotting means items are assigned to pick zones instead of permanent pick locations. If inventory in one slot depletes, then pickers are assigned to pick those items from another location within that zone. Any incoming receipts transfer directly into pick zones, with little to no reserve inventory kept on hand.

Why pick one method over the other? Fixed slotting is traditional regarding how the warehouse industry operates, but it may be becoming less relevant. Replenishing item slots from reserve storage can be a time-intensive process, and increasing shipment volumes demand increased speeds. Random slotting can be faster because there’s much less time spent replenishing, but pick zones may be much larger than permanent bin locations. In short, random slotting may require a larger warehouse.

Macro Slotting vs. Micro Slotting: What’s the Difference?

At the level above random slotting vs. fixed slotting, facility managers must also contend with macro slotting vs. micro slotting.

Macro slotting

When macro slotting, the facility manager must consider the arrangement of their pick zones. In a climate where customers demand two-day shipping, this layout is critical — warehouses must feature high throughput designs with little congestion at the receiving or loading areas.

Micro slotting

Micro slotting concerns the arrangement of items and pallets within picking zones. For example, how should items be stored on an individual shelf? Micro slotting can significantly affect the warehouse ecosystem, primarily relating to worker health and safety. For example, consistently placing heavier items on lower shelves might force workers to bend to pick them up — exposing them to repetitive stress injuries.

There’s not a “versus” component concerning micro slotting and macro slotting. Facility managers should take both realms under consideration as they organize their warehouse. Once businesses have both micro and macro slotting under control, they can see significant improvements in how their warehouses operate.

Benefits of Warehouse Slotting

When facility managers begin the warehouse slotting process, they often need to justify it. What benefits does warehouse slotting produce? The benefits below result from a well-managed slotting process and can help gain executive buy-in for establishing these processes within your organization.

Free up space

Both random slotting and fixed slotting warehouses need to minimize inventory in long-term storage while maximizing the inventory that can be immediately picked and shipped. An efficient slotting process means more space can allocate to the warehouse’s more mission-critical areas.

Faster picking

Faster picking means it’s easier for pickers to find items in slots. Workers always know the location of items and how to get there without ever hunting through shelves.

Fewer errors

Errors occur if an item gets lost, damaged or misdelivered during the picking process. Ensuring the warehouse is organized and slotted correctly minimizes these errors, resulting in lower costs and happier customers.

Increased storage capacity

Space is at a premium in warehouses. Shipping volumes increase, but warehouses can’t expand without difficulty. An improved slotting process helps maximize available space, allowing businesses to fit more items into the same footprint.

Cut travel time

Cutting travel time is a benefit that contributes to, but distinct from, faster picking. A worker may know how to get to an item, but that knowledge doesn’t help if their path is inefficient. Inefficiencies are evident when workers need to travel far back into the warehouse to get a fast-moving item or need to pick items rapidly on opposite sides of a single-aisle. Improved warehouse slotting eliminates these inefficiencies, resulting in faster picking and faster replenishment.

Increase visibility

The time employees spend looking at their clipboard or tablet to find an item is when they could pick and deliver it. Good slotting helps improve employee productivity by allowing them to locate items immediately. This process helps facility managers and employees immediately understand when an item is not in the right place, which reduces the possibility of errors.

Minimize item damage

Besides avoiding damage during transit or packing, a warehouse slotting strategy can also help avoid damage to stored items. For example, it helps ensure workers store perishable foods only within refrigerated sections of the facility.

Reduced carrying costs

The inventory doesn’t just sit there — it accumulates quantifiable storage costs every second it doesn’t ship to a customer. Just-in-time inventory processes stress the importance of keeping very little inventory on hand to reduce inventory carrying costs. Warehouse slotting helps to decrease these costs by increasing throughput. The faster businesses can manage inventory, the less time — and money — they need to spend storing it.

Data Needed to Set Up Warehouse Slotting

There are clear benefits to creating a concrete warehouse slotting strategy, but where do you begin? Using the supply chain data below, managers can begin creating a slotting process that optimizes their facilities.

Order history

This information tells you which items to group for improved efficiency and the yearly or seasonal changes in ordering volume.

SKU data

The data reveals what kind of product an item represents and its dimensions. That helps managers understand any special considerations for storing or handling an item.

Item picking level

This information concerns whether picking occurs at the pallet, case or individual level. It also shows the storage medium from which the item is picked.

Warehouse Slotting Best Practices

How do facility managers use the information above to generate a slotting strategy?

Item level and storage medium

A slotting strategy should consider whether they pick an item at the pallet level, the case level, or a single piece. Moving a pallet or a case can require a forklift or a cart. These movements mean other workers in the area must navigate around a temporary obstacle, reducing their speed. A good strategy ensures high-level items group in areas where they won’t obstruct other pickers.

Cube size and weight

SKU data typically includes information such as an item’s size and weight. It’s best to ensure a heavy item is first in the pick order, which means SKU data is critical. Also, workers need to assemble cubes that don’t exceed the dimensions of the pallet underneath. Therefore, managers need to prioritize how regularly shaped items contribute to packing efficiency.

