After inventory costs, labor is your biggest cost bucket in the warehouse. If you can increase efficiency on the warehouse floor, it’s realistic to drive labor costs down up to 20% – even without automation. That money drops straight to the bottom line.
Labor savings are a product of reduced time and touches, and there are dozens of strategies you could pursue to achieve these objectives. But one strategy – warehouse slotting – is both under-rated and under-utilized.
What is warehouse slotting?
Slotting is the process of organizing inventory in a warehouse to minimize space requirements and reduce travel time. Efficient slotting lets fewer workers pick more orders more efficiently.
The issue isn’t that operators don’t do warehouse slotting, but that they don’t do it often enough. Typically, slotting happens at the onset of a project. But over time the volume changes or the SKU mix changes and no adjustments are made. Labor costs creep up, but very gradually, and no one attributes the increase to poor organization of inventory.
It comes down to making sure that all the inventory is where you want it – for efficient receiving, picking and shipping. The payoff is disproportionately high relative to the effort. Depending on the size of the operation, you could dedicate a person to maintaining the ideal slotting profile and that person could pay for themselves tenfold – just by reducing travel time for the rest of the team.
Elements to examine as part of a warehouse slotting strategy
Many variables factor into a good slotting strategy.
- SKU velocity – fast and slow movers
- Order frequency
- Seasonality by SKU
- Which items often ship together
- Inventory volume
- Pick type (each, case, full pallet)
- Storage medium (pallet rack, shelf, carton)
A good WMS will provide all the data required, but it takes a knowledgeable analyst to translate the data into a smarter layout. For instance, you can have 10 cases on 10 orders or 1 case on 100 orders. It’s the same volume, but the labor requirements are vastly different and the analyst needs to understand that volume is only part of the story.
Depending on the complexity of the operation, your slotting strategy should be revisited monthly (ongoing adjustments to the existing strategy), quarterly (more substantial changes) and annually (major changes involving rezoning, additional racking or different racking solutions). Naturally, ad hoc slotting projects should be initiated if there are major changes to product assortment or sales by product.
Slotting for omnichannel distribution
A superior slotting strategy can drive even greater savings in an omnichannel distribution center with a high-volume of each pick orders, where as much as 60% to 75% of picker’s time is spent traveling to and from the work. In B2C fulfillment, things an industrial engineer could look at to lower labor costs include:
- Better locations for promoted products and high-volume items
- Adjacent locations for products that often sell together
- Placing fast-moving SKUs in locations that allow picking without bending or reaching
- Separating similar products/SKUs that could be mis-picked
- Balancing picking activity across aisles to reduce productivity-decreasing congestion
Slotting in a 3PL environment
Shippers that outsource distribution to third-party providers don’t typically inquire about warehouse slotting strategies. They track high-level KPIs like labor efficiency, but trust that their 3PL partner is taking the necessary steps to optimize storage and labor efficiency.
That trust may or may not be well-placed. It’s a good idea to sit down with your provider and understand their approach to warehouse slotting.
Slotting is part of the blocking and tackling of smart warehouse operations. While effective slotting does require detailed analysis, the cost of doing this analysis on an ongoing basis pales in comparison to the 5- and 6-figure savings potential of an effective slotting strategy.