Common Problems with Slotting Optimization Systems

Warehouse Slotting

• Despite management systems being widely adopted, fulfillment executives – regardless of the industry or organization size – are challenged by a lot of the same problems.

• Most of these common challenges sit outside of the purview of the typical management system, extending into more tactical and strategic territories.

• Operators are typically left to fend for themselves when it comes to matters of capacity constraints, facility expansion, layout optimization, and labor efficiency improvement.

• Slotting optimization systems have emerged as a popular tool that logistics executives and operators rely on to increase operational efficiency.

• The implementation of a slotting optimization system, like any other system, comes with certain risks and challenges.

• Many risks can be mitigated and challenges overcome by choosing the right tool, partner, and ensuring that goals and expectations are aligned internally prior to implementation.

• Slotting optimization is critical to any efficient distribution operation, but it’s only a piece of the larger puzzle.

• See how we achieved top-tier fulfillment for an 18,000 SKU greenfield facility, and improved network efficiency by 7% in just 4 months.

Common Problems with Slotting Optimization Systems

Having seen hundreds of fulfillment operations and having worked with both retailers and wholesalers across North America – from mid-size operations to fortune 500 companies – one constant we have seen is logistics executives are challenged by many of the same problems. However, some are on a different scale than others.

Most of these operations rely on warehouse management, labor management, and transport management systems to run the day-to-day operations, and most operators are skilled, experienced, and often strive towards continuous improvement. 

However, the issues commonly faced by these executives extend beyond the day-to-day management of the operation and into the strategic territory. Challenges surrounding capacity constraints, facility expansion, layout optimization, and labor productivity are simply not dealt with by management systems such as WMS and LMS.  Operators are left to fend for themselves.

What are their options?

Warehouse slotting optimization systems are one of the emerging tools that logistics executives and operators rely on to increase operational efficiency – as a sort of add-on to their existing system stack.  These systems can be very effective for organizing a warehouse, and they help increase productivity in virtually every direct labor function.  Besides, these systems can help create better working conditions through improved ergonomics, reduced aisle and dock congestion, and better overall capacity utilization.

Related:  What is slotting optimization?

However, like any system implementation, a warehouse slotting optimization project can come with its own set of risks, especially when expectations are not clear or understood before-hand.  This could be expectations relating to the system’s performance, the solution provider, or even the internal project team or intended users.

We have collated a transparent list of challenges commonly associated with slotting optimization systems so you can avoid them when implementing this system.  

• Incorrect or undefined project scope

Before implementing a slotting optimization system, it is crucial to define the project’s scope and the intended result.  For slotting optimization projects, it usually comes down to the need for immediate improvement, gradual improvement over time (maintained year-round), or both.  Understand where your improvement opportunities may be.  For instance, if you are planning a mass re-slot, are you slotting back into your racks or exploring the benefits of adding new racking configurations?  With gradual improvement, what areas are you looking to improve, and what areas are you prepared to challenge their design?

• System flexibility

While the operational challenges that executives and operators experience tend to be similar, regardless of the operation, no two operations are the same.  If your warehouse slotting optimization system is not flexible enough to adapt to your specific operation’s intricacies, it will affect overall performance.   For example, if your operation requires multi-variate slotting, a system made for small, single item moves will not suffice.

• Network-wide standardization

For those that oversee a distribution network with multiple facilities, it is critical to have connected tools that allow you to locate opportunities throughout your network, as well as develop and standardize each site’s best practices.  If you cannot easily connect and standardize, opportunities will remain hidden, and overall, performance will suffer.

• Cumbersome user processes

Manual slotting – when done right – is a complex task.  If your users need to access data from multiple systems, cross-reference it, perform the proper calculations and then, on top of it all, make decisions for thousands of items. In that case, the correct process is often discarded and replaced with assumptions.  In a distribution center, as in life, assumptions will rarely yield the results you want. 

Part of a slotting optimization system’s job is to perform many of complex tasks in the background automatically such as recommend new pallet configurations and associated labor required (and many more) based on actual data.  An effective system should allow users to automate as much or as little as possible and focus on the actions needed to manage exceptions as they arise, with no assumptions or manual data input.

• Using assumptions / manual data entry

If you have a WMS and an LMS, you likely already have all the data you need to remove most assumptions regarding the day-to-day operation, if any are needed.  Unfortunately, we have encountered many examples of hard work and very clever planning being derailed during the execution phase because of a single data point that was assumed (e.g., percentage of pallets broken down during receiving).  Even the most experienced and thorough operators make mistakes and misjudgments.  If the data is there somewhere, your tools should be maximizing its value.

• Inconsistent use or lack of integration to daily activities

The fact is, if a tool is not used consistently and/or correctly, it will not work.  This is a universal fact for any system or technology.  If the tool is not integrated correctly into the day-to-day responsibilities of its user(s), it can easily fall by the wayside, regardless of how effective it is and will most likely become shelfware.  

• Misaligned expectations

For those in tune with common continuous improvement methodologies, you will know the Kaizen maxim: every day, everywhere, by everyone. This means that continuous improvement is not something that is performed only occasionally or only by a few people in the organization.

When you perform a mass re-slot, for example, savings projections can be substantial but, they are also often annualized.  The unspoken assumption hidden in those projections is that everything will remain constant throughout the year. In the real world, this rarely happens. New items are coming in daily, items are being discontinued, seasonal items, customer demand change, sales growth, and many other things standing in the way of a static operation.

The only way to ensure you achieve the savings you expect is to continuously apply the logic for which the operation was designed for every day.  In any operation, you can only guarantee the savings of the next week, and then the next one, and so on until you have achieved your expected level of savings at year-end.

• Partners vs. vendors

This one ties into the previous point.  When looking into solutions, you don’t just need someone to optimize your warehouse slotting once, just as you don’t want a tool you will buy, pay for in full, then have your team be on their own for the rest of the year.  Technology has made it possible to transform software vendors into partners, which ensures you and your team are not only supported consistently, but that both sides are held accountable for results.  You will find this partnership dynamic reflected in pricing schemes, in which you can pay-as-you-go (or pay as you improve) as opposed to paying up front and accepting all the risk.

• Outdated technology

We all know how quickly technology continues to advance – exponentially in many cases. When implementing a system of any kind, it is essential to leverage new technology to your advantage.  You don’t always need to be a trailblazer, but you do need to make sure you’re not buying a system that’s about to become obsolete.   Most companies are choosing cloud-based technology, not just to lessen IT resource requirements but because cloud-systems offer a level of flexibility that on-premises systems cannot. Cloud technology also allows service providers to offer solutions that are always up-to-date and work more as partners than vendors.

•  You’re only solving for a piece of the puzzle

The slotting of items in the warehouse, when done right, can provide major productivity improvements as it impacts virtually every direct labor function. While slotting optimization systems make great tools, they are only a piece of the puzzle when optimizing fulfillment operations.

The right solution should always depend on your operation, goals, and scope.  If you are looking for a tool that extends beyond slotting, and into evaluating your facility design, layout, and material handling configurations, you will most likely get better value from an end-to-end fulfillment optimization system.

Read more: What is a fulfillment optimization system?