Warehouse Slotting: Why It’s One of the Best Ways to Optimize Inventory Space

There’s always an opportunity to better organize your warehouse for faster, more accurate picking. As your ecommerce business grows and your product lines expand, you’ll likely focus on putting your inventory in empty spaces without considering where to optimally store it.

While this works just fine in the short term, there are ways to improve your warehousing operations and reduce inventory carrying costs by taking advantage of warehouse slotting. Regardless of the size of your warehouse, every warehouse can benefit from proper slotting.

Many established and growing ecommerce businesses use slotting to improve picking performance, optimize warehouse space, and reduce overall costs related to inventory management and warehousing. 

In this guide, you’ll learn what slotting is, how to implement it, and why it’s beneficial for your business.

What is warehouse slotting?

Warehouse slotting is the process of organizing a warehouse to maximize space and make picking more efficient. Efficient slotting can also improve inventory management processes and reduce overall warehousing costs. Slotting is often organized by SKU number, product type, or any other type of product characteristic. 

3 benefits to slotting your inventory

Reorganizing zones, or even an entire warehouse, can seem like a daunting and time-consuming project. You have to determine how to store inventory in an optimal way, move large amounts of inventory to different locations, and make sure its done correctly so it doesn’t cause any issues during the picking process. 

While slotting can be a major project that takes time and continuous improvement, it ultimately can benefit your business and positively impact your bottom line. Here are a few ways that slotting inventory helps make warehouse management more efficient.

1. Faster picking and less picking errors

Proper slotting can improve picking accuracy by eliminating any possible confusion for the picker. By storing products that make the most sense for the picker (such as by type, size, weight, etc.), it allows for faster picking by taking the guesswork out of where certain items are located. That way, pickers can focus on speed rather than taking too much time locating the right item.

2. More storage capacity

Slotting can help identify opportunities to increase storage capacity. If you think your warehouse is full, rethinking how inventory is currently stored is a great way to gain back much-needed inventory space. Taking the time to optimize your warehouse means you can delay expanding and/or spending extra costs on an additional warehouse.

3. Reduce carrying costs

By optimizing warehouse space and improving processes, you can keep your overall carrying costs down rather than hiring more help or renting out more warehouse space. You can easily calculate your current carrying costs using the formula below: 

Storage Costs + Employee Salaries + Opportunity Costs + Depreciation Costs) / Total Value of Annual Inventory = Inventory Carrying Cost

3 options for slotting inventory and improving efficiency

There are several ways to go about organizing and optimizing your warehouse. Before you begin, you need to do a thorough audit of your warehouse to see where the opportunities for improvement are: 

  • Is there unused warehouse space?
  • Are there too many products stacked too closely together?
  • Which items are usually ordered together?

Be sure to take the time to plan before moving items around to avoid misplacing important inventory or causing any confusion that may cause picking delays. 

1. Reorganize your inventory

Depending on the size of your warehouse, reorganizing inventory to make room for more can take some time, but it can save money and headache in the long run. Going through and reorganizing all the inventory can lead to major benefits including more storage space, more productive picking, and lower carrying costs.

2. Convince your warehouse to slot

Chances are your warehouse uses some form of slotting already. But that process might only be used by an individual picker instead of all the pickers. In order to get the most out of slotting, meet with your warehouse team to understand how they’re currently storing inventory and to see if they’ve noticed opportunities for improvement. This can be difficult if you work with an on-demand warehousing company that just finds open warehouse space for rent. 

3. Work with a 3PL like ShipBob

ShipBob’s ecommerce warehouses are powered by warehouse management technology that’s tailored to ShipBob’s proven picking and packing processes. 3PLs like ShipBob take care of it all, from storing inventory properly to picking an order accurately, and then shipping orders in the fastest, most affordable way.

Slotting your inventory: simple best practices

Slotting is essential to proper warehouse management, but it can be a challenge to get started. Here are some of the most common best practices to keep in mind. 

Identify demand correlation

Demand correlation is a term used to describe items that are often ordered at the same time. You can identify products that are commonly ordered together by looking into past order history.  From there, you can re-organize products so items that are usually bought together are closer to one another, which can reduce picking time significantly. 

Get feedback from pickers

Pickers understand your current warehouse layout better than anyone because they’re always moving around the warehouse. The pickers on the floor may have suggestions in mind on how to rearrange for better efficiency. Collaborate with pickers to identify opportunities to better organize inventory that eliminates headaches and confusion during the picking process. 

Organize SKUs by item level and storage type

Items picked by a full pallet will need a forklift whereas single pieces won’t. Organize SKUs by the level an item will be picked from (single item, case, full pallet) and the storage type (rack, shelf, carton), and store essential equipment (forklift, pallet jack, cart) close by. By organizing SKUs this way, you’re able to eliminate any bottlenecks during the picking process, such as a forklift getting in the way of a single pick.

Invest in a warehouse management system

A warehouse management system (WMS) can make the slotting process easier and comes with other features that help optimize your warehouse. By implementing technology into your warehouse, pickers can use wearable devices or handhelds to easily locate where a SKU is stored, instead of depending on a list of SKU numbers on a spreadsheet. 

Investing in a WMS makes the slotting optimization process easier by taking out the guesswork and using technology to get the job done faster and more accurately. 

Store your inventory in a 3PL fulfillment center

Slotting can be a challenge if you don’t have the right people and technology to get the job done right. Many ecommerce brands leave warehouse management up to a tech-enabled third-party logistics company (3PL) that takes the stress out of of storing and organizing inventory, as well as fulfilling orders faster and more affordably. 

“We never wanted to be a logistics company, so we found a really good partner in ShipBob to offer the fulfillment services, technology, and other tools needed to stay competitive. With everything that ShipBob does for us, we can focus on the brand itself, develop content, evolve our existing products, and expand our product lines.”

Matt Dryfhout, Founder & CEO of BAKblade

Here are some more benefits of working with 3PL like ShipBob. 

Inventory management

A tech-enabled 3PL offers all the fulfillment data and distribution metrics you need to manage your ecommerce inventory without having to store products at your own warehouse. In real time, you can keep track of inventory levels and set automatic reorder point notifications to make sure you never run out of inventory. ShipBob offers an order fulfillment solution with inventory management tools built in 

Distributed inventory

ShipBob offers coast-to-coast warehouses and continues to expand by opening fulfillment centers in new locations. With multiple fulfillment center locations powered by ShipBob’s proprietary technology, you can split inventory across fulfillment centers. From there, orders are sent to the the fulfillment center closest to the shipping destination to be picked quickly. 

Order management

With real-time visibility into the entire order process from the ShipBob dashboard, you can keep customers up-to-date and also easily access order information and fulfillment performance. With order management software, you’re able to manage subscriptions, make changes to customer orders, automatically share tracking information with your customers, and more. 

Conclusion

Warehouse slotting is a great opportunity to improve your warehousing operations to be more efficient and ultimately save on logistics costs. While it may take some time to determine optimal layouts and inventory storage, it can result in big benefits for your ecommerce business. 

If you’re currently self-fulfilling orders and managing inventory in your own warehouse, it may be time to switch to a 3PL. ShipBob offers a robust fulfillment network powered by best-in-class fulfillment technology. To learn more about how ShipBob can help your brand grow, click below to request pricing.