Continued from Ideas
for improving warehouse performance (2)
SPACE UTILIZATION
Do you have
too much warehouse space? Chances are you are either out of space or getting
close to it. It happens all the time…
Inventory
(and other stuff) tends to expand to fill the amount of available space. When
you do run out of warehouse space there are many options to consider including
expanding your warehouse, building a new facility, or leasing outside space.
Alternatively there are many proven, low cost concepts you should consider to
improve the utilization of your existing space.
Random vs. Dedicated Bins
There are
two primary material storage philosophies…fixed or dedicated bins and random or
floating. In dedicated bin storage, each individual stock keeping unit (SKU) or
item is assigned a specific storage bin. A given SKU will always be stored in a
specific bin and no other SKU may be stored in the bin, even though the bin may
be empty. Dedicated bin storage is analogous to a classroom where each student
is assigned a specific seat.
With random
storage, any SKU may be assigned to any available storage bin. An SKU in bin A
one month might be in bin B the next and a different SKU placed into bin A.
Random bin storage is analogous to the assignment of rooms in a hotel. When a
guest checks in they are randomly assigned a room (based on the guests
pre-defined criteria). The amount of storage space required for a SKU is
directly related to the storage philosophy. If dedicated storage is used, a
given SKU must be assigned sufficient space to store the maximum amount of the
SKU that will ever be on hand at any one time. For random storage, the quantity
of items on hand at any time will be the average amount of each SKU. In other
words, when the inventory level of one item is above average, another item will
have a below average level; the sum of the two will be close the average.
Often the
storage philosophy chosen for a specific SKU will be a combination or hybrid
based on where the SKU is in the storage process. A grocery store is an
excellent example. Dedicated bins are used on the store shelves where the
consumers can easily find what they are looking for, and not stored (on
purpose) in any other bin (promotions excluded). In the back storeroom however,
the excess stock is usually stored randomly, wherever there is a bin. Because
combination storage bin is based on a mix of fixed and random storage, its
planned inventory level falls somewhere between the fixed and random quantity.
Choosing one storage philosophy over another means making
a number of
trade-offs between space, accessibility, and material handling efficiency.
Use of
space in a dedicated bin model is poor because space for the maximum amount of
inventory that will ever be on hand is allocated, although actual on hand
inventory will normally approach the average inventory level. Therefore excess
empty space and bins are common in dedicated storage. Random storage is
extremely space-efficient because the space requirements are only 15% above the
average amount of inventory expected on hand.
Material in
dedicated storage has excellent accessibility. Blocked stock is not a problem
because each bin contains only one SKU and the bin of each item is known
(remains constant). Accessibility to stock in random storage can be good but
requires more management especially if a materials tracking system is not in
place or kept up to date. Without good management or a tracking system, using
random storage will result in blocked stock, lost material and eventually
obsolete inventory.
Dedicated
and random storage score equally well for material handling. With either,
inventory is typically handled during the put-away process and then again
during picking. Combination storage is typical of a forward pick and reserve
storage strategy requiring a replenishment flow. This replenishment adds
another product touch as inventory is moved in smaller loads from the reserve
(random) bins to the forward (dedicated) bins for picking.
In summary,
dedicated storage trades space efficiency for better inventory accessibility
and vice-versa for random storage. Combination storage trades material handling
efficiency for middle of the road efficiency in space and accessibility. Which
is best for your operation is unfortunately not a clear cut decision and will
depend on several other factors. The only general conclusion to be made is the
poor use of space in a dedicated bin strategy is a big negative. Compared to
the use of space in a random strategy, a dedicated bin strategy will generally
require 65-85% more space. With the escalating cost of money, land and
construction, few companies can afford to design fixed bin storage warehouse.
This factor alone can justify the investment in technology to help manage a
random storage warehouse.
However,
occasionally efficient use of space is not a critical factor, so dedicated bin
storage is preferred. For example, when the items to be stored are extremely
small or extremely valuable, accessibility and accountability may trump space
utilization. Few jewelers care about efficient use of space when they are
storing and securing diamonds.
Varied Bin Sizing
An
often-overlooked method of reducing space requirements is optimizing the
product bin sizes. Many warehouse operations store and process a wide variety
of product types and sizes. To effectively accommodate this variety, it is
desirable to provide a variety of storage types and sizes. Trying to utilize
only one type of storage media and bin size with a variety of products can lead
to inefficiencies and low overall cube utilization.
For
example, storing pallets with a consistent 44” pallet height into a 60” pallet
storage opening is just wasting space. The right balance between tailored
product bin sizes and flexibility results in improved space utilization.
Storage Density, Velocity and Accessibility
Reducing
aisle widths is a good way to improve space utilization. Thought should be made
to the number of aisles used in your facility. The number of cross aisles and
people aisles should be assessed to maximize the utilization of the aisles. Then
compare various storage utilization improvement concepts against expected
velocity and capacity constraints.
Aisle to Storage Space Ratio
The ratio
of aisle space to storage space is key when developing space saving ideas. One
way to reduce the ratio is to block stack pallets of product on the floor two
or three levels high. Block stacking requires enough inventory of the same SKU
and product that can be stacked without damage. Floor stacking pallets four or
five deep is common in operations with high stackable inventory per SKU. This
ability to deep stack pallets with few aisles manages the aisle/space ratio to
your advantage.
