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Originally published on November 20, 2018 by Logiwa Marketing, Updated on June 14, 2024

The Beginner’s Guide to Directed Putaway Algorithms

Directed putaway algorithms introduce efficiency to a notoriously inefficient, and often-overlooked, warehouse process. When goods arrive, workers transport them to shelves so when an order comes in the right goods can be easily located and shipped off. Where exactly a good winds up when it enters a warehouse impacts how efficient the warehouse picking and shipping processes will be.

If configured correctly, your system collects data on your inventory management, order picking, order packing, and shipping activities. Consequently, it knows how long it takes for workers to pick an item—from the moment an order comes in to the moment an order leaves. It knows which products are most popular and, therefore, which products move most frequently. It’s a treasure trove of information just waiting to be mined by your directed putaway algorithm.

A well defined putaway algorithm helps workers to put right product into the right shelves so that warehousing processes can be improved such as cross-docking, wave picking, zone picking. Putaway is the first step of having an optimized picking process.

BONUS: Before you read further, download our Warehouse Management Software Whitepaper to see how Logiwa uses real-time data to help you get up to 100% inventory accuracy and execute advanced fulfillment strategies like wave planning.

What Is The Putaway Process and Why Is Directed Putaway Such A Big Deal?

What Is The Putaway Process?

As the name implies, the putaway process is the process of moving incoming goods from the dock to their permanent location within a warehouse. This permanent location could be anywhere, including the pick area, the replenishment area, or the storage area.

Warehouse managers use a mixture of math and intuition to determine which spot to send goods. For instance, if the previous month’s orders indicate that a specific good is quite popular, they may send more of that good to the pick area, while allocating other items to the storage area.

The thing is, putaway often takes a backseat to other warehouse tasks. When orders are coming in and the warehouse is super busy, managers prioritize tasks like picking and packing. As a result, incoming goods pile up in the staging area.

Of course, it’s understandable. Customers expect timely delivery of their orders and those orders must be picked. But a quick glance at the big picture shows that putting off putaway negatively impacts your warehouse in many ways:

  • Takes up space: In the warehouse world, space is money. Rent, heating, and insurance are all the price to pay for storing goods. A disorganized pile of goods is an inefficient use of space.
  • Creates congestion: When another shipment of goods arrives, they must wait for the previous pile of unstored goods to be put away before they can be placed in the staging area. If the new goods are simply added to an existing pile, they add to the space issue and extend the time it takes to get caught up.
  • Transaction errors: Goods tracked in an inventory management system may be entered incorrectly or not at all when they build up at the dock or staging area. This can impact your warehouse and inventory management efforts downstream by throwing off your stock numbers.
  • Higher chance of damages: When goods are piled up, workers must move them around constantly to find the products they need. The more goods are handled, the higher the chances of damage or theft.

It benefits your bottom line to put away your goods – and you’ll pay dearly if you don’t. While the costs may not be immediately noticeable, over the long term they’ll add up to become an insidious form of warehouse waste.

Watch the video above to see Logiwa IO’s innovative putaway algorithm.

What Is Directed Putaway?

When you’re in a rush or you’ve had a long day, you likely fling your keys in the first decent spot, only to struggle to remember where you put them the next day.

Now, imagine if the moment you opened the door, a household PA system instructed you to place your keys in a tray in the kitchen. The speaker system would refuse to shut off until it sensed that the keys had been placed in the tray. In the morning, the speaker system would calmly remind you where they were, saving you 10 minutes of frantically flipping over couch cushions.

Conceptually, directed putaway is similar. When you’ve got a million things going on in your warehouse, you plop incoming goods wherever there’s open floor space. When an order comes in, you’re now frantically looking for that SKU.

Even though you know you received a shipment, it’s not on the proper shelf, so you have to dig through a stack of goods, increasing the chances of damage and adding delays to the picking process.

With a directed putaway algorithm, the warehouse management system tells you exactly where to store your goods the moment they enter the warehouse. No thinking necessary. This direction relies  on a number of variables that the system computes based on instructions from your warehouse manager.

In other words: A directed putaway algorithm saves warehouses time, money, and reduces all kinds of unfortunate scenarios involving damaged, lost, or stolen goods.

Of course, benefiting from a directed putaway algorithm is not as simple as acknowledging its helpfulness. You have to do a little upfront work – or at least someone on your team does.

What Kind of Information Does Your Directed Putaway Algorithm Need From Your Warehouse Management System?

Your algorithm is only as good as its data. It doesn’t matter if you have the most perfectly proportioned chocolate cake recipe in the world. If you use dirt instead of cocoa, you’re in for one lousy dessert.

The cake is a beautifully optimized putaway process; the cake recipe is your algorithm. And the ingredients are the data your warehouse management system collects such as:

  • Projected sales volume
  • Size (height, length, weight)
  • Price
  • Receiving frequency
  • Shipping frequency
  • Special material handling requirements (hazardous materials, temperature-controlled goods)
  • Cross-sold items (items that are typically sold together)
  • Storage (space) availability

All of these factors can help you more effectively put away your goods.

