Order Quantity, Product Popularity, and The Location of Stock in a Warehouse

In the assignment of warehouse space to inventory items, the amount of space allocated to each item is traditionally determined on the basis of inventory or production cost considerations. Actual assignment of items to storage locations within the warehouse is then carried out independently, with the space requirements taken as given. Assuming an out-and-back order picking procedure and the simple economic order quantity inventory model, it is demonstrated that the quantity and location problems must be considered simultaneously in order to achieve a minimum total cost (order picking cost plus inventory cost). An iterative solution procedure, based on a gradient search, is developed and applied to a test problem.