SKU velocity/velocity of items

Order history can help you understand which items move the fastest. It shows which items enter and leave the facility in the shortest amount of time — and which move slowest. Grouping fast-moving and slow-moving items together can help increase picking speed.

Fast-moving vs. slow-moving items

Fast-moving items are like they sound — they come into the warehouse quickly and leave just as fast. It often makes sense to put these items close to the front of the warehouse. Meanwhile, slow-moving items take longer to turn around – weeks or months instead of days. It may make sense to put them towards the back of the warehouse unless they’re relatively heavy, which means that they can be first in the picking order and form the pallet’s base.

Zone or technology

Warehouses organized by zone don’t have permanent bin locations. Instead, bins full of perishable items go in refrigerated zones, bins full of action figures go in the “plastic toys” zone, valuable items go into a caged-off zone and more. When slotting items within these zones, care should be taken to place them for ease of access. That means considering the technology used to access these items — by hand, ladder, forklift and more.

Picker feedback

Managers should listen to their workers. Individuals on the ground picking inventory know more than data can ever tell, and their suggestions help optimize the warehouse environment and improve safety.

Seasonality

Velocity changes over time. An item selling quickly during the summer might move slowly during the winter. Understanding velocity information allows businesses to reslot the warehouse and attains maximum efficiency year-round.

Product affinity

Product affinity is essential because these objects often ship together — printers and ink cartridges, for example, or Christmas ornaments and wrapping paper. Items often shipped together should be slotted near one another when possible.

Special storage requirements

Some items — video game consoles, smartphones, jewelry and more — present a tempting target for theft. These items should group in a caged zone and note who enters and leaves. Perishable food should be in perishable zones, and potentially toxic items should be stored separately. Managers should ensure they brief all pickers on safe handling procedures for dangerous or temperature-sensitive items.

Warehouse Slotting Algorithms

Administrators must consider several factors, and because there are many items under management, it’s challenging to manage shifting priorities. Many facility managers are now turning to software for guidance.

One (straightforward) slotting algorithm is the “ABC” method. This method relies solely on order history data to gauge item velocity. It usually collects the SKUs of all items ordered over the last 30 days. These items are then grouped — 50% of items with the most line orders go under group A, the next 25% as group B and the last 25% in group C. Items in group A go closest to the door.

As warehouses handle higher SKU counts and increased inventory turns, the ABC method uses its utility. Velocity isn’t the only consideration warranting prioritizing one item over another.

As facility managers deal with increasing complexity, software is the best and only choice for warehouse slotting. Facility managers can define the measurements of their storage bins, create a user-defined putaway/pick sequences, and combine this information with demand forecasts to optimize the warehouse programmatically. That means that warehouse managers can offload the responsibility of warehouse slotting and focus on their core competencies.

6 Warehouse Slotting Optimization Tips

Warehouse slotting may work well, but it doesn’t work well on its own. The warehouse environment must conform to specific standards to help the slotting process reach its full potential.

1. Keep warehouse clean and organized

Slotting involves organization at the slot level, but there’s more to it than that. Ensuring bins have labels, items stack well and there’s no discarded packing material clogging up aisles means slotting works that much better.

2. Evaluate storage capacity

Warehouse slotting won’t work well unless managers consider macro-slotting along with the micro. That means the warehouse’s organization must take advantage of the space available. That ensures the slotting process never gets derailed by considerations like over-or under-stocking.

3. Reorganize inventory

Remember, speed is not the only end-goal of the slotting process. It shouldn’t just be easy to get to a particular shelf — it should also be easy to find an item on that shelf. That means factors such as labeling and organization also need consideration.

4. Rank slots by priority

Some warehouse slots are more critical than others; for example, the slots closest to the loading dock are usually more critical than the slots to the rear. The most important slots need to get filled first.

5. Safety first

In a similar vein, managers should never trade speed for safety. Strive to keep employees out of the path of forklifts, ensure slot materials stand up to repeated heavy use and confirm employees have the training to deal with heavy and (or) dangerous items.

6. Invest in a warehouse management system

Warehouse management systems (WMS) act as an incredible assist for facility managers who wish to streamline the warehouse optimization process. By incorporating data from around the warehouse, including order history, SKUs and picking level, a WMS may generate insights humans alone would not reach.

When Is Reslotting a Consideration

Warehouse slotting is not a one-and-done process. As customer demand shifts, the interior of the warehouse should shift. When do you reslot?

• Changes in demand:
  Seasonality can cause product velocity to change, but that’s not all. A company might decide to put an item on sale, causing a demand spike. Facility managers should coordinate with marketers to anticipate these changes.
• Changes in product mix:
  New SKUs are continually entering and leaving the product lifecycle. As new products enter or leave the market, facility managers continuously have to rebalance the warehouse to account for this.
• Supply chain shocks:
  Broader economic concerns can make themselves felt in the warehouse. Shortages in parts that were once widely available may mean companies must deemphasize products previously in demand.

Destabilizing events regularly force facility managers to reslot the warehouse — but on the reverse side, a destabilizing event is an opportunity to optimize the warehouse even further. Once companies have reslotting down to an art, they can continuously improve metrics such as selecting and replenishing labor.