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A mathematicaloverview of warehousing systems with single/dual order-picking cycles

Charles J. Maimborg, Bhaskaran Krishnakumar and Gene R. Simons

Department of Decision Sciences and Engineering Systems, Rensselaer Polytechnic Institute, Troy, NY 12181, USA (Received March 1987;revised July 1987)

A multidimensional, integrated lot size and stock location model is outlined to study the empirical properties of a warehousing situation with single/ dual-command order-picking cycles. Normative applications of the model are highlighted, Parameter sensitivity tests are performed to identify desirable parameter settings. Heuristics are then compared statistically with respect to the quality of the solution. A controlled experimental framework is used to study the impact of the level of detail in a model representation on the empirical performance of the model. Experimental results and the results of the statistical analysis are presented,

Keywords: order picking, single- and dual-command cycles, model representation, cube per order index, interleaving

The impact of automation has brought about far-reaching changes in the concept of warehousing. Traditional warehouses are being replaced with highly responsive systems with minimum inventory levels. Greater emphasis is being placed on flexibility, integration, and control of such systems.~ The most time-consuming and expensive operation in a warehouse is usually the process of filling orders for shipment, conventionally referred to as order picking? Any optimization effort should therefore consider this area of significant savings potential. Besides order picking, the other major cost component in warehouse operations is the inventory cost. The integrality of these two cost components, inventory and order picking, has been established by Wilson? An important problem, therefore, is to find a minimizing integrated lot size and stock location model. Such a multidimensional warehouse model for finding the least total operating cost, assuming single- and dual-command order-picking disciplines, and a single dock or input/output (I/O) point, is outlined here. This paper considers development of the empirical properties of the warehousing situation illustrated in

Figure 1, utilizing a model similar to that reported in Ref. 2. The objective is to give a glimpse of the mathematical structure of the problem, discuss the available solution strategies, analyze the problem empirically, and deduce conclusions based on the analysis. The paper is organized into five sections and follows a logical development of the problem. Succeeding the introduction is the formulation of the model. The assumptions of the model, the operating parameters, and the notation used are presented in this section. Normative applications of the formulation are then discussed. Three heuristic lot sizing and stock location solution strategies are described. The empirical analysis section includes the parameter sensitivity tests, the comparison of heuristics, and the experimentation in optimization of the detail of model representation. A summary and conclusions are presented.

Outline of the model

A typical warehouse configuration for the mixed single- and dual-address warehouse system is depicted in Figure 1. The three-dimensional physical space is organized into one-sided racks, separated by aisles, for 1988ButterworthPublishers

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Mathematical overview of warehousing systems: C. Malmborg et al.




2 Conveyor ~]


Racks numbered 1 Through M




I/O Point



11,21 ,

Farm rack madeup of a grid of C columns and R rows.

(1~1) Figure 1 Warehousing situation



h y. X

the order-picking vehicle to travel. Each rack is a storage grid made up of rows and columns. Items are picked up from these racks by the order-picking vehicles and brought to a conveyor (retrieval), where orders are fdled. Items remaining after order completion are stored back in the racks (storage).

The warehousing system under discussion uses a combination of single- and dual-address systems. In single-address systems, the order-picking vehicle travels between the input/output (I/O) point and a single address (location) to execute either a storage or a retrieval command, known as out-and-back order-picking discipline. Dual-address systems, on the other hand, allow the order-picking vehicles to access two addresses (locations) before returning to I/O. This practice is known as interleaving. Each dual-command cycle is assumed to be made up of a storage command and a retrieval command. Other assumptions are: 1. There is no restriction on the allocation of the space required for items among the available storage Io-

cations. This implies that an item may occupy more than one location, and a location may contain more than a single item. 2. Storage and retrieval costs are location dependent. This is due to the assumption of unconstrained rectilinear travel of the order-picking vehicle. 3. There are no constraints on item compatibility. 4. Expected cost computations ignore the short-run dynamics of system operations.

