See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/326610074

Predictive Analysis based Approach for Optimal Warehouse Product Positioning

Conference Paper · May 2018

DOI: 10.23919/MIPRO.2018.8400174

CITATIONS READS
11 2,450

5 authors, including:

Emir Zunic Haris Hasic

Info Studio d.o.o. Sarajevo Tokyo Institute of Technology
64 PUBLICATIONS   414 CITATIONS    12 PUBLICATIONS   111 CITATIONS   

SEE PROFILE SEE PROFILE

Kerim Hodžić Sead Delalić

University of Sarajevo University of Sarajevo
21 PUBLICATIONS   220 CITATIONS    29 PUBLICATIONS   184 CITATIONS   

SEE PROFILE SEE PROFILE

Some of the authors of this publication are also working on these related projects:

Warehouse Process Optimization in Bosnia and Herzegovina View project

MasterThesis View project

All content following this page was uploaded by Kerim Hodžić on 25 July 2018.

The user has requested enhancement of the downloaded file.

 Predictive Analysis based Approach for Optimal
Warehouse Product Positioning
E. Zunic1,2 , H. Hasic2,1 , K. Hodzic2,1 , S. Delalic
1
Info Studio d.o.o., Sarajevo, Bosnia and Herzegovina
2
University of Sarajevo, Faculty of Electrical Engineering, Bosnia and Herzegovina
3
University of Sarajevo, Faculty of Sciences and Mathematics, Bosnia and Herzegovina
Email: emir.zunic@infostudio.ba, {haris.hasic, kerim.hodzic}@etf.unsa.ba, {besirevic.admir, delalic.sead}@gmail.com
Abstract—Building a successful warehouse management sys-
tem encompasses solving many problems of different nature
to reshape the general workflow and ensure improvements in
terms of resource management. In order for such a system to
be accepted and used by a logistics company, those solutions
need to be presented through a simple, adaptable and most
importantly, a feasible software solution. One of the aspects that
needs to be covered while building a warehouse management
system is the optimal product placement in the warehouse. If
the products are strategically placed, all the other improvement
strategies like stock to picking zone item transfer and item
picking order become more efficient and easier to implement.
In this paper, tactics and issues regarding the optimal product
placement in a warehouse are analyzed in detail through a real-
world case study. Solutions of this problem largely differ for
new, empty warehouses and for already operative warehouses
not able to carry out a stocktaking process. Approaches for both
possible situations are proposed and tested out on two different
warehouses in a medium-to-large logistics company.
Keywords—Warehouse Management System, Warehouse Opti-
mization, Optimal Product Placement, Machine Learning
I. I NTRODUCTION
There are various factors that need to be analyzed in
order for a warehouse management system to be successfully
implemented. This is especially true for warehouses that
didn’t have an organized workflow beforehand and most of
the operations and problems were handled ad hoc. In fact,
introducing a warehouse management system to an existing
warehouse requires a lot more attention than building a
planned, structured warehouse from scratch with a detailed
integrated and functioning workflow. This is due to different
factors. The biggest issue is the opposition from the workers
due to the significant paradigm shift in their every day routines
which the introduction of any new system essentially means. It
is of highest priority to properly introduce the new model to
the workers since it can determine the final success of the
system [1]. The next thing to have in mind is the current
item placement in the warehouse which is the direct result
of the previous workflow management. The heterogeneity of
the resulting item placement can be a real issue for the
whole system which will be further elaborated later in the
paper. Other issues include invalid data inputs if any form of
data collection is present at all, inefficient space utilization,
warehouse racks repletion which means increased operational
costs, inconsistent behavior from the workers etc.
3,1 , A. Besirevic3,1
Many diverse classifications of warehouse operations exist,
but one of the most basic states that there are four main
operations, namely [2]: receiving, storing, put-away, picking
and shipping. The storing operations consist out of the distri-
bution of goods to the storage areas, identification, assignment
of the storage bin and put-away. The put-away is a process
of determination of a storage bin concerning the physical
dimensions and the weight of the goods which requires a
strictly determined storage location. It is also stated in [2]
that those two operations take up to 15% of all the operating
costs. Because of that, these operations can be viewed as a
niche to improve the efficiency of the system that has yet to
be inducted. If the mentioned operations are observed strictly
by definition, they represent hardly solvable mathematical
problems in practice and need to be relaxed. For the purpose of
this paper, storing and put-away operations will be viewed as
the transition process of the items from the entrance area to the
warehouse storage racks. After the items arrive at the entrance
area of the warehouse, the action that can be influenced the
most is the placement of the items from the entrance area to the
warehouse racks. If the most frequent items are placed closer
