Racking Up Savings with the

Right Slotting Strategy

January 2011

KOM International White Paper Series

1

Racking Up Savings with the Right Slotting Strategy

© 2011 by KOM International, Inc.

All rights reserved. Published 2011.

RESTRICTED RIGHTS

Printed in Canada.

The information contained within this document is proprietary and confidential to

KOM International, Inc.

KOM International and the KOM International logo are registered trademarks of

KOM International, Inc. Copyright © 2011 KOM International, Inc. All rights reserved.

All other company and product names may be trademarks of their respective owners.

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www.komintl.com

(514) 849-4000

db@komintl.com

Racking Up Savings with the Right Slotting Strategy

Facility slotting is a dynamic process. Facilities that

implement logical slotting, based on the right strategy,

and that maintain it on an ongoing basis are always more

productive both on direct and indirect labor.

This is a significant

opportunity not to be

overlooked as labor is

the major expense in

most DC operations

with selection, or

picking, as the activity

that consumes the greatest majority of labor resources.

Furthermore, of the components that drive picking costs

– 40% to 60% is comprised of travel time.

Additional and related opportunities resulting from

proper slotting include:

• Improved direct labor productivity in:

- Putaway;

- Replenishment;

- Loading;

• Reduced shorts;

• Maximized storage capacity;

• Improved Ergonomics;

• Minimized product damage at warehouse and in

transit;

• And many more…

To maximize these opportunities developing the strategy

for slotting most appropriate for your operation is the key

starting point.

Why is Slotting Strategy so Important?

Development of strategy options and the work to select

the appropriate strategic option is the first step to

establishing the foundation for the entire slotting

exercise. Strategy formulation is essential and precedes

the four stages of tactical slotting outlined later in this

paper. And although developing the right slotting

strategy represents 80% of the overall effort involved it

returns the bulk of the benefits in the form of ongoing

annual operating savings.

As the supply chain moves to a leaner, demand driven

model, the trend is towards less inventory in the system,

in general. This is a fundamental change from the

traditional model which was essentially an inventory

driven supply chain.

With fewer inventories in the system, we see that

product assortment and the need to handle individual

products in the most efficient manner possible is driving

operating strategy. That is, slotting requirements are

now as important as inventory storage.

More than ever companies are reducing costs to remain

competitive, while keeping an eye on further improving

their responsiveness to customer demand. Selecting the

right slotting strategy is a way for companies to increase

efficiency, making it one of the last frontiers on which

companies can compete to reduce cost and improve

customer service levels.

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The slotting strategy, also known as operating strategy, is

predicated on the layout concept, while application of the

layout concept is determined by the specific warehouse

dimensions and set of constraints for a given operation.

As such there is an inherent suitability of certain strategy

alternatives over others for a given operation, which is

not immediately obvious without a rigorous comparative

evaluation of viable alternatives – in regard to both

layout concepts and their corresponding operating or

slotting strategy options.

For the purpose of this paper we focus on the

conventional full case operation, and leave slotting

strategy options applicable to mechanized or automated

material handling concepts and less than full case picking

operations for discussion in a subsequent edition.

So keeping in mind that the right strategy, through the

parameters of the layout concept is contingent on the

specific warehouse dimensions and set of constraints for

a given operation, the list of possible options is as

inexhaustible as the number of different operations that

exist. However, in every case the objective to optimize

selection and replenishment productivity while

maximizing the storage capacity is universal.

Also, important to note is this distinction. Slotting or

operating strategy is developed for the items within the

operation stored in inventory, and does not address other

items that may be handled through methods such as

‘flow-thru’ or ‘crossdocking.’

With this understanding, the following is a list of slotting

strategy alternatives.

Fast / Slow Picking Strategy segregates items into fast

and slow moving areas with independent pick paths, and

can accommodate a hyper fast variant.

Dedicated Pick / Reserve Strategy consists of separating

the racks needed for selection from those required for

reserve inventory reducing the total pick line length.

Alternating Pick / Reserve Strategy segregates racks

needed for selection from those required for reserve but

alternates reserve aisles to locate product closest to the

pick slots, with the same benefits as the ergo strategy.

Store Friendly Strategy sequences products within the

warehouse to satisfy store aisle plan-o-grams and thereby

significantly reduce retail stocking labor.

Engineered Layout Strategy keeps all pick and reserve

racks, and typically results in the longest pick path.

VNA or MLP Strategies both address items with low

movement and low inventory. Very Narrow Aisle (VNA)

saves space as it allows a higher number of pick fronts in

a smaller footprint and works best in facilities where size

is driven by variety rather than inventory. Multi Level

Picking (MLP) provides a less costly alternative.

