Why are Cubic Velocity and Cubic Inventory Important?

DC Metrics: Cubic Velocity and Cubic Inventory
Any industrial engineer worth his/her salt starts a warehouse design (or distribution center or fulfillment operation) with detailed data analysis. This usually begins with gathering forensic information such as a 12-month sales history at line item (SKU) level, a fully populated item master file (including length, width, height, and weight), and inventory snapshots (peak and average). Typically, these transactional files contain millions of records, making a database or access project necessary. These data files are the fundamental building blocks to construct a base (as-is or current) mathematical model against which any alternative designs will be compared. Many ancillary data points may also be needed, but this is the backbone of any re-engineering/optimization or new DC design initiative. In addition to the data collection, existing operations (processes, systems, infrastructure, and labor deployment) receiving through shipping must be documented. Existing operational challenges and opportunities must be noted at this stage as well as any strategic/tactical goals.
Once the historical model is created and validated (mapping and certifying all volumes and costs against current), forecast factors such as organic/acquisition growth, SKU proliferation, and market channel expansion can be applied to the base volumetric model. This compounding of SKUs, volumes, channels, and order profiles is a forward-looking exercise aimed at defining the ultimate design year (typically five-years forward) operational requirements for the new or retrofitted facility. 

So, what does all that have to do with Cubic Velocity and Cubic Inventory by SKU you ask? Cubic Inventory by SKU is the total number of cubic feet in stock (based on quantity x unit of measure – pallet, case, master-pack, inner pack, and/or piece). So, if you have 20 cases of a particular SKU in inventory and each case is two (2) square feet, the total Cubic Inventory for that SKU is 40 cubic feet (approximately one pallet load). Average and peak calculations must be made. Cubic Velocity is computed by taking the cube characteristics of a particular SKU and determining how many were shipped over some period of time (aggregating the number of order lines and picks per line that the SKU moved during that timeframe). The result is the number of cubic feet that an item moved.

These two values (Cubic Inventory and Cubic Velocity by SKU) determine where these items want to “live” in the warehouse, both in storage and in a forward pick location (if applicable). Deep inventory items are best stored in dense storage modules such as floor stack lanes, or drive-in/drive-thru racks, or double-deep racks. Deep inventory items with slow movement characteristics may want to have deep storage locations but also have a forward pick area that is replenished based on consumption and minimum par levels. This reduces overall travel in that instance. Small cube items with low velocities may want to live in shelving, decked rack, or carton flow rack. Some combinations of inventory and movement may be best served by automation such as a goods-to-person system. The combinations of process, systems, infrastructure, and labor approach are exponential. An in-depth industrial engineering based study is required to turn the Cubic Inventory and Cubic Velocity model into quantified alternatives with detailed capital cost, recurring cost (labor), capacity, throughput, flexibility, scalability and risk characteristics. It is the only way to determine the best solution, achieve your service level objectives, and minimize operational costs. It all starts with the basic building blocks. 

Send us an email requesting our “Pick Module Selection Matrix” (a tool for determining which alternatives are worth considering) for further detail on this subject: Info@OPSdesign.com