Pallets that can be stacked high allow many pallet positions per unit of floor space. Conversely, pallets that are unusually heavy or fragile or that have uneven top surfaces cannot be stacked very high and so render unusable all the space above. This waste may be avoided by installing pallet rack, so that pallets may be stored independently of each other.
How much pallet rack should be purchased and what should be stored therein? The value of the rack to the user depends on the sizes and movement patterns of the particular SKUs that visit the warehouse. We require that each SKU present an economic argument for why it should be stored in pallet rack rather than floor storage.
For the moment, imagine that we are considering purchase of a particular type of pallet rack. (All dimensions are fixed; we are just trying to decide how much of it to purchase.) Suppose that we have ni pallets of SKU i and, for simplicity, these populations are fairly stable. The idea is that SKU i should go into rack only if it is benefificial to do so. We just have to be careful to say exactly what we mean by
“beneficial”. Intuitively, we want the benefits we get from putting a SKU in rack to justify the cost of the rack. What sorts of benefifits might we get from putting SKUs in rack?
Here are some possible benefifits of moving a SKU from floor storage into pallet rack.
This means that at least twice the labor was required to retrieve each pallet above the ground floor. This savings can be estimated easily and could be realized as increased throughput or reduced labor requirements.
- • It might create additional pallet positions. For example, storing the pallets of Figure 6.2 in 4-high pallet rack would create an additional pallet position, which is potentially revenue-generating. The value of this additional pallet position depends on how easily it can be rented and so the extent of savings depends on the market for space.
Some SKUs might not generate any new pallet positions if put in rack, and, in fact, might even lose pallet positions. For example, consider 3 pallets, each 4 feet (1.2 meters) high, of a SKU that stack 3-high to come within a two feet (0.6meters) of the ceiling. Moving these pallets to rack will not create additional pallet locations. In fact, it might not be possible to install 3-high pallet rack to hold these pallets because of the additional height required to accommodate the
cross-beams of the rack and the space above each pallet in rack.
- • It will help protect product from damage, for example, by forklifts. This savings is hard to quantify except by comparison to past experience.
- • It might help provide a safer work environment by avoiding unstable pallet stacks. This savings is also hard to quantify.
Each SKU builds its economic argument by estimating the savings for each of these categories and then sums the total savings. The result is a number of dollars, which represents the value of storing that SKU in pallet rack. Now one can compare that the cost of pallet rack and decide, on a SKU-by-SKU basis, whether the pallet rack is economically justifified.
Finally, to compare different rack confifigurations, repeat the process on each alternative and choose the one that is of greatest value.
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