Last session we talked a lot about building a warehouse. We saw how the type of pallet or the type of machines used can influence the size of our warehouse.
What we did not consider is how influencing the allocation of the bin location can be. Should every product be stored on a fixed dedicated place or should we use a kind of chaotic system in which every product can be stored everywhere. Compare with figure:
Fixed Allocation Dynamic Allocation
The advantage of the fixed Allocation is the easy way of handling. Every worker knows where to bring and pick a certain kind of product. No complicated information systems were needed. The downside is that the a lot of places in the warehouse might be empty while other section of the warehouse are overfilled.
Exactly this downside can be eliminated by a dynamic allocation. The product will be stored where a free place in the warehouse exists. Consequently demand variations between products can be settled and the usage rate of the whole warehouse is higher. And a higher usage rate of the warehouse lowers the overall demand of size of the whole warehouse. A disadvantage is that such a system needs IT-Support. Such an investment can be very high and challenging for small businesses. Moreover a chaotic allocation is only possible if the stored products are very similar in their characteristics.
Source:
TUM, Prof. Dr. Ing. Gunther Reinhardt (2016), Script:Planning of a Factory
The blog of Logistics at MGEPS at UPV 
Alex, from my point of view, I prefer to have a non-dynamic warehouse because there are more standards of time and space, which allows you to better manage the warehouse functions. Quesas I say this because in the majority is the method used more frequently today according to my experience in the world of the warehouse.
If you have information of some example of a company with this type of store please let me know, I would be interested to see what advantages they have in detail.
Hi Willy,
Amazon is for example using this approach, whenever it is possible.
They are using it because of the reasons I already gave you:
– Better reaction on demand variations
– Better usage rate of the whole warehouse
There are even more advantages for example when hiring new staff, because those new workers don’t need anymore exact knowledge of how the warehouse is built up, the system is having this knowledge for them
Another advantage is that this system is easier to optimize in terms of the minimal transportation way, because I have several possibilities of shelf to get to a particular product
Moreover I could provide you with some formulations, which prove that under particular circumstances a dynamic allocation is better, but I think this goes too far in a blog. If you are nevertheless intrested, I can give you those in the next class.