to the main transport passageways they can be later easier
accessed and picked up to complete latter orders. Because of
all that was mentioned, the focus of this paper will be on
designing the optimal storing and put-away strategies in order
to optimize the whole product placement process in a small
to medium warehouse without any previously implemented
optimization mechanisms. To fully comprehend the differences
between the initial conditions, an analysis of a newly built
warehouse with a detailed workflow will also be added and
compared to the previously analyzed implementation.
This paper is organized as follows: In the first, introductory
section the importance of item positioning in warehouses
is briefly revised. Related work regarding various general
approaches for optimal item positioning is revised in section
two. In section three, detailed analysis of the current state
of the warehouse in focus and various strategies for optimal
item positioning are conducted and an appropriate predictive
analysis algorithm is proposed and constructed. Also, the real-
world implementation of the proposed method is described in
detail. Discussion and analysis of the achieved results are also
stated in section three. The paper is concluded in section four
with appropriate remarks and guidelines for further research.
 II. R ELATED W ORK
There are various product placement and slotting strategies
for different types of warehouse environments. They can be
item based, depending on how frequently the item is picked
without regard to picking sequences and they are often based
on the Cube per Order Index (abr. COI) or they can be affinity
based slotting strategies that place items that are frequently
ordered together, closer to each other. Similarly, in [3] several
order oriented stocking heuristics are combined together in
a strategy that has the same goal. Their performance is
compared through a set of Vertical Lift Module (abr. VLM) test
problems with different order characteristics. One part of [4]
focuses on the formalization of the novel Pick Frequency/Part
Affinity score, which combines popularity and affinity mea-
sures. Product placement and slotting strategy approaches can
largely differ in how many item relocations are needed to be
executed in order to implement the strategy, which can be
more applicable for new, empty warehouses than for already
operative warehouses not able to pause the workflow and
carry out a complete stocktaking process. Considering this
aspect, the downside of the affinity based algorithms from
[4] mentioned before was that implementing the generated
assignments in a fully operational warehouse required exten-
sive movements of items. Considering storage, relocation and
picking efforts, the costs and benefits of extensive relocations
versus iteratively moving a small number of items per period
were analysed. It was shown that greedily selecting relocations
has disadvantages, which were mitigated by switching to a
”robust” selection strategy.
In industries with strong seasonality patterns and fluctuating
demand regular re-locations of items might be necessary to
ensure that the quality of the storage assignment does not
deteriorate over time. In [5] it is analyzed how to generate
more robust assignments that are suitable for volatile ware-
house scenarios with correlated demand. The aim of [6] was
to extend the classic storage location assignment problem (abr.
SLAP) to a multi-period formulation (abr. M-SLAP) and to test
and compare how various allocation rules and in particular an
affinity based policy, perform in such dynamic scenarios. In
[7], estimation of material handling time reduction for picking
operations using optimal item allocation rather than a uniform
distribution of picking and storage locations was analyzed.
Results were calculated through simulations, based on a vari-
able picking list size, with the aim of underlining the effect
of different slot-code optimization levels on the reduction of
average distances traveled. The comparison was carried out
with and without the most commonly used heuristic. In [8]
a multi-product slot allocation heuristic developed by taking
cue from vertex coloring problems and its pragmatic evaluation
on a real industrial case was presented. A benchmark with a
randomized storage policy was presented to underline heuristic
effectiveness and point out future research opportunities.
All the mentioned approaches represent good ideas to tackle
the product placement problem but most of them define the
problem too close to the warehouse structure and must rely
on heuristics to solve the problems that arise. The next section
will describe a different, more general, approach to the optimal
product placement issue.
III. P REDICTIVE A NALYSIS BASED A PPROACH
As it was mentioned before in the introduction, if the storing
and put-away operations are viewed strictly by definition,
they represent hard to solve mathematical problems. If the
volume and capacity of the warehouse racks and the capacity
of the incoming items is taken into consideration a kind
of knapsack problem [1] arises. Given the difficulty of the
practical implementation of such a system and missing volume
information, this problem needs to be relaxed and the capaci-
ties of items and storage space are no longer considered. This
makes this problem a simple selling frequency based ordering
