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Storage Location assignment problem based on product information

Most of the times, only product information is known about the items to be stored, and items are
instances of products. Products may be classified into product classes. The assignment problem now
assigns an individual item to a product class based on its product characteristics, and assigns a product
class to storage locations. The location of an item in its class is most often done using some simple rule.
Such as nearest location, or randomly. If the number of classes is equal to the number of products, then
this policy is called dedicated storage. If the number of classes is equal to one, this policy is denoted as
random storage. In real-life warehousing operations, a small number of classes ranging from 3 to 5 are
used. This policy is called class-based storage (Gu2005).

1- Dedicated storage location policy

In this method each product is stored at a fixed location, which is called dedicated

In this method each product is stored at a fixed location, which is called dedicated storage (Koster et
al. 2007). The dedicated storage location policy is shown Fig. 18.1.

Dedicated storage is used when an SKU is assigned to a specific storage location or a set of locations.
The term fixed slot is used describe the dedicated storage.

Two methods of dedicated storage are commonly used:

- Store items in parts number sequence

- Dedicate a location for an SKU based on its activity and inventory level.

The latter method is preferred when there are significant differences in either the activity level or
the inventory level for SKUs. Dedicated storage has low space utilization, but the warehouse is
easier to manage since it has a permanent assignment of products to locations.

The class-based storage policy and the dedicated storage policy attempt to reduce the mean travel
times for by storing products with high demand at locations that are easily access (Van den Berg et
al. 1999). This method requires more storage space than class-based storage since sufficient storage
locations have to be reserved for the maximum inventory of each product, and therefore increases
warehouse space cost and material handling cost. On the other hand, dedicated storage has the
advantage that the controlling of the warehouse is very simple, since items of a product will always
be stored in the same locations and sufficient space is always available for a of the items in
replenishment batches. The simplicity advantage decreasing in importance because the introduction
of information technologies such as WMS, bar coding, and radio frequency tags provides a real-time
accurate inventory map of the warehouse. The advantages of robustness and simplicity of dedicated
storage must be traded off against the increased required storage space and material handling cost
(Gu 2005).

A disadvantage of dedicated storage is that a location is reserved even for products that are out of
stock. Moreover, for every product sufficient space has to be reserved such that the maximum
inventory level can be stored. Thus, the space utilization is lowest among all storage policies. An
advantage is that order pickers become familiar with product locations. In retail warehouses, often
the product-to location assignment matches the layout of the stores. This can save work in the
stores, because products are logically grouped. Finally, dedicated storage can be helpful if products
have different weights. Heavy products have to be on the bottom of the pallet and light products on
top. By storing products in order of weight and routing the order pickers accordingly, a good
stacking sequence is obtained without additional effort. Dedicated storage can be applied in pick
areas, with a bulk area for replenishment that may have, for example, random storage. In this way,
the advantages of dedicated storage still hold, but the disadvantages are only minor because
dedicated storage is applied only to a small area (Koster et al. 2007)

Kallina and Lynn (1976) discussed the implementation of the COI rule in practice. The COI rule is
easy implement and has the intuitive appeal of locating compact, fast-moving items in readily
accessible Furthermore, COI rule proved to be optimal for dedicated storage when the following
assumptions are satisfied:

1. Objective is to minimize the long-term average order picking cost.

2. The travel cost depends only on locations. Examples that do not satisfy this assumption include
the case when the travel cost is item dependent when there are multiple I/O points, and
products have different probability moving from/to the I/O points, i e., it does not satisfy the
factoring assumption as defined in Mallette and Francis (1972)
3. When dual or multi-command order picking is used. there is no dependence between the picked
items in the same picking tour
4. Certain routing policies assumed for multi-command order picking, e.g. Jarvis and McDowell
(1991) assume using the traversal routing policy for the conventional multi-aisle order picking
5. There are no compatibility constraints that limit the storage location assignment e.g., certain
items must and/or cannot be put together (Gu 2005) space Requirements