Let L = aisle width plus depth of a rack (ft) (shown in

Figure 1)
h = distance between any two adjacent grid points in a rack face (ft) fy = average frequency of transactions for item j (transactions/period) t = cost per unit distance of travel of the orderpicking vehicle ($/ft) vy = volume per unit of item j (ft) Ma = capacity of location a (ft)

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N = total number of item types sj = average size of a transaction for item j (units/transaction) I = inventory carrying charge ($/$ invested/period) Ci = value of a unit of item j ($) and Aj = replenishment cost per order for item j (S/order)
Formulation Letm = 1. . . . . M , c = 1. . . . . C, andr = 1. . . . . R be the rack, column, and row indices for the configuration shown in Figure I. To simplify the notations let a and b correspond to any two locations (m, c, r) and (x, y, z). Then the rectilinear distance from the 1/O point (0, 0, 0) to location a is Io, = Llm - 01 + h([c - 01 + Ir - 0l)

Besides the order-picking cost, the model also considers the inventory cost. A simple economic order quantity model with no safety stock is assumed for convenience. Stock setting costs or restocking costs in the staging area (Figure 1) are included in the replenishment cost component of the inventory cost. The total inventory cost,/COST is

j = , \ Qi
The total cost Z for the model is then the sum of 1-3: Z = 7ScosT + (1 - 7)DcosT + /COST (4) where 3' is the proportion of single-command cycles in the order-picking spectrum. The model objective is to find a (three-dimensional) layout which would minimize the total cost Z, subject to

and the corresponding travel cost of the order-picking vehicle is

Wo~ = tlo,

capacity constraints

~ X,,i-< M,, V a

Similarly the rectilinear distance and cost for travel between the locations a and b are
I,b = LIm - x[ + h([c - Y[ + ] r - zl) W.b = tl.b

nonnegativity constraints

X,j-> 0 V aj

The expected order-picking cost for out-and-back or single-command cycles, SCOST, is the sum of the costs of all trips of the order-picking vehicle to each location for each item per period:

ScosT = 2 ~ ~ ( W o j j ( X J Q j ) )


Discussion The decision variables of the model are the X's. For a layout with 10 racks, each with I0 rows and columns, the problem of locating 100 items is one of computing 100,000 X's, which demonstrates the dimensionality of the problem. Moreover, the objective function is nonlinear and nonconvex. Such problems have always defied closed-form solutions. Problem-specific approaches such as heuristics are implemented to get a "good" solution.

where X,,~, the decision variable, is the amount of item j stored in location a, and Qj = E,,X,,i is the item lot size. The constant multiplier 2 in the expression is to account for two-way travel of the order-picking vehicle. In the case of dual-command cycles, the expected order-picking cost, Dcosx, is the sum of the cost of the storage transaction to any location a, the interleaving travel cost from a to any other location b picked on a random selection of retrieval transactions, and the travel cost from b to the I/0 point:

Normative applications
Computer-oriented techniques, such as search heuristics, are implemented to realize a locally minimizing three-dimensional layout. The heuristics under discussion obtain a local optimum for any specific objective function in a direct and iterative fashion. Most normative applications of the warehousing problem use the concept of the cube per order index (COD. COI is the ratio of an item's storage space (cube) requirement to its storage/retrieval transactions demand Corders). A widely used policy is to allocate the items to addresses closest to the I/0 point in a sequence based on the ascending rank ordering of the COI ratios. It is an established fact that COl produces an orderpicking cost-minimizing layout for an LP formulation of the stock location model? Optimality of the COl policy has also been proven for the dual-address systems, at fixed inventory levels? Three normative applications are discussed.
Gradient search heuristic This is an iterative improvement approach which uses a rearrangement scheme to improve the cost function by moving in the direction specified by the gradient of the cost function as derived in the appendix. The

where Pb, the normalized frequency of access of location b, is defined by the ratio of the number of transactions per period from items located at b to the total number of transactions per period for all items. It is given by


fj (XhjQ) F

where F = Y. 5 j=~

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solution approach starts with the economic order quantities (EOQs) and moves sequentially from one set of inventory levels to the next so as to minimize the cost function Z. At each stage (i.e. inventory level) the COI policy specifies the "best" assignment, and a scaled step size based on user input initialization values gives the amount to move in the direction specified by the gradient. The gradient of the cost function, Gj, is obtained by computing the rate of change in the unconstrained cost function with respect to X~j, OZ/OX,j, and adding to it the incremental product relocation cost, AR'. 3. Compute current value of the cost function ZCURR = f(NEWQ) and let i = 1. 4. If i -< N, then the new trial point is Q = (Qb Q2, . . . . Q,. + AQi. . . . . QN); ZNEW = f(Q). I f / > N, then STOP. 5. ]fZNEw < ZcuRa, then ZCURR = Zr~EW;NEWQ = Q; i = i + 1. Accept this as the starting point and repeat from step 4. 6. If ZNEW -- ZCURR, then Q - - ( Q , Qz. . . . . Qi 2AOi. . . . . QN); ZNEW = f(a). 7. If ZNEW < ZCURa then ZcoRR = ZNEW; NEWQ = Q ; i = i + 1. G o t o s t e p 4 . 8. IfZNEw > ZCURa still, then Q, remains unchanged. Set i = i + 1, and go to step 4. The exploratory move yields a new basepoint NEWQ. The overall logic is shown in Figure 2. The starting