problem if the warehouse is initially empty but it becomes
more complicated if the warehouse is already working at full
capacity and a new system needs to be implemented. This
section will focus on finding a solution for the defined relaxed
problem for both initial states. The whole process is split into
different stages: analysis of the current state of the warehouse
in focus, problem definition and construction of the predictive
analysis based approach and result analysis.
A. Analysis of the Current State
The analysis of the current state of the warehouse has shown
that, in the last 2 years, the warehouse stored about 2,360
different items. The average number of exported item units
per day was 27,132 with a rather high standard deviation of
22,324 which indicates a large variety of differently demanded
items present in the warehouse. The total number of orders for
the last two years was 173,103. The appearance frequency of
items in different orders is shown in Table I which further
indicates the high differentiation in warehouse item demand.
TABLE I: Item Appearance Frequency on Different Orders.
Number of Order Items Frequency
10,000 - 50,000 7
5,000 - 10,000 42
1,000 - 5,000 331
500 - 1,000 298
100 - 500 691
0 - 100 991
If this analysis is scaled down to the daily level, almost
the same conclusion can be made. Table II shown below
represents the average daily frequency of item units appearing
on different orders analyzed in same periods of time.
TABLE II: Daily Appearance Frequency on Different Orders.
Number of Order Items Frequency
30 - 40 7
20 - 30 17
10 - 20 77
5 - 10 216
2-5 618
0-2 1425
 To further stress this fact, if the analysis of different
products per order is shown in a graph like it is shown in Fig.
1, it indicates that 125,918 out of total 173,103 orders (around
72.75%) consisted out of 10 or less different products.
Fig. 1: Number of Different Products per Order.
Given the obvious importance of the items with the highest
demand, the first idea was to target orders with 10 different
products or less because they provide most space for optimiza-
tion in terms of worker order collection travelling distance and
time. The presumption was that the worker collecting the order
with a large number of items will usually have to visit most
parts of the warehouse anyway and in these scenarios there
is not much room for optimization. Situations when a small
number of items is collected on the other hand offers a lot of
space for improvement if the items are placed strategically
in the warehouse. Analysis of the orders with 10 or less
different products in the period of one year have shown that
they consisted out of 1,540 different products. Analysis of
how many times products were ordered have shown that the
number was 1 for least frequent and 2,512 for most frequent
item. The graph presented in Fig. 2 shows how many times
the top 100 products from small orders were ordered in the
mentioned historical period of one year.
Fig. 2: Number of Orders per Product.
The warehouse in focus is divided in two logical parts
or sectors for different item brands and additional separate
rooms for items that must be stored in specific temperature
ranges. Because they lacked a better solution, warehouse
workers arranged products in warehouse ad hoc, according to
their everyday experience and needs. Items were instinctively
grouped so that they could find them easily find when they are
collecting orders. Because of that and similar working habits,
they needed more time later to accept new optimized working
system that included new database, modules for order picking,
pick zone capacity and content prediction which is described
in [9] and [10] and product placement optimization which is
described here.
B. Problem Definition and Introduction of the New Approach
After the relaxation, the easiest way to approach this
problem is to view the whole warehouse as a sort of closed
environment. The only communication with the outside are the
items come in and leave the warehouse at a variable rate, day
by day. Consequently, spots in the warehouse storage racks are
freed and occupied according to the earlier mentioned ad hoc
approach from the warehouse workers. As it is shown in Fig. 3,
the warehouse in focus is organized as follows: the designated
entrance area, the central hallway and the designated output
area. Taking all the mentioned facts into consideration, the
problem can be defined as a simple question: “How can the
most frequent items be placed as near as possible to the central
hallway but not get scattered too far away from the main
accumulation point?”.
Fig. 3: Warehouse Layout with Designated Areas.
This brings up two main goals that can be set:
1) Move the most frequent items for the orders with 10 or
less items as close as possible to the central hallway.
2) Restore and maintain the homogeneity of the placement
of the warehouse items.
To achieve the first goal, the sales history needs to be
thoroughly analyzed. The optimal period that was chosen
was one year back from the current date because of the
dynamic nature of the handling of warehouse items. Some
items can stop being sold and become inactive, some items
change their identification number, new items are introduced
etc. The second goal requires a kind of a sorting process to
regroup the already scattered items. Since the company that