High Density Storage Strategy entails an even mix of

multiple deep which addresses demand for increased

density of storage capacity; however, it typically yields a

lesser amount of pick fronts.

Common / Unique Strategy identifies items that are

commonly ordered across many accounts served and

separates out those that are unique with the objective to

reduce pick-line lengths.

Group and/or Batch Picking Strategies both allow for a

consolidation of small order quantities to be picked

together in order to save travel distance. In the case of

Batch Picking order sorting is required. While the

combination of Group and Batch Picking provides the

added benefit of reduced handling by sorting as the small

order quantities are picked with pre-sorted orders

arriving at the dock.

Ergonomic Strategy sees the rack widths increased to

provide for more ergonomic product selection, reduced

damage and workmen compensation claims. The wider

racks typically reduce available pick fronts as well as

storage capacity with wider center ergo beams

introduced for the selection of 2-level pick slots as

needed.

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The Right Slotting Strategy is Typically a Hybrid Solution

For a given operation there are many restraints and

requirements that will influence selecting the right

slotting strategy, which will undoubtedly be a

combination of two or more of the strategies outlined

above that come together as a hybrid solution that is

unique and specific to that particular operation and

facility.

Therefore each of the strategies outlined above, although

complete, unique strategies in their own right, are

integral to the formulation of a hybrid solution that will

appropriately emerge through the evidence of the

analysis as the right slotting strategy for your operation.

Strategy Precedes the Tactical Slotting Process

Note that each proposed strategic option entails an

implicit slotting methodology, and set of parameters or

rules that define the execution of the slotting process.

Choosing the right strategy in any given situation is

paramount to successful execution of the slotting process

because the chosen strategy not only defines the rules

that dictate execution of the overall slotting process, it

also determines the layout.

Once the strategy is decided upon implementing the four

stages of the tactical slotting process described further on

in this paper becomes systematic. The set of parameters

dictated by the strategic option are set, and then and only

then is a slotting software package useful in supporting

the slotting process.

Without a clear set of rules defined by a well defined

strategic orientation, the slotting software package can

do little to facilitate the slotting process. The old adage

‘garbage in – garbage out’ holds in the absence of a solid

strategy on which to build a detailed slotting

methodology that serves as the framework for the four

stages of the tactical slotting process.

In addition to the discussion above and intrinsic to

determining the right strategy, is an evaluation of a

number of key tactical or operational layout issues that

impact productivity and can also contribute to strategy

determination. These include but are not limited to the

following considerations.

Building Height and Rack Elevations

How many rack bays are needed to satisfy the cubic (ft3)

movement and inventory requirements, on average and

at a peak? And how does building height impact our

operation’s ability to efficiently store the required

inventory closest to the pick slot?

These are key strategic determinants because the

necessary storage volume is often expressed in terms of

cube (ft3). The ability of a distribution center to

efficiently store cube is defined as Net Working Capacity

(NWC). NWC is directly impacted by building height

which defines the height of the bays and the extent to

which inventory will fit overhead of the pick slots.

The impact here is that the right strategy for operations

where inventory levels are very high and clear stacking

heights are low may require the incorporation of special

dense storage sections added to the DC layout in order to

minimize stacking height requirements. (See the

discussion of VNA above)

Given that the prevailing objective is to minimize the

amount of putaway and replenishment labor required to

replenish the pick slot, it’s always vital to hold inventory

for a given item as close as possible to its designated pick

location(s).

Impact of Building Height on Storage Capacity

BUILDING DD1 RL1 ML1 RL2

HEIGHT PICK RES PICK RES PICK RES PICK RES

16 FT. 407.2 499.8 212.9 249.9 185.1 238.0

18 FT. 482.0 591.6 252.0 295.8 201.0 258.4

21 FT. 579.0 714.0 304.1 357.0 259.9 292.4 265.6 323.0

26 FT. 702.9 829.6 368.7 414.8 333.0 365.5 330.2 387.6

32 FT. 898.7 1,037.0 472.4 518.5 434.4 469.2 394.8 452.2

35 FT. 1,031.3 1,190.0 542.1 595.0 510.0 550.8 459.4 516.8

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When developing rack elevations, the full height of

a building is not necessarily usable.

Aisle and Rack Layout Considerations

Another important consideration is that the travel aisle

spacing between rack bays dictates the mobile

equipment that can operate within a given aisle, and as a

general rule fork lift equipment outrigger dimensions will

vary with the required lift height at which product is

placed in overhead reserve locations.

