Whether you operate a warehouse, retail sales, service or manufacturing business you have some form of inventory. In the past we have discussed some of the methods for maintaining the proper levels of inventory now we will discuss where to put these items within your facility. You will have items that you use frequently and those you use infrequently. You will have items that you use in large quantity and those that you use sparingly. Where you place or profile this product is just as important to your efficiencies and costing as controlling the amount.
The overall amount you use or sell during a specific timeframe is called the volume. The number of times you need the product or to be more specific the number of times an employee needs to visit the location holding the product is called the visits or hits. The difference between the two is you can have an item that uses or sells 50 units within let’s say a week but only have 2 visits or hits. This could be because the item is used in 25 unit increments or perhaps, if sold, a customer purchased 30 on Tuesday and on Wednesday another customer purchased 20. Either way if this is the average usage then the volume would be 50 per week while the visits or hits are 2.
Determining the hits and volume is easy. I recommend exponential smoothing over a 13 week period.
The hits determine the proximity to the usage point while the volume and size of the product determines the size of the location. That may sound simple but that’s it, but as with all business practices what is easy on paper may not be easy in application. You may lack space in close proximity to the usage point or you lack the space to have the locations large enough to cover demand. Generally, depending on your business, you will have a variety of location sizes near the usage point. In warehousing these are usually pallet, carton and bin locations. In manufacturing you could also add barrels, drums, spools and a variety of other location types.
To summarize; to properly profile your items:
- Understand the average volume per the time period you choose.
- Understand the average number of times the item is ordered or how often it is needed.
- Rate your items from highest hits to lowest hits (or visits).
- Arrange the highest hitting items nearest to the point of usage in a location that is appropriately sized to handle the volume.
Profiling can be implemented with any 5S projects or it can be a project unto itself.
Proper profiling of your facility will lead to higher efficiencies and lower costs.