Best Practices Consortium Supply Chain Best Practices Consortium Distribution Center Slot Management Practices Executive Seminar Track 2, Session C September, 2006

Scope This session covers the objectives and approaches to be considered in establishing an effective slot management program. A well- formulated slotting plan is key to maintaining well-managed distribution center (DC) operations. Operational Efficiency: What factors drive picking efficiency and have a positive influence on other operations? Internal and External Information: What relevant information is available to support slotting? Approach: Which approach yields the greatest result from the information available? What is practical? Techniques: What techniques might be available which are not being utilized?

General Practice and Approach Highly manual-based process is still the norm—advanced functionality availability has not taken a strong hold. As a result, frequency of revisions to slotting are moderate. What is your primary methodology for assigning products to storage slots? All Retail Manual assignment of SKU's to slots based on physical characteristics and best efforts to minimize labor requirements 38% 35% Same as manual process, but assisted by internally developed spreadsheets or database tools 34% Sophisticated slotting software that optimizes the trade offs between storage utilization, labor productivity and safety 19% 20% Fixed assignment of SKUs to storage slots based on physical characteristics (i.e., pallets, cases, loose pieces) 9% 10%

Data Availability to Support Slotting Where automated slotting techniques apply, the basics of location ID, type and size are covered. Elements more meaningful to operations efficiency are not as highly represented.

Objectives Guiding Slot Management Again, the basics prevail. Many factors contribute to the slotting plan. Diminishing returns could be the result of too broad of an attempt to optimize. Which of the following objectives are evaluated explicitly in your methodology to develop slotting plans? All Retail a. Maximize cube utilization 39% 42% b. Locate non-conveyables and products picked in pallet quantities near shipping 25% 26% c. Group slots with similar storage characteristics (i.e., pallet, case, loose pieces/broken cases) 50% 47% d. Group slots with similar special handling characteristics (i.e., temperature controlled, hazardous) 29% 32% e. Limit slot reassignments to minimize re-slotting effort and staff retraining 21% f. Optimally match slot picking characteristics (e.g., shelves vs. carousels) to anticipated pick frequency g. Locate fast moving items near conveyors (conveyables only) h. Locate fast moving items (all types) near shipping i. Locate faster moving items on center shelves (golden or hot zone) 46% 53% j. Locate heavy items at the beginning of the pick path k. Locate crushable items at the end of the pick path l. Locate cases in the pick path based on similar height m. Store items that are often sold together in close proximity 18% 16% n. Store similar items in different areas to reduce proximity picking errors o. Store items in the ergonomically best area to reduce injuries p. Store items in family groups to minimize restocking effort at stores (retail and vendor DSD) 37% q. Store high volume items in multiple zones to balance workloads and minimize congestion r. Store items that are often sold together in close proximity s. Store items from the same vendor in close proximity to minimize putaway 11% 5% t. Balance slot capacity and pick frequency to achieve targeted replenishment frequency u. Store high volume items in different carousels in a pod to balance the workload 4% v. Store high volume items in carousels near each other to reduce indexing

Your Expectations What would you like to learn from this session? What are the relevant objectives of slot management? What are the approaches and techniques which should be utilized? How should the facility layout and location characteristics be classified? What factor should SKU velocity (A/B/C/Seasonal) play in slot management? Other key factors? How do you ensure that the approach fits with the objectives?

Potential Discussion Points What are the primary slot management considerations in supporting picking efficiency? What considerations are most important to support picking accuracy? Should replenishment frequency and efficiency be a priority in slot management? Are downstream packing, shipping and customer or store operations influenced by slotting techniques? What importance should be placed on placement of related product?

Potential Discussion Points (continued) What importance should be placed on proximity to material handling equipment? What level of information is required for effective slotting? How can availability be automated? What level of slot management support is provided by the WMS? Does the WMS or slot management tool provide for dynamic, automated slotting? What are the factors that support justification for use of a dedicated slot management toolset?

Important Takeaways While there are several interesting Benchmarking & Best Practices findings and discussion points on slot management, some of the more important are: Efficiency – Effective slot management holds the key to maintaining efficient picking operations. Further considerations for picking accuracy and related upstream and downstream operations provide for the most effective solution. Approach – Integration of appropriate, relevant information from the outside should serve as the foundation. WMS capabilities and additional tools, whether integrated or manual, should be considered jointly in establishing the best-fit approach. Layout – The layout of the facility (material handling, travel aisles, etc.) also should play a key role in establishing the basis for slotting.

Important Takeaways (continued) Planning - Advance information from the business and from the outside allows for the effective overall space management and for setting the stage for slot management to support efficient picking operations. Big Gains from moderate effort – There are many factors which may the influence slotting approach. Establish the appropriate realistic model to build upon and refine the program over time.

Questions?

Benchmarking & Best Practices References Information related to slot management can be found in the following references: Reports and Analyses Analytical Reports DC Configuration and Basic Operations DC Operations Overview Warehouse Management Systems Technology Executive Seminar Presentations Supply Chain Technology - What is Working, What is Not and Where We are Going Distribution Center Best Practices Note: Available for downloading at www.supplychainconsortium.com