aZ* OZ ---~-~LR' oQ~ ox,,

The incremental product relocation cost is introduced in the above expression to take care of the capacity constraints. It is defined as
aR' -- v:Z

where at is the farthest location a for which X,,~ > O. The step size may be arbitrarily chosen as follows: STEP = AQmaxlmaxlGjI

j E (1,N)
Base Point

where ~Qm,x is the maximum change in Qj in any one direction, i.e., the previously mentioned user specified initialization value. The solution procedure may be summarized as follows: 1. Start by setting Qj equal to EOQ and iteration counter, K=I. 2. Assign items using the COI policy. Compute Z*, the functional value for the assignment. 3. Compute the gradient Gj and the step size STEP. 4. The next set of inventory levels is QJ~+~ = Q~ S T E P * G j V j . S e t K = K + 1. 5. Repeat steps 2--4 until Z* shows an increase. 6. Halve ~Qmax. 7. Repeat steps 2-6 until a. ~Q,,,~ _< E (a prespecified constant)

Start At

Make Exploratory Moves



b. K is greater than the iteration limit.

( S e t ) New Base Point Make Pattern Move


Pattern search heuristic This heuristic is a "direct search" sequential technique involving a sequential examination of each trial solution and comparing it to the best obtained so far in order to fix the next solution point. The method of Hooke and Jeeves 6 is a well-known, popular pattern search method. It is comprised of two moves: the exploratory and the pattern. The exploratory move explores the local behavior of the objective function; while the pattern move guides the solution from one base point to another. The exploratory move logic is as follows:
I. Start with a solution NEWQ = (EOQ, EOQz . . . . . EOQN). 2. Assume step lengths AQI in directions i = I, 2 . . . . . N.

Make Exploratory


Yes~Valu e Below That At BasePoint,

Figure 2 Flowchart for Hooke and Jeeves method

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point is the starting base by definition. The pattern move makes a simple step from the current basepoint CURRQ to another point Q': Q' : 2CURRQ - PREVQ PREVQ is the previous basepoint. Exploratory moves are performed once again to yield NEWQ. If the functional value at NEWQ is better than at Q', then NEWQ becomes the current basepoint and PREVQ is updated. Otherwise, a reduced step length is chosen, and the last base becomes the starting base and the process restarted.

Table 1 Parameter sensitivity testa'b GAMMA

0,9 % reduction in cost No. of iterations to reach "optimum" 17.57 62 0.5 20.52 33 0.25 18.70 16 0.1 22.24 37 0 21.50 14

" Responsesbased on gradient search technique.

b Executionon IBM 3081 (<15 seesof CPU time) performance of well-established methods on not-sowell-defined surfaces.

Arbitrary sequential search heuristic This is a simple sequential search technique similar to that reported in Ref. 2. All the items are initially rank ordered based on their COl ratios. Items are then picked sequentially from this ranked list, and their inventory levels are reduced arbitrarily by, say, A% (typically about 25%). The success of the move, noted by the reduction in the functional value, initiates further reduction of the inventory level by the same rate. This is repeated until there is an increase in the functional value, whereupon a smaller step size of, say, B% (about 10%) is chosen, and the process is repeated. A third stage of reduction (about 1%) may be used. The A and B percentage reductions are arbitrarily chosen. There is no restriction on the number of items considered at a time for reduction. The logic described gives only the spirit of the mechanism; considerable sophistication can be built in, depending on the problem at hand. Discussion The gradient method is an established method for minimizing a function of several variables. Theoretically, it is one of the simplest methods for which an efficient analytical basis exists. Note that the objective function maps into an N-dimensional nonconvex surface. The behavior of the heuristic is unclear on such surfaces. However, in practice the pattern search has been proven to be successful in locating minima on surfaces which contain "sharp valleys. ''6 In fact, the pattern search may be thought of as a variant of the gradient search since it computes the gradient numerically. The arbitrary search heuristic, as the name implies, does not use any well-established theoretical precept. It merely exploits the arbitrary shape of the configuration space of the problem. However, this heuristic lends an interesting possibility of comparing the
Table 2 Comparison of heuristics 'b GAMMA = 0.0

