Our Improved Inventory Zone System

A little over a year ago I wrote a post entitled New Warehouse Layout, Inventory Zones, & Efficiency where I explained our new “inventory zone” system.  Prior to implementing that system, packing slips would just print out items in alphabetical order, potentially sending one of us all over the warehouse to pull the products for an order.  We smartened up and assigned a “zone” to each shelving unit, which was then entered into our database to correspond with the products in the “zone” so that the packing slips printed products in “snaking zone order” like so:

Pure Adapt Inventory Zones

This helped pulling speed immensely, but it didn’t solve all of our problems.  Our packing slips didn’t actually say which zone the product was in so it was still hard sometimes to find a product in a brand that encompassed five shelving units.  The idea of snaking the puller through the warehouse, while making sense in theory, didn’t play out on the average order and just served to confuse people by ordering products in reverse order for half of the rows.  And most importantly, as us owners removed ourselves almost entirely from the pulling process, errors climbed above our acceptable level.

So we decided to start over.  Today we unveiled our new system, one that should be a marked improvement.  Throughout the entire process everyone was involved, particularly our employees who actually do the pulling.  I made sure to run everything by the guys in the warehouse at each step of the way to make sure it passed the common sense check.

Anyway, here’s what we did.  We now have a “three-dimensional zone” where every product is categorized by it’s row, shelving unit, and shelf.  This is the image that’s in our Admin system for whomever might be working in the warehouse and entering new product locations in the future:

Pure Adapt Inventory Zones

The packing slip now shows the zone in the first column.  We also bolded any quantity of two or more, which has been a common mistake for us to make.

New DI Invoice

We all pulled some orders today to test it out.  My initial thoughts were that it sped up my pulling time quite a bit.  I was able to see which row to start at and just go right to it, rather than thinking “I’m pulling a Meguiar’s product, which row is that in again?”  If there’s anything we might change, I could see us getting rid of the letters from the zones (so R1-U-7-S3 would just be 1-7-3).  We’ll play that by ear and solicit feedback from everyone who tries it out and then go from there.  Like with anything new, it’s good to give it some time and see how it plays out over the course of a few weeks before tweaking it too much.

After I completed work on the packing slips, I tried to estimate how much time was spent on this project, from conception to reality.  I came up with about 10 hours total.  There was probably an hour of discussion. I probably spent 2 hours programming it. Charlie probably spent 7 hours total logging all of the products into our new system and then marking all of the rows/units/shelves with large magnets. Not bad at all.

The other nice thing about this is that while it will almost certainly speed up pulling and reduce errors, it will also make training a new employee much easier.  You can literally give a new person one of our packing slips and it will tell them what box size to use and the exact location of each and every product.  While they’ll probably be slow at first, they’ll also probably be pretty accurate right from the start, which is what’s most important to us (I mean, if I told you the exact product name and the exact shelf it was on, it would be hard for you to pick up the wrong one, even if you knew nothing about our products).

All in all, this should be a big gain for us, especially considering the minimal time spent.  I think it’s also significant in that it’s the last major warehouse procedure change that I see us making in the near future.  We’ve built the processes that we’re going to be scaling with, and there’s still plenty of scaling left before those processes will need to be revisited.  Aside from minor tweaks, we can turn almost all of our focus to the stuff that makes us money on the front end.

11 comments on Our Improved Inventory Zone System

  1. Tim says:

    That’s pretty cool! It seems simple and obvious now that it’s developed and easy enough to implement too. I’m sure there is a small learning curve, but once you overcome that it probably makes the process of filling orders much better.

    My old business was a 8,900 square foot building and we had no form of organization like this, with deliveries coming in a few times/hour and inventory constantly being sold it was a disaster. Thankfully I have a very good memory and never took time off so I did a lot of yelling and pointing. Looking back I can’t believe it actually worked! I knew where everything was at all times and by some miracle kept it all straight, though when we sold we were right on the cusp of me burning out and it being too much to keep up with. Point being, I know how difficult it would have been to come up with a system like this for us, well done!

    • Adam McFarland says:

      Thanks Tim. Although our place is about half the size, we’re much much smaller than you were. We have far less employees and have much less daily inventory being delivered so it’s a lot easier for us to put a system like this in place. Hopefully it serves us well for a long time.

  2. Tim says:

    Definitely the wise move to implement a system like this before you are beyond the point of no return. Looks like it can grow with you too, adding Rows and Units seems like it wouldn’t be that big of a deal when the time comes.

    When we did sell the new owners planned on opening within a week, that week turned into 3+ months and I suspect a large part of that was cataloging and organizing the inventory. Keep in mind the business was started in 1993 and the original cataloging was a 3 ring binder with graph paper, kind of funny to think about looking back!

  3. Rob says:

    I think the XYZ system is a good one, well done on the new system!

    What happens when a company brings out a new product or you take other items on? What if it’s obvious that that item should go somewhere in the middle of your current system? How would you handle this? How do other companies handle this?