owns the warehouse in focus could not allow itself a break
in the workflow, the sorting of the items needed to be done
dynamically and over a longer period of time. That required
a smart approach in handling the occupation of free space
in the warehouse racks. The new approach would dictate the
position for each new item that enters the warehouse. This
would require new calculation for each new item shipment
that reaches the warehouse given the dynamic nature of the
warehouse. The main steps of the approach are given in
pseudo-code form in Algorithm 1 shown below.
Algorithm 1 Position Grade Calculation Pseudo Code
function CALCULATE P RODUCT P OSITON G RADES
Require:
aid - Identification number of the entering article.
sec - Sector of the entering article.
ig = CalculateItemGrade(aid);
positions = GetListOfFreePositions(sec);
cwgb = CalculateCurrentWarehouseGradeBalance(sec);
for p in positions
result.Add(p.id, ig/p.grade, cwgb - ig/p.grade);
end
return result;
end
The approach consists out of multiple steps. The first,
initial step is to calculate the grade of the item that needs
to be positioned somewhere in the warehouse. This is done
by considering the daily item picking frequency of the item
acquired from a years worth of data. The second step is to get
the list of all the available free positions in the sector of the
corresponding item. The third and final step is to calculate the
factor which reflects the current situation in the warehouse.
This calculation relies heavy on the grades of the items and
the positions of the warehouse. In this approach the grades of
the items are calculated based on their daily picking frequency
where the most frequently picked items get higher grades. On
the other hand, the grades of the positions are calculated based
on their distance from the central hallway where the positions
closer to the hallway get the higher grades. In this case the
grade and the distance are reversely proportional. Both grading
scales need to be normalized to the same range in a way which
will properly reflect the relations of the initial scale. Once the
grades are put within the same range the current item/position
grade balance can be calculated by dividing the item grades
with their corresponding positions. Since the the grades need
to be about equal to represent the ideal positioning, the average
result needs to be closer to 1 as much as possible. This is a
good parameter for monitoring the current state of the item
placement in the warehouse. More about the calculation of the
distance between the positions, picking frequency and item
relocation can be found in previous work about this topic,
[9] and [10]. After all these parameters are calculated, the
list of all the available positions is expanded by the grade
ratio of the corresponding item and the current position and
the deviation of that grade from the current average grade
ratio of the warehouse. This result is the complete list of
available positions because it is not the best approach to limit
the choices for the workers. Also, this list can be sorted by
the best grade ratio or the deviation from the current situation
in the warehouse which gives the workers room to maneuver
if there are unforeseen impediments that can arise in such a
dynamic environment like a logistics company warehouse.
C. Result Analysis for two Initial States
How long will it take to significantly improve the item
placement situation in a warehouse largely depends on the
initial state of the warehouse. The achieved results can be
viewed from two different standpoints. First is how the reas-
signing of item positions simplified the item picking process
and the second is how the homogeneity of the item placement
has improved. This can be measured through the length of the
picking route when an order is completed. Table III shows by
how much percent the average length of the picking route was
reduced one month after the approach was implemented.
TABLE III: Average Picking Route Length Reduction.
Number of Order Items Average Length Reduction (%)
30 - 40 17.34%
20 - 30 12.5%
10 - 20 10%
5 - 10 7.1%
0-5 4.4%
What can also be measured are the changes in location
homogeneity of the items in the warehouse before and after
the implementation of this item assignment approach. This is
represented in Fig. 4 where the red slots mark the positions of
the ten most popular items in the warehouse before and one
month after this approach was implemented in the warehouse.
Fig. 4: Before and After Locations of the Top 10 Items.
 It is clearly visible that the homogeneity of item grouping
has increased since the items are not scattered all over the
warehouse anymore. It is clear that they converge towards the
central hallway of the warehouse since it has been selected
as the reference point where the items should be placed as
near as possible. There are still some unnaturally occupied
item locations but it is important to keep in mind that this
is only one month after the approach was implemented. This
approach is meant to order and homogenize the item locations
of the warehouse over a longer period of time and there is still
room for further improvement than it is shown in the results.
This is very important to note since it is a real constraint that
can occur in many warehouses that can’t allow a break in the
