Forward Reserve Warehousing and Allocation Problem

Presented by:
Akshay Narayan(003)
Girish Ranjan Mishra(015)
Lakshman Singh Negi(023)
Hrishikesh Palande(028)
Suraj Tiwary(054)
Tapan Saxena(057)
Forward-reserve Warehouse
 Forward-reserve Warehouse

The forward-reserve configuration is a warehouse layout strategy that allows both efficient
order picking and efficient storage.
The forward area is mainly used for order picking and is characterized by:
(1) expensive storage and picking equipment that facilitates item selection and retrieval
(2) low storage density as net storage volume per unit storage area
(3) high picking efficiency as average travel and item retrieval time per pick.

The reserve area is mainly used for bulk storage and is characterized by:
(1) inexpensive storage methods such as block stacking and pallet racks
(2) high storage density
(3) low picking efficiency
 Forward reserve Vs Conventional warehouse
Conventional warehouse
It needs large storage area during peak
demand to keep for all SKUs.
Storage area uses high-density storage
equipment to maximize space utilization
but these technologies do not allow
convenient or fast item access.
It is inefficient to pick orders directly from
this storage area
Picking orders from a large area may
cause excessive unproductive travel
Forward reserve
Forward warehouse store goods in at least
two areas, a reserve area that is efficient
for storage and a forward area that is
efficient for order picking.
The forward area is designed for
convenient, fast item access and
extraction. It improves order picking
efficiency.
It is compact in size.
Their is replenishment of the SKUs from
the reserve area to the forward area.
 Application of forward- reserve layout

In distribution centres with forward-reserve storage model,

◆ around 50 percent of orders to be fulfilled from forward area,
◆ 40 percent are of full pallets from reserve area and only
◆ percent of orders require a mix of both.
Therefore, to fulfill partial order requirements, a separate small and fast pick area,
generally referred as to as forward area, is designed in warehouse only to improve
material flow, travel time and bring required SKUs nearby depot at “Just-in-time”
before picking.
The forward area is designed as a smaller zone or pallets kept reserve for selected
high-movable SKUs. Its objective is to satisfy partial pallet orders and to make
effective storage utilization that can lead to significant cost reductions with improved
picking productivity and response time.
 Advantages

1. Optimal space utilization

2. Eliminates need of leasing or contracting additional
warehouse space
3. Reduction in capital as well as working capital
4. Effective utilization of manpower
5. High throughput performance
6. Suitable for retail distribution centres with high SKUs
 Strategy Needed

• So a strategy must be used to either reduce allocations or

improve objective function or improve effective storage
utilization with practical allocations.
• A balanced allocation policy is requiring which works robustly
beyond optimization limitations.
• The pallet allocations must be change dynamically with
changing SKU demand contribution over a period of time in
order to compensate performance and underutilized storage
space.
 Assumptions of the Model

◆ All SKUs are of rectangular shape, can be stored on dedicated pallet and can be handled
by one person.
◆ All SKUs are of rectangular shape, can be stored on dedicated pallet and can be handled
by one person.
◆ Picking policy: from forward area, it is done carton by carton from one pallet at a time
from one direction and lane only.
◆ Demand Considerations is forecasted by studying known past data, the reason of
considering random demands with exponential distribution is that, normally the order
arrival follows exponential (time between order demanded and dispatch) distribution.
◆ SKU tracking: computer-assisted system tracks forward buffer and it also classifies and
identifies the order type, i.e., full pallets, partial pallets or mix.
◆ Storage policy: pallets in racks and floor stacking in reserve and storage areas,
respectively.
 Formulation of the Model

◆
Performance
  efficiency for each SKU=

  Objective function Z is the maximum performance efficiency

(PE)

Subject to constraints • N is the forward buffer capacity in pallets.

• n the number of SKUs in forward buffer.
• Li the minimum number of pallet locations required by ith SKU.
• Ui the maximum number of pallet locations required by ith
Xi
SKU.
• Xi is 1, if ith pallet is allocated in forward buffer, otherwise 0.
 Some Observations

◆ The results summarize that simple 0/1 knapsack optimization model creates allocation wastes. So, it is not
worth to increase buffer allocations after some extent as it does not improve objective value and also creates
SWs in the form of slacks.

◆ Furthermore, it is theoretically proven that rather than 0/1 knapsack if the constraint is (7) relaxed to
{0⩽xi⩽1} and allows partial pallet allocation, i.e., less than a pallet allocation in forward buffer, then it
improves objective value more than full pallet allocation.

◆ In order to reduce the slacks, if we relax upper bound up to (U=N−n+1), then the maximum upper bound is
always allocated with monotonically increasing objective value and none wastages (slacks) as compared with
previous static allocations, but non-uniform allocations are done
Allocating space in a forward pick area

Forward
BULK STORAGE Reserve area
Restock Pick
Revised Model Formulation

Objective function Z is the maximum PE:

Ai the number of pallet locations allocated to ith

SKU in forward buffer;
Performance efficiency (measure of throughput)
Demand to availability (DAR)

Storage effectiveness (SE) : measure of waste

Restocking ratio (measure of flow)
 Sensitivity Analysis

◆ The sensitivity analysis describes the impact of varying demand and buffer size
on performance.
◆ Analysis shows that allocating equal initial allocations for each SKU and varying
it dynamically perform better than static one.
◆ After the optimal point i.e. satisfying everything from the forward area only and
having sufficient cartoons to satisfy the demand; beyond this it is not possible
to increase PE. Even if more locations, it increases wastes.
◆ So it is advisable to allocate equally distributed to each SKU as per size of
forward area availability.
◆ As the size increases, it reduces SE and increases wastes.
 Sensitivity Analysis

◆ As the forward buffer is limited, after some extent, it cannot be increased and
becomes stable at 1, so this is a strategic decision.
◆ At any point of time, there is a marginal loss of one pallet space for each SKU in
forward buffer which cannot be eliminated. So dynamic allocation is better than
static allocations.
◆ Uniform demand distributions perform better than other method of distribution
strategies.
◆ initial allocation should be done with min. past historical past data.so that the
waste will be minimum and performance will be higher.(1 sku to all)
◆ Static Vs. Dynamic (666 vs 477) (as per the changing demands)
Thank You