E-commerce Logistics: Warehouse Slotting and Space Utilization

Slotting – determining the locations of your SKUs in your warehouse – used to be an easy concept. But in the new world of warehousing focusing exclusively to a large degree on e-commerce sales, this is no longer simple. E-commerce sales in the United States grew to over $348.9 billion last year and it is not expected to slow down. As a result, today’s method of slotting your warehouse needs to grow and adapt as well.

Slotting had the potential to become complex depending on your SKU type, although generally you would identify your top selling SKUs and rank right down to your slowest moving. The second main step was to plot out your warehouse and determining the size of each storage location and distance to your dispatch area. Using this information, you would then slot your fastest moving items in the closest location to where your pickers started their picks from, second fasted item in next closed location and so on.

The old slotting method has now becoming more difficult for these reasons:

• SKU ranges in eCommerce change more frequently.

Drop shipping is more common.

• There are a large number of small orders, compared to a small number of large orders.

• Add on services such as gift-wrapping and kitting may impact your warehouse layout.

Data accuracy is critical to help with frequently changing SKUs and many orders with small order sizes. You can no longer slot every six months using the previous six months of data. You don’t need to invest in a slotting tool either. Set up spread sheets to track demand for products on a weekly basis. Most cloud inventory management systems will be able to pull this data quite easily. Compare this weekly demand tracker to the locations they’re currently stored in with a distance to dispatch field. You don’t also need to re-slot products weekly, but keep an on eye on this report and if it’s clear a product is no longer a top seller, yet sits in the prime warehouse location, consider moving it. This is best done when stock levels for that product are low, right before replenishment.

The second challenge to overcome is new SKUs being added to your range more frequently. You will not always know the demand of the new SKUs, which makes this tricky. Best practice is to base the demand on comparable products your stock. Then slot the SKU location based on that demand. Monitor it closely over the first two months and don’t be afraid to relocate the SKU if it no longer makes sense to have it in that location. Tracking demand weekly will help with this.

Add on services such as gift-wrapping and kitting requires rethinking your prime locations. If certain products are often sold as a kit then it would make more sense to locate these close to your work area where kits are assembled. This may not necessarily be in your dispatch area. The result may be having multiple prime locations depending on the SKU. This can also be captured and identified in spread sheet.

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