Empirical analysis
Wilson ~ has solved a problem composed of 10 items and 20 locations for a one-dimensional warehouse layout with out-and-back order-picking discipline. This problem is adapted for use in the empirical analysis of the model and is referred to as the base problem. Parameter sensitivity tests The parameter chosen for investigation is GAMMA, the proportion of single-command cycles in the orderpicking spectrum. Ideally, GAMMA is determined by the sequence of items that are picked; i.e., it is a function of the mix of orders. A GAMMA value of 1.0 represents an out-and-back warehousing situation, and a value of zero represents a dual-command order-picking situation. All other GAMMA values, between 0 and 1, represent a combination of the above two orderpicking disciplines. Table I gives the responses based on the application of the gradient search heuristic on the base problem. The percentage reduction in the total cost--i.e., the sum of order-picking and the inventory costs--does not behave in any specific fashion with varying values of GAMMA. GAMMA values of 0 and 0.5 represent a complete dual-command situation, and a balance of single- and dual-command cycles, respectively. With respect to the quality of the solution, namely, the percentage reduction in total cost, and the running time in terms of the number of iterations, these two GAMMA parameter settings seem to perform well on the average. Therefore, they are chosen as the basis for comparing the heuristics. The three heuristics, namely, the gradient search, the pattern search, and the arbitrary sequential search, are used to solve the base problem for the two GAMMA parameter settings chosen above. The responses are presented in Table 2. The arbitrary sequential search

GAMMA = 0.5 % red in Cost 14.00 27.30 27,70 Cost at EOQ (in $) 533.85 533.85 533.85 Cost at "Optimum" (in $) 424.29 414.22 413.62 % red in Cost 20.52 22.41 22.52

Cost at EOQ (in $)

Gradient search Sequential search Hooke & Jeeves 574.66 574.66 574.66

Cost at "Optimum" (in $} 451.19 417.85 415.48

" Responses based on Wilson's problem. b Execution on IBM 3081.

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Mathematical overview of warehousing systems: C. Malmborg et al. Table3 Test problems

Problem No. No. of items No. of locations No. of variables 1 50 10 500 2 60 10 600 3 80 10 800 4 125 10 1250 5 150 10 1500

Table5 Control experimenta,b~

No. of locations i 10 20 30 50 Capacity 15,000/i (ft3) 1500 750 500 300 M (ft} 19.4 13.7 11.2 8.7 No. of columns y 5 10 15 25

heuristic seems to perform as well as, if not better than, the well-defined schemes such as the gradient search. From an empirical standpoint, this reinforces the unpredictability of classical solution schemes on highly nonconvex and nonlinear surfaces.

8 50 items; item characteristics fixed. b Volume required (based on EOQ):15,000 L = 10 + 4 = 14ft.

Comparison of heuristics For comparing the heuristics, test problems with a fair dimension of realism need to be used. Five test problems of reasonable magnitude, and within the range of computational capability of the heuristics, are developed using a simple pseudorandom problem generator. The configuration of the warehouse is kept constant. The level of detail of model representation, characterized by the number of storage locations in the model (i.e., the capacity of individual locations), is also maintained the same for the test problems. The number of items vary from problem to problem. Each of the five test problems listed in Table 3 is "solved" using the three heuristics. The responses, i.e., the percentage reductions in total cost, are presented in Table 4. A two-way factorial design, as shown in Table 5, is used to compare the heuristics. The test problems form the blocking variable of the experimental design, and the heuristics form the treatments. At a 5% level of significance, the analysis of variance gives no reason to reject the null hypothesis--that there is no significant difference in the three heuristics via quality of the solution. Experimentation in optimization of model representation Since the three heuristics do not differ in terms of the quality of solution, it is sufficient from the limited analysis if any of the heuristics is considered for further analysis. The gradient search heuristic is chosen to study the impact of the level of detail in model representation, i.e., the number of locations on the various cost components. The control experiment is set up using test problem number I, and varying the model representation, as listed in Table 5. This corresponds

