Space Utilization and the Rule of 4

d5admin December 14, 2010

When designing warehouse storage, two challenges work against each other: storage density and space utilization.

The desire for greater storage density sometimes leads to lower space utilization. Many warehouse managers have tried to increase warehouse storage by introducing drive-in, push-back or pallet flow rack in order to increase storage density only to find their storage lanes sitting at 60 % utilization.

The rule of 4 helps increase storage density and increases space utilization to 87.5%. Here’s how.

For SKUs (storage keeping units) with an average quantity on hand of 4 pallets, selective racking is likely the best storage medium. The reason is space utilization.

Take a scenario where you have 4 pallets on hand, stored in single selective pallet racking, and you are picking case quantities from one of the pallets until the pallet is empty.

When you first store all 4 pallets you have 100% space utilization of the 4 storage slots.
Once the pallet is fully depleted of case quantities, the space utilization is now at 75%.
Therefore, on average, 50% of the time the pick slot (one pallet position) is half depleted
That one pallet represents 25% of your storage of the entire SKU, so
- 50% of 25% is 12.5% of your total quantity on hand of that SKU.
On average 12.5% of your space dedicated for the SKU is empty, so
Your space utilization for the storage of that one SKU is 87.5%

Pretty good, right? Maybe this is the best you could hope for. Higher utilization of storage space would mean too many aisles. Lower utilization of space would mean too much empty racking.

To achieve the same space utilization in Double Deep, you would need 8 pallets on hand.

Double deep racking is a full pallet storage medium. (Push-back is suggested for case picking). So assuming that of the 8 slots used by any particular SKU, one pallet would be missing, the storage utilization would be 87.5%. If the second pallet is removed, then a different SKU could be stored in the double deep slot.

What about drive-in racking? How many pallets would you need on hand to achieve 87.5% space utilization? Assuming you have 4 deep and 4 high drive-in racking, you would need 64 pallets on hand. Here is the reason:

To get all the pallets on the bottom row, all rows above need to be cleared in the 4 deep run.
To get to all pallets on the top row, all rows on the bottom need to be cleared in the 4 deep run.
Therefore, on average, the 4 deep 4 high bay would be 50% filled or depleted.
- So utilization would be 50% on average
To get to 87.5% storage utilization for the SKU in the storage media, 3 other rows would need to be filled

Remember! We are discussing these racking types as storage media. Drive-in is useful for staging where pallets are loaded and unloaded regularly.

Now, when designing your racking system,

run a velocity report and look at the average pallets you have on hand of your SKUs.
Perform the 80-20 rule to discover the 10% of your SKUs that represent the 50% of your volume.
Take the a pallet quantity on hand and divide it by 4.
Look for commonality.

If you find the majority of you high volume inventory is 4 pallets on hand, single selective is suggest.

If you have 8 pallets, double deep.

If you have a greater number, possibly push-back rack, drive-in or pallet flow is recommended.