The allowance for operators to pass easily in an aisle as

determined by aisle width has a direct impact on

operational productivity and therefore the choice of the

right slotting strategy for any given set of operational

layout issues. Passing is a requirement for efficiency as it

prevents an operator being impeded by another from

performing their function.

Layouts can include any combination of rack and aisle

configurations

Product Flow and Traffic Patterns

As a general rule the fastest-moving products should be

located along the shortest route from production and

receiving to shipping in order to minimize travel to put

products away and later pick or ship.

The trade off in productivity is pick line length versus

replenishment or restocking activity.

Long narrow buildings create long pick lines, while single

corridor to Perishables creates bottlenecks. Multiple

small rooms create complicated pick paths. In order to

fulfill an order for operations spread across multiple

buildings a single case of product may have to be handled

many times. Any one of these operational layout issues

are key determinants to choosing the right slotting

strategy as each of these factors drastically impact

productivity.

Dock Size and Configuration

Not to be underestimated is the amount of dock space

and number of dock doors required for efficient receiving,

flow and shipping of product. The dock is the heart of

any operation and ultimately creates needed efficiencies

or, if inadequate, hazardous bottlenecks.

Dock sizes range from 50’ to 120’ in depth, depending on

the amount of crossdock or product flow-through on a

given operating shift or for any required equipment such

as pallet wrapping machines.

Again, this is a key operational layout issue impacting

productivity not to mention shipping or service levels, the

hours of operation, and the number of days per week of

operation.

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Up to 25% of total building area can be taken up by Dock

Two-Sided Docks provide separate docks for shipping and

receiving functions

65 70 71 72 73 74 75 76 77 78 79 1011121314151617181920212223242526272830313233

END OFDAIRY

START OFMEAT

START OFDAIRY

START OF END OF35 ° PRODUCE35° PRODUCE

END OFMEAT / DELI

FIS

H AR

EA

WIT

H DR

AIN

S

35° WETPRODUCE

(3 AISLES) (7 AISLES)

PRODUCE35° DRY 35° DELI

(4 AISLES)

32° MEAT(9 AISLES)

35° DAIRY(10 AISLES)

RECEIVING DOCK35° PERISHABLE

RECEIVING DOCK(TOTAL 46 DOORS)

SHIPPING DOCK35° PERISHABLE

(TOTAL 54 DOORS)

BUTTERS & MARGARINES

EXTRA COVERAGE

YOGURTS

FISH DRAINS

END OF55° PRODUCE

Pick Line Length

Pick Line requirements are a key driver in maintaining

productivity with the following components to consider

when determining the right slotting strategy.

• Linear feet travelled past product in an aisle - is a

function of the number and size of slots allocated

to products.

• Linear feet travelled to the product in the aisle –

is a function of aisle width and the number of

times a picker must change aisle sides

• Turning Distance – is a function of aisle width,

rack depth, and the number of aisles and turns.

• Dock Travel – is a function of:

- Distance from order assignment to

beginning of pick.

- Distance from end of pick to

staging/loading area.

- Distance from staging/loading to order

assignment.

• Trips Per Order – is important whenever an order

size exceeds the capacity of one picker pallet or

cart, and the picker must take the completed

portion to dock and then returns to the previous

point in pick to continue the order.

Product Placement

In addition to the key tactical or operational layout issues

impacting productivity, considerations determined by

your customer must not be overlooked.

For example product placement issues dictated by your

customer may include: adherence to strict product

grouping; or orders placed by product type. Others are

determined by local legislation around controlled areas

for flammable or explosive goods.

Other concerns may include protecting product from

damage such as risk of “contamination” by other

products; toxic goods; incompatible goods; as well as

crushability and stackability.

Slotting to the “Golden” Zone

Another consideration is factoring in the safety of

warehouse personnel. An example of this is slotting the

greatest activity in the “golden” zone for slotting systems

involving a lot of bending and reaching.

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Ergonomic considerations define the “Golden” zone

Other examples are; no heavy products on top level

selection; and slotting heavy-to-light in the picking

sequence; or no lifting heavy products to top of 6 foot

pick pallet.

So, What is Slotting?

Tactical slotting execution can best be described as the

placement of Stock Keeping Units (SKUs) in a storage

location. These locations can be on the floor, in shelving

units, racks, case flow lanes, etc. These locations are

usually labeled for track ability and tied into a database

that has some basic information such as: SKU

characteristics, quantity on hand and average sales.