to varying the capacity of individual storage locations. In actual problems individual location capacities are small. An extremely precise solution is obtained when the exact locations are specified, but this can result in prohibitively high problem dimensionality. Very large location capacities can greatly reduce the number of decision variables but also yield less precise solutions where a single location in the model could correspond to a potentially large number of pallet rack addresses. Each problem in the control experiment is "solved" using the gradient search heuristic, and the level of the cost components at EOQ, and at the optimum, are graphed versus the number of storage locations (i.e., location capacity) in the model representation (Figure 3). It can be seen from Figure 3 that inventory cost is insensitive to model representation. This is intuitive since the inventory cost formulation depends only on the inventory levels Q's, and not on the X's. The orderpicking costs are sensitive to model representation, since they depend on the X's. However, out of the two cost components the single-command cost component seems to be the most sensitive to model representation. This is reasonable since the travel distance involved in a simple out-and-back scheme is definitely more than that in the case of dual commands for the same orderpicking demand. Obviously the model representation influences the computational severity of the problem. Hence, for such modeling efforts it is necessary to carefully choose the model representation to match any particular implementation, since model effectiveness (cost reduction achieved) as well as computational requirements may be affected. A simple experimentation similar to the one described above is sufficient to gain insight into the influence of the model representation on the empirical performance of the model. Such an experimentation may be viewed as an effort in optimization of

Table4 ANOVA results for comparison of heuristics*

Blocks Treatments Gradient search Hooke and Jeeves Sequential search Total Mean Prob 1 9.20 9.20 6.60 25 8.33 Prob2 !1.20 11.20 11.50 33.90 11.30 Prob3 9.40 9.57 9.53 28.50 9.50 Prob4 9.68 9.50 9.85 29.03 9.68 Prob 5 10.68 10.68 9.67 31.03 10.34 Total/Mean 50.16/10.03 50.15/10.03 47.15/9.43 147.46 9.83

* Execution on IBM 3081 and IBM PC-XT.

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+ Single Command 13 Dual Command Inventory 2 At Optimum 1 At EOQ +

+1 J

$ f -

resentation for the best implementation of the heuristic. The significance of this empirical overview of the warehousing problem is the notion that realistically sized problems can be handled with a computationally efficient and otherwise suitable model representation. With warehousing functions becoming increasingly dynamic, there is a pressing need for multicriteria optimization models, such as the one studied, to enhance utilization and reduce operating costs.

l 2 3



20.00 30.00 Number of Locations



4 5 6

Figure3 Costcurves
the model representation for best implementation of a heuristic for a given problem.

White,J. A. Warehousingin a changingworld,Proc. Fifth Int. Conf. on Automation in Warehousing. Atlanta,Georgia, 1983, pp. 3-6 Malmborg,C. J., Balachandran,S., and Kyle, D. M. A model based estimationof a commonlyused rule of thumb for warehouse layout. Appl. Math. Modelling, 1986, 10, 133-138 Wilson,H. G. Order quantity, product popularity,and the location of stock in a warehouse. AIIE Trans. 1977,9, 230-237 Harmatuck, D. J. A comparison of two approaches to stock location. Logistics Transport. Rev. 1976, 12, 282-285 Malmborg, C. J. and Krishnakumar,B. On the optimalityof the cube per order indexfor warehouseswithdual commandcycles. J. Material Flow 1987,4, 169-175 Hooke,R. and Jeeves, J. A. Direct search solutionof numerical and statistical problems. J. Assoc. Comput. Maeh. 1961, 8, 212-229

Appendix Summary and conclusions

The intent of this effort is to analyze the warehousing problem empirically, based on a multidimensional single/dual-address model. The mathematical structure of the problem reveals an objective function which maps into a nonlinear and nonconvex surface. This makes it impossible to attempt any closed-form solutions. Three normative applications of the model are outlined. The parameter sensitivity tests are used to fix the parameter settings of the model. The heuristics are then compared for the chosen parameter settings. Statistically, the heuristics do not differ significantly in terms of the quality of the solution. From an implementation standpoint the arbitrary sequential search heuristic is preferable over the other two heuristics which require the computation of the gradient of the cost function. The control experiment framework is used to study the impact of model representation on the empirical performance of the model. The empirical analysis suggests an optimization approach for choosing the model repo z e = (1 + ~) wooajwJ~ - (J - y)

( f] ]

Asfjsj + ICi


Koj = ~, (W.~ + Woo)X.j


Note: 1. i is the last item to be located at location a; i.e., it has the highest COI of all items at location a. 2. K refers to the iteration counter.

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