With dedicated storage, products are assigned to specific locations. Also, one and only one product
is assigned to a storage location. Hence the number of storage locations assigned to a product
capable of satisfying the maximum storage requirement for the product. With multiproduct storage,
the storage space required equals the sum of the maximum storage requirements for each of the
products (Francis et al. 1992) Sizing on the Basis of Service Levels

One approach that can be used to size storage under dedicated storage conditions is a service-level
approach. Specifically, when demand for storage is a random variable, storage capacity can be
determined on the basis of the probability of a shortage of space. With dedicated storage, Qj storage
sots are assigned t product i for I = 1…. n. Therefore, the probability of there bring a sufficient
number of storage positions for product i is simply the probability of storage demand being less than
or equal to Qj. Thus the probability is given by the cumulative distribution function Fj (Qj)

If the storage demands for the various products are statistically independent, the probability of
there being one or more shortages 0 storage space is given by

Pr(1 𝑜𝑟 𝑚𝑜𝑟𝑒 𝑠ℎ𝑜𝑟𝑡𝑎𝑔𝑒𝑠) = 1 − Pr(𝑛𝑜 𝑠ℎ𝑜𝑟𝑡𝑎𝑔𝑒𝑠) …………………X1

Since the terms on the right-hand side of X2 are the cumulative probabilities, X2 can be expressed

Pr (𝑛𝑜 𝑠ℎ𝑜𝑟𝑡𝑎𝑔𝑒𝑠) = ∏𝑛𝑗=1 𝑃𝑟…………….X2

Pr (𝑛𝑜 𝑠ℎ𝑜𝑟𝑡𝑎𝑔𝑒𝑠) = ∏𝑛𝑗=1 𝐹𝑗 (𝑄𝑗 )………X3

Therefore, on substituting X3 in X1, we obtain

Pr (1 𝑜𝑟 𝑚𝑜𝑟𝑒 𝑠ℎ𝑜𝑟𝑡𝑎𝑔𝑒𝑠) = 1 − ∏𝑛𝑗=1 𝐹𝑗 (𝑄𝑗 )………X4 Sizing on the basis of costs

The previous analysis of space requirements for dedicated storage was based entirely on, service-
level considerations. Under deterministic conditions, the size requirement (dt,j – Qj) is met via leased
storage at an incremental cost of C2; t per unit stored in leased space during period t. Assigning Products to storage/Retrieval Locations

With dedicated storage, products are to storage/retrieval locations in an attempt to minimize the
time required to perform the storage and retrieval operations. Of course, for dedicated storage to
be feasible, you must have a sufficient number of storage slots to dedicate slots to products. In such
a situation, the assignment problem becomes a matter of assigning products to slots according to an
appropriate criterion. In our case the criterion will be to minimize some function 0 the distance
traveled and retrieve the assigned products. To formulate the dedicated storage assignment
problem, let

S = number of storage slots or locations

n = number of products to be stored

m = number of input/output (l/O) points

Sj = storage requirement for product j, expressed in number of storage slots

Tj = throughput requirement or activity level for product j, expressed by the number of

storage/retrievals performed per unit time i

Pi, j = percent of the storage/retrieval trips for product j that are from/to input/output (I/O) point t i,k
= time required to travel between I/O point I and storage/retrieval location k

X j,k = 1, if products j is assigned to storage/retrieval location k = 0, otherwise

I (x) = expected time required to satisfy the throughput requirement for the system the formulation
of the dedicated storage assignment problem is
𝑀𝑖𝑛 ∑𝑚 𝑛 𝑠 𝑗
𝑖=1 ∑𝑗=1 ∑𝑘=1 𝑆 (𝑝𝑖,𝑗 𝑡𝑖,𝑘 𝑥𝑗,𝑘 ) ………………………………..X5

Subject to

∑ 𝑥𝑗,𝑘 = 1 𝑘 = 1, … . , 𝑠

18.2.2 Cube-Per-Order Index (COI)

Cube-per-order index (COI) rule is one of the earliest dedicated storage algorithms (Lai et al. 2002.
Zapfel et al. 2006). The cube per order index (COI) is perhaps the most common storage dispatching
rule. It is defined as the ratio of the number of storage addresses allocated to an item, to the
number of transactions per period. It is applied by routing incoming items with the lowest COI
values to the most accessible storage addresses of a facility (Malmborg et al. 2000).