What is Optimal Slotting?

Optimal slotting incorporates forecasted and historical

sales, inventory levels, growth, numbering, hit rates,

priority, cube, weight, ergonomics, etc., and is paired with

the right slotting strategy that best addresses the key

operational layout issues of a particular facility. This

allows you to gain productivity savings on all direct labor

functions (receiving, put away, replenishments, and

selection).

The gains available when implementing optimal slotting

that’s paired with the right strategy result in direct labor

savings ranging from 15% to 20% depending on the

operation.

KOM’s (4) Stages of Optimal Slotting

The Optimal slotting process consists of four stages: the

Preslot Stage, the Slot Refinement Stage, the Final

Slotting Stage and the Slot Maintenance Stage. For most

distribution centers, all these stages are needed to

determine the optimal slotting system.

As indicated in the discussion around layout concepts and

strategy determinants above, the combination of factors

impacting slotting can be quite complex and the best

solution is always unique to a given situation.

The issues relating to productivity that operators have the

most control over include:

- Grouping commodity groups by activity;

- Slotting to ‘Golden Zone;’

- Weight considerations;

- Case height sequencing;

- Slotting to priority slots in pick path;

- Activity balancing and congestion;

- Hit rate/density.

And only after the right slotting strategy has been

established should the more tactical optimal slotting

step-by-step process begin.

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Stage (1) - Preslot

To begin the first or Preslot Stage, detailed analysis of

each Stock Keeping Unit (SKU) must be performed.

Specifically: SKU sales (units, case and cube movement),

inventory levels and dimensional data. The Preslot Stage

can also incorporate rules to insure that unique

complexities of your operation are adhered to, like

weight restrictions. Additional examples of these

complexities are: vendor pallet heights and pallet weight,

date or lot sensitive products, fire protection, chemical

protection, etc…

Once analyzed, we must determine what the slot type

should be for each item, and then each specific item is

assigned its optimal slot type. These slot types can be as

small as shelving units or as large as multiple deep and

multiple faced full pallet slots.

Stage (2) – Slot Refinement

While the preslot may have yielded the optimal slot type

for each item, the preslot slot types rarely fit existing

warehouse layouts and equipment. Assuming we are not

designing a new Greenfield facility, we must then proceed

to the second or Slot Refinement Stage.

At this stage the slot types and/or layouts must be

adjusted to ensure a good fit between the assigned slot

types and the slots available in the facility.

Stage (3) – Final Slotting

After the sum total of all the assigned slot types correctly

fit the given warehouse layout, the third or Final Slotting

Stage can begin. In this stage, items are assigned an

actual new slot or position number that is based on a

combination of agreed to criteria.

These criteria ensure that the most efficient warehouse

operating system possible will be put into effect –

providing optimal slotting for a given point in time.

There are two basic methods for final slotting. The first,

the Customer Receiving Method, emphasizes efficiencies

in customer receiving and the second, the Warehouse

Shipping Method, emphasizes the efficiencies in

warehouse operations. The method chosen by most

companies is a compromise between these two methods

and is designed to suit the specific needs of both the

warehouse and the customers.

Additional Grouping Guidelines

Other guidelines by which to slot items within a grouping

are, as follows:

• Numbering Different numbering methods

are used to optimize the productivity of all direct

labor (Z-Pick, U-Pick, X-Aisle, One sided, etc.) The

preferred method is dependent on your type of

operation.

Location and Reserve Numbering Example:

• Priority Once the preferred numbering

method is chosen, Items with the highest

movement are slotted at "dot" positions. These

positions concentrate movement and minimize

the number of times an order picker will cross the

aisles and walk backwards.

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X-Pick

U-Pick

Z-Pick

• Weight restrictions Heavy items are kept at an

ergonomically friendly height.

• The number of slots This should include a

minimum of 10% opens positions for introduction

of new SKUs and flexibility.

When new racking is installed or a major reslot of aisles

occurs you must determine the profiles for the new rack

elevations. There are multiple factors to consider for this

stage:

• Existing Limitations

1. Building clear stacking height

2. Sprinkler design

3. Maximum fork lift height

4. Vendor HI versus Warehouse HI

• Ergonomics

1. Height of the beam in a two level pick (low

enough to select product but high enough to

get a pallet in the bottom position)

2. Height of the beam in a one level pick (high

enough not to hit your head!)

It’s a challenge to take all the above information, tie it

together and then use it to make all the necessary

changes in the physical building. Creating a detailed step-

by-step move plan with associated time-lines is an

integral part of the re-racking, re-setting and re-slotting

project.

