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Stocking Strategies.
By Dr. Rick Johnson
Friday, 1st August 2014
 
The determination of how you stock your inventory within your warehouse (sometimes referred to as 'slotting') has a critical effect on your outbound efficiency and accuracy.

Often, however, warehouses select putaway locations based on what is easiest for the receiver or computer system. When considering the following techniques, ask your peers for advice about what they have tried and how well it worked. There is no substitute for real world experience in your own industry.
 
Segregate by Product Velocity
 
There are a limited number of “prime” locations within your warehouse. These are the locations that are the easiest to pick from. They could be floor locations, the lower levels of pallet racks, shelves or just the areas closes to your shipping dock doors. By simply locating your fastest moving product in these locations you can often significantly improve your picking efficiency.

More importantly, your picking accuracy will become higher because the easy pick locations are also typically the easiest to count. Of course, this may require you to separate slower moving products from fast movers at receiving and to track each product’s “pick velocity” (the number of times it is picked, NOT the dollar value sold, over a period of time).
 
Co-locate Common Products
 
By analyzing your customer orders, you should be able to discover products that are commonly included on the same order. (This information is, of course, also highly useful for sales analysis.) If you find high rates of correlation, such as two products that are ordered together more than 30% of the time, try to stock them in the same aisle or area.
 
Replenishment
 
As noted earlier, your warehouse has a limited number of “prime” picking locations. Replenishment is a method of exploiting these locations. Rather than having an entire pallet of a slow moving product sitting in a prime picking location, you may want to subdivide the location into slots so that additional items can be stored within the same cube, and keep the balance of the pallet in a reserve location.

Periodically, based on a “minimum” level, you replenish the forward pick location from the reserve location. Although this represents extra work during put away and replenishment, it enables you to keep, say, four items in prime locations rather than one. In addition, you may now be able to pick faster because a lift truck is not required. The benefits of replenishment typically begin to outweigh the costs in warehouses of 50,000 square feet or more.
 
Repackaging
 
Typically, product is put away in the same configuration as it is received. For example, items are stored on the same pallets that they were received on. You should, however, consider reconfiguring, or repackaging, your receipts to optimize picking.

For example, if a product is usually picked singularly or case quantities but received on pallets you could separate out a few cases and put them away to a shelve location, while placing the balance in a separate pallet location. If you find that special product is often ordered in standard lengths you could precut an identified percentage at receiving.
 
Units of Measure
 
As an extension to the repackaging theme, using standard units of measure (UOM) can enable you to pick faster and much more accurately. Take an example of glue, which is shipped from the vendor in pallets. Each pallet contains 10 boxes and each carton contains 10 bottles.

Rather than storing the product as a pallet in a rack, you could maintain a shelf location with loose bottles or broken cartons, a floor location with sealed cartons, and rack locations with full pallets. If someone ordered 31 bottles the picker grabs 3 cartons and 1 bottle from two locations rather than pulling a pallet and counting out 31 bottles from various broken cartons. This is sometimes a faster operation and almost always more accurate.

Rick Johnson, expert speaker, wholesale distribution’s “Leadership Strategist”, founder of CEO Strategist, LLC a firm that helps clients create and maintain competitive advantage. Need a speaker for your next event, E-mail rick@ceostrategist.com. Don’t forget to check out the Lead Wolf Series that can help you put more profit into your business.
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