Right Sizing Distribution Center Storage: There's Gold in That There Rack!

Distribution center storage configuration; not a topic that immediately comes to mind when you seek to elevate your distribution operations to best-in-class levels. Productivity, order cycle time, accuracy, cross-dock percentage and today even environmental friendliness (I'm trying to avoid using the “G” word directly for once) usually make the top of the best-in-class characteristics of a distribution operation — and well they should. However, the majority of space in most distribution centers is dedicated to storage. Even when every storage location in a facility is a potential pick slot, those positions serve as storage locations first and pick slots second.

When a facility operates with a forward pick area such as picking from the floor locations only or picking from a segregated pick area or picking from a broken-case pick module, the majority of the space in the facility is dedicated to reserve storage. If there was not a large area allocated to storage, a facility wouldn't need a “forward” pick line in the first place. If there was not any need for storage capacity, well then, the facility would be a cross-dock facility or a freight terminal or a place that only exists in the wildest fantasies of supply chain managers everywhere — a building that turns over 250 times per year!

Well, all those desires for rapid turn of inventory aside, most distribution centers have more than 60 percent of their space dedicated to product storage. When you add in storage associated with forward pick lines and the like, that number can increase to 75 percent. Anything an operation can do to increase storage density is going to reap fiscal advantages. There is gold to be mined with proper storage system configuration, and not just because the price of steel seems to be competing with fuel for the steepest price increases. How can an operation evaluate its storage density opportunity and, more importantly, realize that opportunity without hurting productivity, throughput, order cycle time and accuracy?

The best example to begin with is usually the simplest, and in distribution that means talking about a pallet. The most common rack configuration, single deep selective, is set up to hold full unit loads of product stored on a unit load carrier, which we'll assume is a pallet (all apologies to slip sheets and alternative unit load devices). The sizing of rack openings generally hold a full pallet's worth of product, let's say five feet high, so the storage position openings are about five and one-half feet high to allow for movement of the pallet in and out of the position. Now, there are operations that handle only full-pallet quantities of product in and out, and for those, the above configuration you could consider “right sized,” providing there were not very large pallet quantities of a single SKU on hand. Most distribution operations have some measure of product in less-than-pallet quantities. This is particularly true for distributors with small parts distribution requirements. If the only slots available were full-pallet positions, many slots would be dramatically underutilized, resulting in a lower capacity overall for a facility.

The adjustment in the above simple example is also very straightforward. Adding beams within the existing rack structure to create the appropriate number of partial pallet locations will increase the overall density of the storage system. If 25 percent of the pallets in storage were partials of half height or less, creating half-pallet positions in a quantity suitable for that percentage would increase storage effectiveness by at least 10 percent. In a 400,000-square-foot storage area, that's 40,000 square feet that can used for other business or, if this decision is made in the design phase, could be reduced from a building footprint. The right-sized pallet position approach can include even smaller positions, including converting the racking for the smallest positions into racked shelving through the use of wire decking or similar material. But the greater the number of position sizes pursued, the more articulate the sizing analysis must be to avoid the possible issues with differentiated storage position sizing.

The cautions associated with right-sizing partial-pallet storage are few but very important. If all the partial pallets in stock started life as full pallets of product and were depleted over an extended period of time, then they would need to be put away as two partial pallets to achieve a utilization increase over time. In this case, one of the two half-pallet positions becomes available for other product in half the time it would require the depletion of a full pallet. Also, analysis of the appropriate number of partial-pallet positions needs to review the storage use of the operation over time. You should evaluate the number of partial positions needed over a full year. Working with one single snapshot may cause the installation of too many partial positions, leaving the operation with a shortage of full positions at another time of year when they may be required. The goal is to have the appropriate mix of position sizes to allow the operation to work without worrying about reconfiguring the rack every six months.

Right-sizing locations does not only apply to making pallet positions smaller and indeed does not only apply to product stored in quantity on pallets. Both larger storage positions and much smaller positions are key to providing the best storage density and utilization without negatively impacting productivity, throughput, order cycle time and accuracy. In fact, many of those metrics can actually increase with a storage system properly configured to the needs of the operation it must service.

For large quantities of storage, such as items that have a half-dozen or more pallets in stock consistently, storage equipment configured for larger quantities of a single item will yield density increases over single deep selective racking. Racking options available such as double deep selective rack (about the same price as single deep selective, but requiring a deep reach truck), push back rack and drive-in racking all offer significant density increases for the operation whose storage requirements make deeper rack configurations suitable. The same analysis over time of storage demands that serves to determine if partial-pallet positions are appropriate can determine if and how much deep storage could service the operational storage needs.

For small parts storage, the storage complexion analysis over time can yield better sizing of storage media from the smallest drawer sizes to pick bins to bin shelf sizes and case flow rack depths. Small parts storage is very often also the small parts picking area, and if right-sizing of small parts storage slots yields a reduction in overall pick area, then you have reduced the necessary pick path, and a reduction in pick path yields an increase in productivity. Walking the pick path constitutes 50 percent of the pick labor, so even a small increase in the pick area (and therefore pick path) can yield significant productivity savings. The shorter pick path will also allow for order cycle time to go down and facility throughput to increase. Just as with the other right-sized areas discussed above, you should carefully analyze the small parts storage demands over time, to ensure the location size determination will service the operation without constant reconfiguration.

Right-sizing storage equipment within your facility can bring tremendous value to a distribution or fulfillment operation. Mining this value requires caution that you right-size the storage equipment and not just simply “downsize” it. Making the storage positions too small will force items in far more positions than required. Likewise detrimental is adding too many large positions, such as multiple-pallet drive-in storage, if there is not enough inventory for the items earmarked for that storage. This will result in grossly underutilized storage positions and could actually cause an increase in the storage area required.

Properly executing a storage complexion analysis (or lane depth analysis, as it is also called) within your facility will not only mine value in reduced footprint and the ability to service more business without physical building expansion, but properly developed, a right-sizing exercise will increase productivity in almost all activities interfacing with your storage system. The smaller the footprint, the less travel there is for any activity — from pallet put away to forward pick replenishment to small parts and less-than-case picking. With optimally sized pick and storage location sizes, an operation increases fixed-asset utilization and reduces variable operating costs, moving closer to best in class on both fronts. Finally, with optimally sized pick and storage locations, the next level of cost reduction can be more easily attacked — where those locations should be positioned within an operation or a pick line to further reduce variable operating costs — but that is another story.

Bryan Jensen has 24 years of experience in retail and wholesale distribution, transportation and logistics, and is a vice president and principal with St. Onge Co. in York, PA, assisting clients in “right sizing” their storage systems. St. Onge Co. is a material handling and manufacturing consulting firm specializing in the planning, engineering and implementation of advanced material handling, information and control systems supporting logistics, manufacturing and distribution since 1983 (www.stonge.com). Contact Bryan at 717/840-8181 or by e-mail at [email protected].
© 2008 Bryan Jensen

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