Minimizing Warehouse Operation Cost

Abstract

Storage location assignment problems (SLAPs) are one of the challenges in warehouse managerial decision making to find the most cost-effective strategy in order to reduce the warehouse operational cost. The decision made in relation to the SLAP will also affect not only the operation cost, but also to the warehouse performance. Hence, a suitable alternative storage location assignment policy is significant to be implemented in the warehouse. This study intends to minimize the operational cost which includes both storage space cost and handling cost. A mixed integer programming model class-based storage location assignment with combined closest open location storage policy is used in this study where the allocation of any incoming product based on the closest open location (COL) storage location assignment policy within each class has been considered. Then, the assignment of product to each class to find the minimum operational cost has been solved using Microsoft Excel Adds-In Solver. The model also considers the volume of the storage space used to ensure the utilization of the storage space is maximized. Three different policies which are the developed model, the classical class-based, and dedicated are compared to determine the most profitable policies in terms of storage space utilization (storage space cost) and also storage total travel distance (handling cost). It is found that implementation of the proposed model class-based storage location assignment with combined closest open location storage policy contributes to the lowest operational cost in warehouse operation compared to the other policies.