Achieving Highest Operational Efficiency

The Final Slotting of a facility is performed for a snapshot

or a specific moment in time. Past historical levels of

movement and inventory can quickly change due to new

items, changing sales patterns, seasonality and many

other factors. As a result, the slotting must be constantly

monitored and maintained if you are to keep the

warehouse at its highest operational efficiency. Ideally

this is achieved by basing monitoring and maintenance

activity on forecasted sales rather than historical data.

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Stage 4 – Slot Maintenance

Finally, the fourth or Slot Maintenance Stage would be

the ongoing process of keeping the warehouse at peak

operating efficiency. Reports of changes and additions to

the final slotting will allow you and your employees to

keep the slotting continually up-to-date.

Slot Maintenance reports are essential to pinpoint

problem areas and summarize overall operations.

These reports will provide the analytical and support

tools needed to easily keep your facility up-to-date.

Many imprudent companies stop after completion of the

final slotting stage and suffer the consequences later,

when the delicate balance achieved during final slotting is

degraded over time.

The overall objective of the Slot Maintenance reports is to

simplify the ongoing task of maintaining a good slotting

system. Slotting systems are dynamic and cannot be

maintained without continuous effort.

What is the Time Frame for All This?

• 10-12 weeks to develop the right strategy

• 2-3 weeks to move from strategy to final slotting

• To implement varies by customer and complexity

To Conclude

Once again, choosing the right strategy for any given

operation is paramount to successful execution of the

slotting process because the chosen strategy not only

defines the rules that dictate execution of the slotting

process, it also determines the layout.

What about Slotting Software?

The old adage ‘garbage in – garbage out’

holds in the absence of a solid strategy on

which to build a detailed slotting method-

ology that serves as the framework for the

slotting process.

Without a clear set of rules defined by a well

defined strategic orientation, the slotting

software package can do little to facilitate the

slotting process.

Slotting software packages typically only offer

a pre-assigned item level diagnostic capa-

bility, and as such will not perform dynamic,

efficient slot type assignments. Instead it’s

designed as a tool to manipulate large data

bases and test various scenarios and

problems. Which means the requirement

remains for another means to manipulate the

data and optimize slot types

A few potential Limitations of Slotting

Software:

Inability to handle large number of

constraints and rules necessary to support the

right slotting strategy i.e. Zones, Store

Friendly sequence, slot sequence, priorities,

height sequence, weight restrictions,

packaging restrictions, movement, inventory.

Inability to emulate a Z-pick travel pattern, or

respect slotting priorities inherent to it when

there’s a need to handle even number of

double-faced items while keeping them side-

by-side (in same bay).

Difficult to incorporate small changes as the

software conducts a re-slot of all SKU’s,

producing a new final slotting result each

time.

Difficult to interpret the importance of the

goals settings i.e. goals can be given an

importance between 0 to 100 (highest) but

how the program optimizes between several

goals is difficult to appreciate.

Sensitivity is problematic i.e. difficult to

calibrate goals and sequences, small changes

seem to produce large differences in slotting.

Often, Tech Support takes a very long time to

reply or callback.

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KOM International has a reputation for delivering logistics solutions that are

practical, flexible and value-oriented. To better understand how KOM International

can help your firm achieve world-class logistics, contact us at our headquarters

and request a business assessment at no obligation or visit us at www.komintl.com

Corporate Headquarters

KOM International Inc.

300 St-Sacrement, suite 307

Montreal, Quebec

Canada H2Y 1X4

Tel.: (514) 849-4000

Fax: (514) 849-8888

www.komintl.com

About the Authors

Keith Swiednicki a Senior Partner and COO at KOM International, originally joined KOM International

in 1984 as a project manager. Over the years, he has successfully completed hundreds of logistics

consulting projects, and most involved facility resets through to final slotting, which has contributed

to his reputation today as a highly respected logistics and supply chain consultant. Mr. Swiednicki has

been published in numerous trade journals and industry publications including: Grocery Distribution,

U.S. Distribution Journal and Food logistics.

Denise Beamish, Marketing Manager, joined KOM International in 2002 bringing her 20 years of

communications and marketing experience to the task of building a formal marketing and sales

function for the firm. In her work with KOM, Ms. Beamish contributes to KOM’s publications in

numerous trade and industry journals including: CSCMP Supply Chain Comment, OIM, and Agro

Expansion.

All names, trademarks, products and services mentioned are registered or

unregistered trademarks of their respective owners.

© 2011 KOM International, Inc.

100203

Printed in Canada