Warehouse Management

The approach here is quiet simple. The idea is to evaluate total cost for each distinct item demand profile and storage option. A cost is assigned for storage and equipment, replenishment and travel for each distinct storage combination:

• Storage and equipment cost would depend on the space the storage option occupies.

• Replenishments costs would depend on how frequently the item is ordered frequently and therefore the pick area needs to be replenished. Clearly if a frequently ordered item with high cubic volume is slotted in a smaller space, the replenishment costs would sky rocket.

• Travel costs would depend on the size of the storage space and how frequently the picker travels past it. As to be expected, smaller shelves will have a much lower travel costs and if items with low pick activity are slotted in smaller shelves, picker does not have to travel past these locations that frequently.

Here we see that flow racks are expensive in relation to its storage capacity thereby requiring more frequent replenishments. However it does minimize the pick and travel time. 

Makes Sense?

To summarize, if you operate a large and high volume warehouse (5000 orders >day), you need to store your most frequently ordered SKUs with high cubic pick activity in locators that can store a full pallet. To keep it simple, lets call these SKUs, the high volume "A" items. If you have SKUs with medium pick activity and cubic volume, the most cost effective way to store them is in flow racks. Similarly for SKUs with low cubic pick activity, you need small shelving. Aren't warehouses of the world awash with these type of SKU's, the unit level "C" items?

I have taken the liberty of summarizing the optimal storage options presented in the original operations and fulfillment article in the following table: