The below content was taken from the upcoming Parts Playbook.

A common principle of inventory management is ABC analysis. The premise of ABC analysis is all parts can be categorized based on activity. The ‘A’ items are 10-20% of inventory and account for 70-80% of the annual consumption. ‘B’ items are the next 25-35% of inventory and account for 15-25% of the annual consumption. Finally, ‘C’ items are the last 50-60% of inventory and account for 5-10% of the annual consumption.

Once a Parts Manager “knows their ABC’s” they can use that information to arrange inventory in a more efficient way, storing ‘A’ items in areas offering the quickest access, thereby reducing frequent trips to remote locations. One variation of this concept is Pick Density - storing fast moving inventory, as defined by the number and frequency of picks, in locations that are closer to the shipping area than items with less pick volume.

EXAMPLE

We have employed this practice at our Parts Warehouse in Dayton, Ohio. We identified the items that were being picked more than 1x per week over a two-year span. Our total was just over 700 parts. We ranked and moved these items to 10 inventory locations closest to our shipping docks. Now, 46% of our total picks happen in these 10 locations. The full value of this transition can be captured in this example:          

Before Pick Density

Receiving employee places a pallet containing 20 cartons of item X in row 40, requiring travel of 7 aisles there and 7 aisles back, for a total of 14 aisles traveled. This product is sold as “each” so the Shipping employee will travel 40 aisles to pick the product and 40 aisles back to the dock, for a total of 80 aisles per pick. With 20 per pallet, the total distance traveled to pick all parts is 80 aisles x 20 parts = 1600 aisles traveled to pick the entire pallet.

• Receiving travel = 14
• Shipping travel = 1600
• Total travel = 1614 aisles 

After Pick Density Implemented

Item X has been moved up to row 6. Receiving employee now travels 41 aisles to put the pallet into location and 41 aisles back to Receiving, for a total distance of 82 aisles traveled. Shipping employee now only travels 6 aisles to retrieve the part and 6 aisles back, for a total of 12 aisles for each part. At 20 per pallet, Shipping travels 12 aisles x 20 parts, for a total of 240 aisles per pallet.

• Receiving travel = 82
• Shipping travel = 240
• Total travel = 322 aisles
• Savings of 1292 aisles per pallet of an ‘A’ item (more than 1 pick per week)

This is an extreme case and the Daikin Applied Parts warehouse is larger than what you would find at a Distributor location, but it effectively demonstrates the cost-savings potential when you monitor turns and organize your inventory based on that data.