STORAGE AND WAREHOUSING:STORAGE SPACE PLANNING

STORAGE SPACE PLANNING

Space planning is the part of the science of warehousing concerned with making a quantitative assessment of warehouse space requirements. As is true of any science, space planning possesses a very specific methodology. The space planning methodology consists of the following general steps:

1. Determine what is to be accomplished.

2. Determine how to accomplish it.

3. Determine space allowances for each element required to accomplish the activity.

4. Calculate the total space requirements.

The first two steps of the space planning process define the activity and techniques, equipment, information, and so on to be used in performing that activity. Step 3 involves determining the space requirements of each element that goes into performing the activity. In warehousing, these elements might include personnel and personnel services, material handling and material storage equipment, maintenance services, and utilities. Finally, step 4 combines the space requirements of the individual elements to obtain total space requirements.

Storage-space planning is particularly critical because the storage activity accounts for the bulk of the space requirements of a warehouse. Inadequate storage-space planning can easily result in a warehouse that is significantly larger or smaller than required. Too little storage space will result in a world of operational problems, including lost stock, inaccessible material, poor housekeeping, damaged material, safety problems, and low productivity. Too much storage space will breed poor use of space so that it appears that all the available space is really needed. The result will be high space costs in the form of land, construction, equipment, and energy.

To avoid these problems, storage-space planning must be approached from a quantitative view- point, as opposed to a qualitative assessment of requirements. The following sections present the scientific methodology of storage-space planning, which when followed, will generate a quantitative and defensible assessment of storage-space requirements.

4.1. Define the Materials to Be Stored

The first step in storage-space planning is to define what is to be accomplished; that is, to define the materials to be stored. A useful tool in defining the materials to be stored is the storage analysis chart (SAC) given in Table 1. Columns 1–5 of the SAC define what materials are to be stored,

columns 6–8 specify how much is to be stored, and columns 9–12 define how the materials are to be stored. The information requirements for columns 1–5 of the SAC can be obtained by physically surveying the existing storage areas. The survey would proceed by identifying, generically classifying, measuring, and weighing the unit loads presently in the storage areas.

Columns 6 and 7 of the SAC list the maximum and average number of unit loads of each category of material that should be on hand. Column 8 cites the planned inventory level of each type of material for which storage area will be planned. Determining the proper inventory level is directly related to the storage philosophy that will be used for each category of materials. The different storage philosophies and the decision process one should use to determine the proper planned inventory level will be discussed in the next section of this chapter.

The last four columns of the SAC define the physical characteristics of the storage area being planned. These physical characteristics include the method of storage and the space requirements of that method.

4.2. Determine Storage Philosophy

Once the maximum and average inventory levels have been recorded, the inventory level that will be used as a basis for planning required storage space must be determined. The planned inventory level depends on the philosophy followed in assigning material to storage space. There are two major material-storage philosophies: fixed (or assigned) location storage and random (or floating) location storage. In fixed-location storage each individual stock-keeping unit will always be stored in a specific storage location. No other stock-keeping unit may be stored in that location, even though that location may be empty.

With random-location storage, any stock-keeping unit may be assigned to any available storage location. A stock-keeping unit in location A one month might be stored in location B the following month and a different stock-keeping unit stored in location A.

The amount of space planned for a stock-keeping unit is directly related to the method of assigning space. If fixed-location storage is used, a given stock-keeping unit must be assigned sufficient space to store the maximum amount of the stock-keeping unit that will ever be on hand at any one time. For random-location storage, the quantity of items on hand at any time will be the average amount of each stock-keeping unit. In other words, when the inventory level of one item is above average, another item will likely have an inventory level that is below average; the sum of the two will be close to the average.

Oftentimes, the storage philosophy chosen for a specific stock-keeping unit will not be strictly fixed-location storage or random-location storage. Instead, it will be a combination of the two. A grocery store is an excellent example of combination, or hybrid, location storage. Fixed-location storage is used in the front room of a grocery store where the consumers shop. Pickles are assigned a fixed location, and only pickles will be stored in that location. Pickles will not be found in any other location in the front room of the grocery store. In the back room, or storeroom, of the grocery store, however, the excess, or overstock, merchandise is usually stored randomly. Pickles may be found in one location one week and in a different location the next week. Because combination- location storage is based on a mixture of fixed-location storage and random-location storage, its planned inventory level falls between the fixed-location quantity and random-location quantity. At what point between the fixed-location and random-location quantity the planned inventory level falls is dependent on the percentage of inventory to be assigned fixed locations.

To summarize, the planned inventory level recorded in column 8 of the storage analysis chart in Table 1 should be equal to the maximum inventory level (column 6) for fixed-location storage, the average inventory level (column 7) for random-location storage, or a value between the maximum and average quantities for combination-location storage.

Little has been said at this point about the advantages of one storage philosophy over another. Should the storage philosophy be fixed-, random-, or combination-location storage? Unfortunately, an unequivocal answer to this question does not exist. Choosing one storage philosophy over another means making a number of trade-offs, which must be evaluated. Table 2 presents a qualitative com- parison of fixed-, random-, and combination-location storage for three extremely important criteria: use of space, accessibility to material, and material handling.

