Applying a two-stage clustering-assignment model for an item-associated product family warehouse storage location problem

Abstract

The objective of this research was to re-design the storage location of raw materials and common products in the warehouse of a chain restaurant as the case study. An existing problem is unproductive travelling distance and non-value-added time-consuming order picking by the customer orders because of an inappropriate layout. As observed, the nature of the picking processes indicate that pickers pick the individual items by each brand along with common products that share together for all brands. To design new appropriate locations and product zones for each SKUs, this study proposed a Two-Stages Clustering-Assignment Model to deal with classifying product groups and determining product placements problems. Firstly, was to find Item-based associations of both product groups (items and all brands). Secondly, was then to determine placements for associated items by formulating the problem as warehouse storage location assignment problem so as to minimize picking distance. OpenSolver2.9.3_Beta_LinearWin was used to find the optimal solution. The result shows that the new configuration help reducing picking distance by 56% comparing to the current storage locations. This benefit proves more efficient as it reduces pickers from 11 to 8 regular staffs, which in turns saving labor costs about 39,000 baht per month or 468,000 baht per year.