So while slotting considers multiple factors, says Basmajian, shorter travel times and improved labor productivity are common goals.
Other sometimes-crucial constraints include stacking heavy items on the bottom of a pallet to reduce damage and avoid picker congestion, which might happen if a slotting tool simply crams all the fast movers in one small zone, says Basmajian.
* There is considerable variability for slotting allowances across product categories concerning time likelihood of paying fees and the magnitude of the fees paid.
* Slotting fees can make up a large fraction of time revenues earned by some products in their first year.
92-80, the IRS stated that "[o]nly in the unusual circumstance where advertising is directed towards obtaining future benefits significantly beyond those traditionally associated with ordinary product advertising or with institutional or goodwill advertising, must the costs of that advertising be capitalized." Arguably, slotting allowances that do not provide the manufacturer with a specific contractual right to an allotment of shelf space beyond the year immediately following the year of the expenditure would follow this rationale; the nature of any potential future benefit of such an expenditure is virtually indistinguishable from that inherent in other advertising costs.
If the Service requires capitalization in the case of a slotting agreement that does not establish a useful life, it would be appropriate for the IRS to create a deemed useful life for the capitalized expenditure similar to that created for package design costs.
What can users of slotting and WMS expect as they face these omni-channel pressures?
Slotting software is used by companies to establish the best locations for goods in a warehouse by looking at the forecast for SKUs, especially order velocity or how fast a mover an item is, data about the product such as dimensions and weight, and data about locations in the warehouse.
"Looking at it more often is better than less often, even if you're a very sophisticated company and use a slotting solution, simply because perceptions of business and realities are often different," Kennedy says.
La Londe says customers new to slotting might start with the top 100 fastest-moving items, the 100 slowest, and make gradual improvements.
The payback for effective slotting, however, can be significant, especially for end users with large facilities and lots of stock keeping units (SKUs).
As companies become more sophisticated in distribution practices and tie what happens in the warehouse to the store, slotting may also deliver cost savings across the supply chain.
Slotting can also improve accuracy by separating similar products to reduce picking errors.
A number of slotting software modules are available to facilitate the process and can be tremendously helpful when following the fundamentals.
The steeper the distribution of activity for stock-keeping units (SKUs) on a Pareto chart, the more value we can get from slotting