Optimisation of stock keeping unit placement in a retail distribution centre

Abstract

The retail problem of slotting refers to the assignment of stock keeping units (SKUs) to the available storage locations in a distribution centre (DC). Generally, the expected total distance travelled by stock pickers during an order consolidation and the resulting level of congestion experienced within aisle racking are common considerations when making these assignments. These criteria give rise to a bi-objective optimisation model with the aim of identifying multiple stock setups that achieve acceptable trade-offs between minimising the criteria on expectation. A mathematical framework is established in this paper, based on these two criteria, for evaluating the effectiveness of a given stock setup. In the framework, a stock picker’s movement between various storage locations is modelled as a Markov chain in order to quantify his or her expected travel distance, while a closed queuing network model is used to devise a suitable measure of congestion. This optimisation model framework forms the basis of a flexible decision support system (DSS) for the purpose of discovering high-quality stock assignment trade-off solutions for inventory managers. The DSS is applied to a special case study involving data from a real DC, and the desirability of the recommended stock configurations is compared with that currently implemented within the DC.