    I’ve a little warehouse experience, my only job ever being a few shifts at a local Argos, working in the warehouse. Argos is a catalogue store (that also sells though the web) with lots of branches and they rely entirely on fast, precise pulling. 10s of thousands of items in each warehouse location, the one I worked in was an odd shape, totalling about 2500 square feet. Here’s how it worked:

    The customer orders an item using the part code (in the format 123-4567 where 123 is the type of product, so for instance gardening goods would be a range, and within that rakes would be a certain code). This is a code generated by Argos and used as their SKU. The cashier confirms the name of the item and the customer pays. The customer is sent to wait at a specific bay, so for in-store orders you’ve got about 30 secs to pull the order and put it on the conveyor. Orders typically consisted of a single item and they did not need to be packaged once picked. (for internet orders I presume someone else did this).

    In the warehouse, a printer spits out a 3×4″ ticket with the time, item number, truncated item name, quantity, collection bay, and a 3-2-1 number (explained below).

    The shelving units are arranged in rows about 15-20 feet long, back to back in whatever unusual shaped space is available above/at the back of the store (they’re usually city centre locations). On the end of the row it says the start SKU and the end SKU contained within that row. I don’t seem to remember identification of how far down the row, or what shelf the item is on being listed on the picking ticket, but once within a row, they were organised in order and were quite easy to find, but not as precise as your method. Because the SKU is the primary way of identifying an item they all have stickers on the boxes (which of course added extra work). The 3-2-1 number however, was a really good idea. I think Argos promised to give you an item for free if they said it was in stock but it wasn’t. Because of this, they needed very good stock control. Every picking receipt had the quantity that should be remaining on the shelf listed on it. If the quantity was 3, 2 or 1 it was in bold and you were required to notify a manager if the quantity listed on the ticket did not match the quantity on the shelf if it was 3, 2 or 1. There were big signs up everywhere “remember your 3-2-1s” etc.

    After an order was picked, the ticket would be taped to it with coloured tape corresponding to the collection bay and it would be sent down the conveyor to customer facing colleagues.

    Occasionally they’d do an all-night shift and do an entire stock check, but just keeping track of the stock when it got low like this made it very unlikely that an item would be listed as in stock when it wasn’t.

    Like you we occasionally had issues where a customer would order multiples but as we were so used to pulling singles we’d miss it. Luckily as the customers were just downstairs they could complain and get it sorted immediately. I don’t know a good solution to this really, other than perhaps listing them in a separate section, or rather than having (eg.) 2x chemical guys wax XYZ, having the item listed twice as 1x and 1x. Could get long if a customer orders hundreds..

    Do you still do the thing where you pull all orders in one go to a central area, and then re-pull each individual order from that pool as required? That seemed like it could save a lot of repeat paths.

    • Adam McFarland says:

      Rob –

      Very interesting insight into how things were done at Argos – I just Googled them and played around on their site a bit to learn more about them.

      We space our shelves pretty well, so for the most part we don’t have any issues integrating new products. We have a pretty good idea in advance what we’ll be getting and where we’ll be putting it. It’s fairly simple for the guys in the warehouse to change the zone if need be. Occasionally we’ll have to move a whole unit to accommodate an expansion. The physical labor is more time than changing it in the system.

      At some point though, we are planning on ramping up expansion and probably re-designing the floor space, which will require every item to be entered in again…but that’s probably 1-2 years away so it’s not really a factor now.

      We actually don’t pull orders to a central area. The only time we did it was for Amazon when we’d sell say qty of 1 x 15 orders of the same product. For DI, we’ve never seriously considered it. The physical steps saved probably wouldn’t come close to offsetting the additional step of sorting the products in a sorting area. It’s something to consider though as we grow. I know most larger warehouses do it this way.

  4. Rob says:

    I think the thing to realise is that you’re probably a lot, lot more optimised than the vast majority of companies your size. Obviously with so few staff and such high inventory turnover it makes sense to optimise as much as it is efficient to do so, and it sounds like you’ve done a good job on that.

    Another thought – how did you actually decide what items went where? Were items that are heavier, or ordered more frequently grouped together near the packing area, for instance, or is it based on supplier (for ease of unloading and setting the shelves) or something else?

    • Adam McFarland says:

      Another good question 🙂

      The location of the brands on the shelves were basically determined by the order we’ve picked something up. So if we add a new brand of products, we put in a new row of shelves behind the last row. We do have several rows behind the last unit for buffers, buffer pads, towels, buckets, hoses, and other things that don’t fit well on shelves.

      Within the brands though, we’ve got it optimized pretty well. All of the most popular products are on the middle 3 shelves, which are the easiest to pull from. The bottom shelf is reserved for larger sizes like gallons. The top is for products that don’t sell often. We went through one day with a sales report and re-organized accordingly. We also try to keep products with similar names or similar labels apart from each other to prevent confusion, both when loading the shelves and pulling.

  5. Rob says:

    That’s such a good idea about the similar names, I hadn’t even considered that!

    Another thing I thought of that they did at Argos that was smart was that they had products that were often bought together placed together. Eg. blank CDs and CD cases, torches and batteries, DVD players and cables.

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