Distribution Center Design Rule #37B: “Top-Off Logic” and How it Can Improve Space Utilization

There are numerous “tips and tricks” for effective distribution center design; many of them are discussed in a paper we recently authored titled, “Confidently Committing to a Distribution Center Design, Part I.” One often-overlooked rule when companies design forward pick areas is that of “Top-Off Logic”. Paying due attention to this topic can improve space utilization and reduce replenishment intervals in the distribution center.

Most distribution center design tools are built to determine the optimal storage medium for a given SKU, based on the amount of product which needs to be stored. As an example, the company’s business rule may state that a 2-week supply of product is to be stored in the forward pick area. For SKU "x", this may mean 16 units, or 4 cases. The software may determine that the smallest storage medium which can accommodate this supply is a lane of carton flow rack (Figure 1), and it assigns the 4 cases to that bin type.

Figure 1: Slotting without top-off logic

However, there is a sizeable portion of the carton flow rack which is still unused. In the case of carton flow rack, it is not advisable to mix multiple SKUs in the same lane of rack. Therefore, in order to maximize the available space, greater than a 2-week supply must be stored in the lane.

An effective slotting system will calculate the available, un-used space in each bin and “top off” the product to be stored, even if this violates the target weeks-of-supply rule. This will reduce the amount of space required for overstock, and will also reduce the amount of labor required to replenish the forward pick area (Figure 2).

Figure 2: Slotting with top-off logic

While this concept may seem somewhat obvious, many slotting and planning tools to not take it into account. Factoring in top-off space can be especially valuable when designing a new distribution center. The tool must be savvy enough to understand that the 20 cases in the carton flow are actually more than enough supply. If the forecasted demand is flexed upward by 20%, for instance, no additional space is actually required in the forward pick area for this SKU.

Little things like topping off bins can add up across thousands of SKUs to have a sizeable impact on the design of a distribution center!