How To Leverage Directed Putaway Algorithms to Increase Operational Efficiency

It’s up to you what information you collect, how you prioritize it, and how it optimizes your warehouse.

For instance, if you forecast a high sales volume for certain SKUs, you can place them closer to the staging area or place a higher proportion of them in the pick area. Conversely, if the projected sales volume for a specific SKU is low, you can store them further back in the warehouse. This approach will improve the inventory turnover in your entire supply chain.

The same goes for collecting data on the size of your goods.Assessing whether a package fits in a certain area takes up unnecessary time. Moreover, if a worker only realizes the space limitation after walking to the location, they’ve wasted labor hours on this task.

The same goes for storage availability. Instead of dispatching a worker to store goods in one location only to realize there’s no more space, a warehouse management system would detect this and the directed putaway algorithm would assign a new location.

Data on cross-selling is also an interesting way to further refine your putaway algorithm. Your warehouse management system, in conjunction with your order management system, will identify items that are often sold together. The directed putaway algorithm will instruct warehouse workers to store these items close to each other, shortening the overall pick time.

Similarly, your smart putaway algorithm can place all popular items together. That way, fast-moving items are easily replenished because they are located closer to the dock. Down the road, this makes the pick process easier as well, since pickers can quickly grab popular items to fulfill orders.

Better Warehouse Performance = Higher Profit Margins: Logiwa syncs accurate data across your entire interface so the inventory numbers you see on your dashboard are what your employees see on their devices. Learn how Logiwa uses real-time data to help you get up to 100% inventory accuracy and 2.5x shipments.

How To Set Up Your Directed Putaway Algorithm

The first step in creating a putaway algorithm is to set priorities. For instance, if it isn’t possible to conduct one putaway action (e.g., putting away an item based on its sales frequency) which rule should determine its location next?

Technically, a warehouse can customize its putaway algorithm to all sorts of optimization objectives. That said, there is a standard approach and priority order that warehouses can adopt.

  1. Directing putaway location based on an item’s velocity first
  2. Directing putaway location based on an item’s package type and storage requirements second
  3. Directing putaway location based on an item’s usage last

Directing Putaway Location Based On Velocity

What do we mean by “velocity?”

Velocity is how often an item moves, and the reason for that item’s movement could be anything, including:

  • Fulfilling a sales order
  • Transferring to another location
  • Pre-assembling items (also known as kitting)
  • Fulfilling production orders

Each item receives a velocity code that is based on ABC analysis. ABC analysis is an inventory management technique that helps warehouses decide how to allocate their stock-keeping resources. Since it would be difficult to count all stock at once, different SKUs are assigned into different categories (A, B, and C) based on how important they are.

Importance can be defined in many different ways. Importance may refer to the most valuable or profitable SKUs or the most frequently picked SKUs. In the context of directed putaway, importance is based on velocity.

High-velocity items are “A” items, items with a medium velocity are “B” items, and items with a low velocity are “C” items.

The directed putaway algorithm would instruct workers to put “A” items in the most convenient locations. This means shelves that are near the dock or staging area and are at knee-to-chest height. The “C” category items would be put in sections with the complete opposite characteristics: near the back of the warehouse on shelves that are harder to reach.

Directing Putaway Location Based On Package Type and Storage Requirements

Warehouses store items in different parts of the facility based on varying packaging and storage requirements.

Pallets may be stored in one area while individual cartons are stored in another. You can create an algorithm or rule to direct packages to specific areas of the warehouse depending on whether they are heavy or light, large or small, require refrigeration or don’t, and are hazardous or not.

Directing Putaway Location Based On Usage

After your directed putaway algorithm considers the item’s velocity and the item’s package type and storage requirements, then it would consider the item’s usage – the reason it’s being moved. Putaway workers would be directed to stock specific items together.

For example, items needed for a certain production process would be stored together and items that are often kitted together would be stored in the same section.

How These Factors Work Together In The Putaway Algorithm

To make sense of the directed putaway algorithm’s different variables, the warehouse management system creates putaway zones. This allows it to quickly decide where to send items based on each item’s unique mixture of variables.

Using Technology To Enhance Your Directed Putaway Efforts

A directed putaway algorithm can significantly optimize your putaway process. Once you’ve established an algorithm to quickly tell you where to place items, you can take things further by investing in technology that makes the entire process faster.

Of course, this depends on how much money you can, and want to, invest in technology. If you have the cash and can justify additional spend on technology enhancements (i.e., see a positive ROI for your warehouse), consider the following technologies:

While these are expensive and time-intensive to implement, all of these pieces of warehouse technology can help further optimize your directed putaway efforts.

Directed Putaway Algorithms Help Optimize an Often-Overlooked Warehouse Management Process

The putaway process lays the foundation for the rest of your warehouse operations. It plays a role in  how much damage your goods will sustain, the likelihood of theft or loss, how easy it will be for warehouse staff to locate goods, and how long the picking process will take. In a nutshell, an investment in the health of your putaway process is an investment in the overall health of your warehouse.

Directed putaway algorithms enable warehouses to store their items in the most efficient way possible. A WMS or a 3PL warehouse management system equipped with a directed putaway algorithm presents game-changing possibilities for your distribution business.

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