Slotting analysis is the practical application of a statistical analysis for the SKU/product base in a warehouse distribution center or manufacturing facility. It consists of reviewing and analyzing the velocity or movement of items and associated cubic storage movement of those items relative to the other items.
The goal is to determine optimal locations to store items and also make decisions about optimized automation systems to store and manage those items. Primarily, slotting improves labor, travel time and automation efficiency. The secondary by-product improvement is space utilization. A slotting analysis can help determine if a business is out of space or consuming too much space. If a business slots correctly and automates correctly, the footprint can often be significantly reduced.
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A slotting analysis is based on the cubic dimensions of items, as well as their current and projected velocity. Velocity equates to the requisite travel time for an operator to pick the item over a given period of time. That means that the velocity of an item picked 1,000 times a month is much higher than the velocity of an item picked once a month. Velocity directly correlates to operator labor and travel time either in a non-automated environment or in an automated environment. It could be the wait or dwell time of the automation equipment for that particular item. Conducting a slotting analysis and making decisions about how to optimally slot items in the facility improves productivity substantially. Slotting analysis helps determine what type of automation equipment to use and generates the underlying ROI for re-slotting and/or automating the storage of any given set of SKUs or products.
The average warehouse associate spends 60% of their time traveling. In a warehouse that is properly slotted, travel time can be significantly reduced and that, in turn, lowers labor costs. Slotting can also increase the efficiency of automated storage equipment. In fact, all the dynamics of a warehouse can benefit from a slotting analysis since it improves average warehouse throughput, productivity by piece of equipment, productivity by picker, order turn-around time, and overall throughput to meet peak demands.
Most of us encounter slotting in our day-to-day routines. , refrigerator slotting occurs when coffee drinkers keep the creamer in the door or right up front. They don’t dig all the way through to the back of the refrigerator to get a high velocity item they use multiple times a day. Most closets are arranged the same way. The low velocity tux is in the back corner in the garment bag; it’s not up front. The shirts worn every day are in the front of the closet. Slotting is simply applying those same principles to a warehouse operation using statistical analysis.
ABC methodology is often mentioned in relation to inventory cycle counting frequency and also slotting analysis. Classically, this is a correlation of the volume movement of an item and its associated dollar value, so the focus is on items based on cost of inventory. An “A” item is either a high cost and/or high movement item, as it’s based on the dollar value movement of an item in your operation. A high cost item with relatively low velocity could be easily considered an A item, such as Rolex watches at a jewelry or watch distributor – even though not many are picked and shipped in a month.
From and ABC inventory counting perspective an organization is going to want to keep a close eye and count frequently the Rolex watches, however from a true picking velocity standpoint it is rather low and may even be stored in a controlled access area. Compare that to Fit Bit watch bands at the same distributor, relatively cheap compared to a Rolex but they are going to move A LOT of those. This is a bit of an extreme example to highlight the difference between ABC methodology for inventory control, management and cycle counting as compared to velocity slotting. A velocity based slotting analysis looks at the physical movement and associated labor impact – not the relative cost or total value of the item that is stored in the facility. A velocity slotting analysis is similar but includes more factors than the classic ABC definition, those factors are more directly related to the impact of labor costs. It is important to understand the difference based on the goals and objectives of the analysis being performed.