Analysis of Warehouse Items – ABC – 80-20 Rule
ABC behavior is so common in the warehousing and distribution industry that it is possible to assume that a similar rule applies in your distribution business also. But, consider performing a fresh ABC analysis for your warehouse facility. Why?
What if your facility does not have the exact 80-20 rule? You could have a 95-5, meaning that just 5% of the SKUs (Stock Keeping Units) account for 95% of all movement, or, a 80-50 rule, meaning that you have to visit 50% of the SKUs to account for 80% of the pick volume.
How do your customers place their orders?
Both the frequency and type of the order (number of SKUs etc) will determine many aspects of layout and the picking process. We recommend that you analyze Lines per Order and Pieces per Order. We call this Order Profiling.
Different Types of Lines per Order
Described below are 6 major ranges of Lines per Order. These instances of lines per order are typical of different types of warehouse picking scenarios. These are recommended ways to design a picking operation based on the number of the average lines per order a warehouse operation handles.
1 or 2 Lines per order
When order size has only a couple of lines per order, there is likely a specific reason for how the product is being bought. You will see such orders come in due to TV based sales promotions being processed in a order fulfillment center. It starts with a TV commercial and in a matter of 20 minutes, 6000 orders may be generated for just 1 SKU. In this instance, that one SKU, can be brought from a reserve location, kept as a full pallet close to the packing area. You process all 6000 orders and send them for packing and shipping. Some warehouses will call this as consolidated pick.
Key point: Multiple orders for single (or limited) SKUs should be fulfilled from a floor loaded full pallet closest to the packing area.
3, 4, 5, 6 lines per order
These orders can be processed from a layout slotted by product velocity (sales volume). When the end-customer receives a box or a container with up to 6 (about 6) line items, s/he can still match the received items against a packing slip or an invoice. Hence there is no need to pick these orders in any family sequence.
Key point: Orders with up to 6 line items should be picked from a pick path optimized for SKU velocity without creating congestion.
7 to 15 lines per order
This is the gray area between velocity based slotting and family type based slotting (items often sold together, or grouped by size or weight).
16 to 45 lines per order
Definitely suggests Family type slotting. Layered slotting using the bays close to the dock.
45+ lines per order
Family type based slotting. Often Grocery DC’s are in this group. Consider some type of batch picking for the “C” items (with no sorting).
Slotting by Store Aisles
Slotting by store aisles applies when your company owns both the warehouse and the retail stores. It is important to both pick a pallet of items efficiently in the warehouse and make it easy to unload and stock the shelves in the retail store. We call this type of warehouse slotting ‘Store Aisle Group’.
How do I Slot my Warehouse by Store Aisle?
To start you will need a store planogram. (A planogram is a diagram of fixtures and products that illustrates how and where retail products should be displayed, usually on a store shelf in order to increase customer purchases.)
Split a store aisle into few segments. List the product family groups in each segment. In the warehouse, take all the family groups in one segment, sort by velocity mixing different family groups in that store aisle group.
This will achieve efficient picking in the warehouse as well as efficient stocking of the retail shelves. To achieve full success, you need standardized store layouts and almost standardized planograms. Since every retail store planogram is ‘tweaked’ to meet the local retail demand, you may find you will have variations in store layout and planograms.
Written by Ram Krishnan,
Related article on th subject of warehouse profiling: What is Profiling for the Warehouse?