Aisles
Another
area to review is the width of existing aisles in the warehouse. Most material
handling equipment (MHE) is designed with a minimum aisle width or turning
radius associated with particular style of fork truck. Make sure you don’t
overdesign the aisle width and waste potential storage space. In larger
warehouses with many aisles of racking, a small decrease in each aisle width
can result in additional rack bays for storage. But avoid making them too
narrow and causing other operational issues.
Reducing
aisle widths is a start to optimizing storage space. The type of lift truck
used and the pallet parameters will influence aisle widths. However, with an
assessment of aisle widths, you may identify aisles that can be reduced using
the same equipment.
In other
cases, you might consider the investment of narrow aisle (96” to 108”) or very
narrow aisle (44” to 66”) industrial vehicles, such as reach or swing-mast
respectively.
KNOWLEDGE NUGGET…
In a
warehouse it is common for aisles/cross aisles to consume 30-40% of the space.
Rules of thumb for space planning include:
·
Docks and processing areas = 15-30% of total space
·
Aisles = product storage space
·
Cross aisles = 20% of the aisles + product storage
space
·
Benchmark for storage capacity = 10 – 15 square
feet per pallet
Think Cubic Feet
The impact
of using vertical storage space depends on your current storage clear height
and product stack-ability restrictions. For example, in the beverage industry,
a stack height limitation of one to two pallets is common. With these low stack
heights, a simple 4 to 5 level pallet rack structure, using basic
counterbalanced vehicles can drastically reduce the space requirements of the
facility. In addition, the vertical space within a pallet rack structure should
not be wasted. The lift-off height provided between the top of the load and the
beam should be adequate but not excessive. The typical lift-off heights within
a pallet rack structure range from 3 to 8 inches.
Rack Over Doors
Most
receiving dock doors are spaced far enough apart to permit racks to be erected
and span the door openings. These racks can provide several levels of product
storage above the clear height of the door opening. These racks can be used to
store very slow moving products (i.e. packaging supplies and empty pallets).
In-Rack Tunnels
In warehouses
where pallet rack is used, a missed opportunity exists if rack “tunnels” are
not used over cross aisles. Most warehouses try to align rows of rack on either
side of a main or cross aisle. The area above these aisles is wasted unless racking
is installed bridging the aisle between the ends of rows of rack. Even allowing
clearance for lift truck traffic, it is possible to add two or three levels of pallet
storage.
KNOWLEDGE NUGGET…
As a rule
of thumb, the reduced travel distances from using cross aisles or tunnels will
improve picking efficiency up to 25%, far offsetting the resulting decrease in storage bins/space
utilization.
Bin Utilization
After you
establish the layout and bin characteristics, the next job is to make sure you
utilize all of the potential space in each bin. During tours, I frequently see
instances where one or two cases are stored in a bin designed for a full pallet
quantity. This is overcome by having a variety of bin sizes to accommodate the
variety of storage needs on a product by product basis.
Another
waste of space occurs in picking areas where only the front portion of the pick
slot is utilized with empty space left behind. A formal slotting analysis
should help identify areas of opportunity. Make sure the pick slot is designed
to fit the cube movement of the SKU. It is impossible to attain 100% storage capacity
on a daily basis but the higher percentage you can maintain in established
bins, the more space you will have available.
Mezzanine
Although
they can be costly to install, the option of installing a mezzanine makes sense
in some situations. If you can find the right use for this type of space, you
can double the footprint of the warehouse where you install the mezzanine.
Issues such as product flow and the cost per square foot of space in your warehouse will
determine the potential use of a mezzanine.
KNOWLEDGE NUGGET…
Measure
both Absolute and Relative bin utilization. Absolute determines if there is any
inventory in the bin and is a binary measure, 1 or 0, Yes or No. Relative determines
how much of any given bin is full. Keep the measures simple - 0, 25, 50, 75 and
100%. As you walk through the warehouse, take a random sample to see how the facility
measures up.
Layout/Product Flow Review
A proactive
strategy for managing warehouse operations is to develop and maintain a scaled
layout drawing. A periodic review of the layout will help you define the
overall approach to utilizing space within the warehouse facility.
Common
space utilization tactics, such as storing products along outer walls, can be
identified and integrated into the physical layout. Performing a review of your
existing space utilization is advisable before investing in other options for
handling space shortages. If not, you might duplicate bad space utilization
practices into your next facility or expansion. Another key factor for
improving warehouse space utilization is planning for future expansions at the
start of any new building design. However, best practices organizations have 5
year growth plans including an evolving warehouse layout.
For example, the biggest decision on developing a new facility is using docks on one-side of the facility or both sides. Having docks on multiple sides of a building requires multiple staging areas for unloading and loading products. This leads to the majority of your facility being occupied by floor storage or wasted vertical space. If you can operate with docks on one side of the facility, then you can share the space required for unloading and loading.
Cross Dock If Possible
The best
way to improve space utilization and pick labour productivity is to not do it.
Don’t put product into storage and don’t pick orders.
Cross
docking is a logistics procedure where products from a supplier or
manufacturing plant are distributed directly to a waiting sales order with
marginal to no handling or storage time. You can potentially reduce storage requirements
and improve overall labour productivity by moving product from the receiving
dock direct to an out bound order. This practice is best supported with some
form of technology to match inbound receipts with open outbound orders.
Contributed by: HighJump Software Inc & iWMS
Supply Chain Software (the SA channel partner for HighJump)
Read next: Ideas for
improving warehouse performance (4) here