Use of space in a fixed-location system is poor because space for the maximum amount of inventory that will ever be on hand has been allocated although actual on-hand inventory will nor- mally approach the average inventory level. Therefore, a great deal of empty space is common in fixed-location storage. Random-location storage is extremely space efficient because the space re- quirements are only about 15% above the average amount of inventory expected on hand. Use of space for combination-location storage is better than it is for fixed location storage and worse than it is for random-location storage because the space requirements are based on a planned inventory level somewhere between the fixed-location and random-location quantities.

Material in fixed-location storage has excellent accessibility because a given storage location contains only one stock-keeping unit. The location of every item is fixed: it is known. Blocked stock is avoided and every stock-keeping unit is readily accessible. Accessibility to material in random- location storage is good as a long as a good material-locator system exists. The material-locator system keeps track of the present location of every item in storage. Once a specific stock-keeping unit is committed to a storage location, no other stock-keeping unit can be placed in that location until the original stock-keeping unit is completely removed. However, if a material-locator system does not exist, or is poorly designed and maintained, then accessibility to material in a random- location storage system will be extremely poor. Blocked stock, lost material, and obsolete material will inevitably result. Even with a good material-locator system, accessibility to material will never be as good in random-location storage as in fixed-location storage. Accessibility to material in com- bination storage is good if a good material-locator system exists for the randomly-stored portion of storage, or if the percentage of inventory stored randomly is small.

Fixed-location storage and random-location storage score equally well on the material-handling criterion. In each philosophy, material is received, placed into storage, retrieved from storage, and shipped to a user. The flow of material is straightforward and economical. Material is received, placed in the random-location storage area, retrieved, placed into the fixed-location storage area, retrieved, and shipped to a user. Consequently, combination-location storage involves several extra handling steps not required by either fixed-location storage or random-location storage.

In summary, fixed-location storage trades efficiency in use of space for easy accessibility to material; random-location storage trades accessibility to material for efficiency in use of space; and combination-location storage trades material-handling efficiency for middle-of-the-road efficiency in use of space and accessibility to material. However, a clear-cut decision still cannot be made on the best storage philosophy. Perhaps the only general conclusion that can be drawn is that poor use of space by fixed-location storage is a big factor. Compared to the use of space by random-location storage for the same materials, fixed-location storage will generally require 65–85% more space. With the escalating costs of money, land, and construction, few firms can afford to build a fixed- location storage warehouse, which would be 75% larger than that required for random-location storage. The expense of developing and maintaining an effective material-locator system for random- location storage—when compared with these costs—is easily justified. Consequently, one should always carefully evaluate random-location storage before deciding to use fixed-location storage. Rarely will the gains in accessibility to material made by fixed-location storage be enough to offset its high space costs. Occasionally, however, efficient use of space is not a critical factor, so fixed- location storage is preferred. For example, when the items to be stored are extremely small and / or extremely valuable, accessibility to them and accountability for them may be all-important. Few jewelers care about the use of space when they are storing diamond rings.

4.3. Determine Alternative Storage Method Space Requirements

The space requirements of a storage alternative are directly related to the volume of material to be stored and the use-of-space characteristics of the alternative. The two most important use-of-space characteristics are aisle allowances and honeycombing allowances. Aisle allowance is the percentage of space occupied by aisles within a storage area. Aisles are necessary within a storage area to allow accessibility to the material being stored. The amount of aisle allowance depends on the storage method, which dictates the number of aisles required, and on the material-handling method, which dictates the size of the aisles. Expected aisle allowance must be calculated for each storage alternative under consideration.

Honeycombing allowances are the percentage of storage space lost because of ineffective use of the capacity of a storage area. Honeycombing is illustrated in Figure 1. Honeycombing occurs when- ever a storage location is only partially filled with material. The unoccupied area within the storage

location is honeycombed space. Honeycombing may occur horizontally and vertically. For example, Figure 1(a) presents a plan view of a bulk storage area in which material can be placed four units deep. Because the bulk storage area is full, no honeycombing occurs. In Figure 1(b), however, two units of product A and one unit of product B have been removed, leaving three empty slots. No other items can be placed in these slots until the remaining units of A and B have been removed (otherwise, blocked stock will result); so these slots are horizontal honeycombing losses. Figure 1(c) is an elevation view of a bulk storage area in which material can be stacked three units high. Here again, the storage area is full and no honeycombing occurs. In Figure 1(d), however, two units of product A and one unit of product B have been removed, leaving three empty slots. To avoid blocked stock or poor stock rotation, no other units can be placed in these slots until the remaining units of A and B have been removed. Consequently, the empty slots are vertical honeycombing losses. Horizontal and vertical honeycombing losses will occur. Efforts to totally eliminate honeycombing may improve space utilization but will assuredly result in increased material-handling costs related to double han- dling loads, material damage, and lost productivity. Honeycombing, while it should be minimized, must be considered a natural and allowed-for phenomenon of the storage process. For each storage alternative under consideration, the expected honeycombing allowance must be estimated.

Once the aisle and honeycombing allowances for a storage method alternative have been deter- mined, a space standard can be calculated for that storage method. A space standard is a benchmark Item A requires special environmental control. A special storage area must be established to house the maximum quantity of item A, which is to be stored on pallets, four pallets high. In a bulk storage analysis chart, how much space should be allocated for the storage of item A?

that defines the amount of space required per unit of product stored. Given the space standard and the total inventory of a class of items to be stored, the total space required for that class of items may then be calculated. Figure 2 presents an example illustrating the calculation and use of space standards.