What Percent of Your Items Drive 80% of the Work?
Cases shipped. That’s the number that drives everything in a warehouse. Most of our metrics involve cases. Not SKU count, not sales dollars. Cases. Cases per hour, cases per pallet, cases per replenishment, cases shipped, cases received, cases per error. Nearly everything we do in a warehouse is done to move cases more efficiently, or to improve a metric that cases directly affect. When it comes to determining where to focus your slotting efforts, cases shipped is THE number to focus your efforts on.
When searching for slotting optimization on the internet, a common result found is the velocity based ABC method. Let me give you my explanation of this strategy. It divides your items into three categories:
- A – Fast movers – Top 20% of items
- B – Medium movers – Middle 60% of items
- C – Slow movers – Bottom 20% of items
This basic setup is good, and should be used for a solid foundation to your slotting program.
The Pareto principle states that 80% of “X” comes from 20% of “Y”. It was first noticed in Italy in 1896 by Vilfredo Pareto when he made the correlation that 80% of the land was owned by 20% of the population. It has since been applied more broadly to mean that you get 80% of your results from 20% of your efforts. In our specific environment, it means that 80% of your sales (or movement) is from 20% of your items (or cases).
Many ABC discussions online measure these percentages by sales dollars. This is where we differ. Cases shipped gives you a cleaner picture of actual warehouse activity.
Start With the Data
Ten percent of my items were responsible for over 80% of my cases shipped. Here’s exactly how I got there.
I pulled my warehouse data for the week and sorted every slotted item by 8-week average cases shipped. Then I built a simple running total formula in Excel and ran it down the spreadsheet until I hit 80% of my total weekly cases. Here’s what the numbers looked like:
- Total items slotted: 13,946
- Total cases shipped for the week: 208,615
- 80% of cases shipped: 166,892
- Items needed to reach that number: 1,394 (just 10% of my total inventory)
Those 1,394 items shipped 171,728 cases. That’s more than 80% of everything that moved through my warehouse that week, coming from 10% of what I had slotted.
That’s the Pareto principle in action, and it tells you exactly where to focus.
Let Your Reports Do the Work
The math gets you there one way. Reports get you there another way. Most warehouses already have reports built for this. You probably have reports that show you the “Top 10 fastest moving items”, or “Items with the most letdowns (replenishments)”, some sort of Top 10 list. If you don’t have one in the warehouse, ask the sales department, they probably have one. These reports should be generated weekly. I found the best reports to look at were the “Top 10 by replenishment” and a report called “Most Home Slot Transfers by Item.” This specific report showed me the items that were typically in smaller slots that were filled by stacking cases in the pick slot and then moving the rest of the pallet back up into a reserve location. This report solved multiple issues when working through it. The first issue was obviously, if these items were getting filled so frequently, they should be in a bigger location. By moving these items into a bigger location, you would reduce the amount of times the slot had to be filled, thus reducing the number of forklift transactions involved with that item. Other possible benefits of moving this item could be fewer pallets when receiving (new ti-hi to fit new slot), reduced chance of damage to item (moving pallet from reserve frequently increases the chance of damage), and improving inventory accuracy (the employee could record the wrong amount of cases back to reserve in the system).
This report could also reveal bad employee practices. There may be an item that is being filled 13 times a week, and when you go to review that item, you see that the pick slot should hold 12 cases, but every time they fill the slot, they are only moving three cases into the pick slot and moving the rest back to reserve. This could have several causes. Maybe the boxes are bigger than expected and the slot doesn’t hold what you think it should; or maybe a setting in the system for that slot needs to be adjusted. Perhaps the system only lets them put in three cases. Possibly the forklift is only putting three cases there each time, not completely filling the location. Being slotted incorrectly creates more forklift transactions, meaning more work, and also an opportunity for the customer to not get what they ordered. Not filling the slot could create shorts for the selectors, increasing errors and putting customer orders at risk.
However you get there — whether the Pareto math, your replenishment reports, or both — the goal is the same. Determine where to focus your efforts, and which items are driving your work. Once you have that list, every slotting decision you make gets easier, faster, more defensible, and more impactful.
Identifying your focus items is only half the equation. The other half is knowing what to do with that information. That’s exactly what we’re covering in the next post. We’ll look at what a slotting coordinator actually does with this data, and what that work is worth to a warehouse operation in real dollars. Make sure you’re signed up to be notified when it goes live.