workflow but a solution needs to be implemented nevertheless.
Like it was already mentioned, incorporating a new system
that requires changes in the existing workflow is always
more difficult than building a new system from scratch. The
prime example is the implementation of such a system in a
new warehouse branch that was being added by the logistics
company in question. The layout of the new warehouse,
as shown in Fig. 5, is more complicated than the layout
of the previously described warehouse since it has more
more sectors and differently temperature regulated rooms that
are interconnected. Besides the structural complexity of the
warehouse, given the fact that the functions for distance
calculation are already implemented, the implementation of
the approach was trivial since it came down to sa simple
frequency ordering problem. Namely, for each sector which
were given identification numbers, an appropriate reference
point was calculated and the most frequent items were grouped
and ordered as near as possible to that point for each sector.
When an order is completed for an individual sector the worker
moves on to the next one. The optimization is bound to each
sector individually as the grouping of items is done locally.
Fig. 5: Layout of the Initially Empty Warehouse.
Results of the optimization in both cases were satisfactory.
Both described approaches represent optimization of the same
operations but illustrate how much complications the initial
state of a warehouse can cause when implementing those
optimization modules of the warehouse management system.
View publication stats
IV. C ONCLUSION AND F UTURE R ESEARCH
In this paper, a solution for optimal warehouse item posi-
tioning was proposed. The described approach was the base of
the optimization module that was incorporated in a medium-to-
large logistics company warehouse in Bosnia and Herzegovina.
Based on the results from this module an analysis of the
achieved improvements was made and compared with the ap-
proach for an initially empty warehouse. The main assumption
was that when items are strategically placed in the warehouse
racks, all the other implemented optimization modules become
more efficient. The thorough analysis conducted in subsection
2.A has shown that the previous workflow left a lot of space for
improvement. How that improvement was accomplished and
how the weak sides were fixed was explained in subsection
2.B. Product dimensions and weight are important aspects that
were not taken into account when this solution was imple-
mented because of the complexity of the resulting problem and
absence of that kind of information in company databases. A
future modification of the approach could include this informa-
tion when it becomes available. Future improvements for the
overall warehouse management system will be the transitions
of the modules into deep learning based sales prediction which
will, integrated with other implemented modules, lead to full
coverage of the warehouse item workflow.
R EFERENCES
[1] J.J. Bartholdi, S.T. Hackman (2014). Warehouse & Distribution Science,
Release 0.96. The Supply Chain and Logistics Institute, School of
Industrial and Systems Engineering, Georgia Institute of Technology.
Atlanta, GA 30332-0205 USA.
[2] J. Karasek (2013). An Overview of Warehouse Optimization. International
Journal of Advances in Telecommunications, Electrotechnics, Signals and
Systems, [S.l.], v. 2, n. 3, p. 111-117, nov. 2013. ISSN 1805-5443.
doi:http://dx.doi.org/10.11601/ijates.v2i3.61.
[3] R.J. Mantel, P. Schuur, S.S. Heragu (2007). Order Oriented Slotting:
A new Assignment Strategy for Warehouses. European J of Industrial
Engineering 1(3):301-316. DOI: 10.1504/EJIE.2007.014689.
[4] M. Kofler (2015). Optimising the Storage Location Assignment Problem
under Dynamic Conditions. Doctor thesis, Advisor: Michael Affenzeller.
Johannes Kepler University, Linz.
[5] M. Kofler, A. Beham, S. Wagner, M. Affenzeller (2015). Robust Storage
Assignment in Warehouses with Correlated Demand. Computational Intel-
ligence and Efficiency in Engineering, Springer International Publishing.
DOI: 10.1007/978-3-319-15720-7 29.
[6] M. Kofler, A. Beham, S. Wagner, M. Affenzeller (2014).Affinity Based
Slotting in Warehouses with Dynamic Order Patterns.Advanced Methods
and Applications in Computational Intelligence. DOI: 10.1007/978-3-
319-01436-4 7.
[7] A. Fumi, L. Scarabotti, M. Schiraldi (2013). The Effect of Slot-Code
Optimization in Warehouse Order Picking. International Journal of En-
gineering Business Management 5(1). DOI: 10.5772/56803. License: CC
BY 4.0.
[8] M. Schiraldi, C. Battista, A. Fumi (2013). Multiproduct Slot Allocation
Heuristic to Minimize Storage Space. International Journal of Retail
& Distribution Management 42(3):172 - 186. DOI: 10.1108/IJRDM-03-
2012-0024.
[9] E. Zunic, K. Hodzic, H. Hasic, A. Besirevic, R. Skrobo, D. Donko
(2017). Application of Advanced Analysis and Predictive Algorithm for
Warehouse Picking Zone Capacity and Content Prediction. XXVI Inter-
national Conference on Information, Communication and Automation.
DOI: 10.1109/ICAT.2017.8171629.
[10] E. Zunic, A. Besirevic, R. Skrobo, H. Hasic, K. Hodzic, A. Djedovic
(2017). Design of Optimization System for Warehouse Order Picking
in Real Environmentn. XXVI International Conference on Information,
Communication and Automation. DOI: 10.1109/ICAT.2017.8171630.