The algorithm consists of locating the items with the lowest COI closest to the dock, and assigning
items to locations progressively farther away from the dock by increasing COI. Harmatuck showed
that COI yields an optimal solution when the system is: of a single-command (one clamp truck trip
fulfils one task, stock or retrieve), has a single I/O. with no compatibility constraints; and the
traveling of different items are independent. Malmborg and Krishnakumar (2000) have shown that
under the Euclidean distance, COI produces the shortest traveling cycle time for a multiple-
command system (Lai et al. 2002)

18.2.3 Class-Based Storage Location Policy

The class-based storage location policy distributes the products, based on their demand rates,
among a number of classes region within the storage area for each class, Accordingly, an incoming
load is stored at an arbitrary open location within its class (Van den Berg et al. 1999). The concept of
class-based storage combines some of the methods mentioned so far. In class based storage if the
number of classes is equal to the number of products, then this policy is called dedicated storage
(Gu et al.2007). The class-based storage location policy is shown Fig X2.

In inventory control, a classical way for dividing items into classes based on popularity is Pareto’s
method. The idea is to group products into classes in such a way that the fastest moving class
contains only about 15% of the products stored but contributes to about 85% of the turnover each
class is then assigned to a dedicated area of the warehouse. Storage within an area is random.
Classes are determined by some measure of demand frequency of the products, such as COI or pick

The next smallest (𝑡𝑗𝑖 𝑛 + 𝑡𝑗𝑜𝑢𝑡 ) to the second class, and so. Accordingly, the locations are ranked
according to nonincreasing demand per reserved space. We define 𝑔𝑘 (𝑝, 𝑙) as the contribution of
classes 1,2….k to X16 when products 1,2,….p and storage location 1,2,….l are distributed among
these classes such that 𝑔𝑘 (𝑝, 𝑙) is minimal. Then 𝑔𝑘 (𝑝, 𝑙) satisfies.
𝑔𝑘 (𝑝, 𝑙) = min 1 ≤ 𝑖 ≤ 𝑝, 𝑙 ≤ 𝑗 ≤ 𝑙{ℎ𝑖+1,𝑝 + 𝑔𝑘−1 (𝑖, 𝑗)}. ………….X17

Where hi +1, pj + 1,l denotes the contribution to X16 if the products I + 1…..p and the locations j +
1….;l from one class k. Recalling that the number of locations required in each class is determined
by X15 the values 𝑔𝑘 (𝑝, 𝑙) are found by iteratively solving the dynamic programming X17 each
𝑔𝑘 (𝑝, 𝑙) corresponds to an optimal solution of the sub problem with k classes and the First p
products and the first l storage locations when ranked as indicated before. We may use the
algorithm to determine the optimal class-partition for 1,2….k classes. Subsequently, the number of
classes among 1,2….k may be selected that constitute an acceptable mean travel time and space
requirement (Van den Berg al. 1999).

Research on this problem has been largely focused on AS/RS, especially single command AS/RS.
Hausman et al. (1976) show that for single-command AS/RS with the Chebyshev metric, the ideal
shape of storage regions is L-shaped. For such systems, the problem reduces to determining the
number and boundaries of the classes.

Explicit analytical solutions for the class boundaries can be derived for the case with 2 or 3 classes,
as shown by Hausman et al. (1976), Kouvelis and apanicolaou (1995), and Eynan and Rpsenblatt
(1994). For the general n-class case, Rosenblatt and Eynan (1989) and Eynan and Rosenb