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A simulation-based optimization approach to design optimal layouts for

block stacking warehouses

Shahab Derhami, Jeffrey S. Smith, Kevin R. Gue

PII: S0925-5273(19)30352-4
DOI: https://doi.org/10.1016/j.ijpe.2019.107525
Reference: PROECO 107525

To appear in: International Journal of Production Economics

Received date : 5 June 2019

Revised date : 13 September 2019
Accepted date : 15 October 2019

Please cite this article as: S. Derhami, J.S. Smith and K.R. Gue, A simulation-based optimization
approach to design optimal layouts for block stacking warehouses. International Journal of
Production Economics (2019), doi: https://doi.org/10.1016/j.ijpe.2019.107525.

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A simulation-based optimization approach to design optimal

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layouts for block stacking warehouses

Shahab Derhami1 , Jeffrey S. Smith2 , and Kevin R. Gue3

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School of Industrial and Systems Engineering, Georgia Institute of Technology, Atlanta,
GA 30332, USA
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Department of Industrial and Systems Engineering, Auburn University, Auburn, AL
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36849, USA
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Department of Industrial Engineering, University of Louisville, Louisville, KY 40292, USA

September 13, 2019

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Abstract
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Storing pallets of products on top of one another on the floor of a warehouse is called block stacking.

The arrangement of lanes, aisles, and cross-aisles in this storage system affects both utilization of the

storage space and material handling costs; however, the existing literature focuses exclusively on lane
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depths and their impact on space utilization. This paper fills this gap and studies the optimal layout

design for block stacking, which includes determining the numbers of aisles and cross-aisles, bay depths,

and cross-aisle types. We show that lane depths affect material handling cost in addition to space

utilization and develop a simulation-based optimization algorithm to find optimal layouts with respect

to both of these objectives. We also propose a closed-form solution to the optimal number of aisles in
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a layout. The results of a case study in the beverage industry show that the resulting layout can save

up to ten percent of the operational costs of a warehouse. We present the computational efficiency of

the algorithm and some insights into the problem through an exhaustive experimental analysis based on

various test problems that cover small- to industrial-sized warehouses.

Keyword : block stacking, warehouse design, lane depth, facility layout, space utilization, cross-aisle

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Storing pallets of products on top of one another on the floor of a warehouse is called block stacking.
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27 The arrangement of lanes, aisles, and cross-aisles in this storage system affects both utilization of the
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storage space and material handling costs; however, the existing literature focuses exclusively on lane
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30 depths and their impact on space utilization. This paper fills this gap and studies the optimal layout
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32 design for block stacking, which includes determining the numbers of aisles and cross-aisles, bay depths,
33 and cross-aisle types. We show that lane depths affect material handling cost in addition to space
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35 utilization and develop a simulation-based optimization algorithm to find optimal layouts with respect
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to both of these objectives. We also propose a closed-form solution to the optimal number of aisles in
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38 a layout. The results of a case study in the beverage industry show that the resulting layout can save
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40 up to ten percent of the operational costs of a warehouse. We present the computational efficiency of
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41 the algorithm and some insights into the problem through an exhaustive experimental analysis based on
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43 various test problems that cover small- to industrial-sized warehouses.
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Keyword : block stacking, warehouse design, lane depth, facility layout, space utilization, cross-aisle
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1 Introduction
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51 Block stacking refers to stacking pallets of stock keeping units (SKUs) on top of one another in lanes on
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53 a warehouse floor. This storage system is usually operated without using any storage racks, which makes
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55 it inexpensive to implement but challenging in terms of space planning because lower pallets cannot be
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reached until the ones stacked on top and in front of them are retrieved. Block stacking is widely used for
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58 warehousing and cross-docking, especially when pallets are heavy and large. Examples of such environments
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60 are bottled beverage and home appliance companies.
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4 Block stacking is mainly operated under the shared (also known as random) storage policy, in which,
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6 unlike the dedicated storage policy, lanes are not dedicated to SKUs and an empty lane is available to all
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8 SKUs. However, to avoid blockage and relocation of pallets, a lane is temporarily dedicated to the SKU
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10 that occupies its first pallet position until it is fully depleted. This restricts utilization of the storage space
11 because some unoccupied pallet positions in a partially occupied lane will not be available to other SKUs.

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13 This effect is called honeycombing, and the waste associated with it accumulates in a lane until it becomes
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15 entirely occupied or emptied [3]. Aisles also contribute to the amount of wasted space because they are used

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17 for accessibility rather than storage. There is a trade-off between honeycombing and accessibility waste with
18 respect to space utilization: shallow lanes generate less honeycombing waste but impose more aisles on the
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20 layout, while the opposite is true for deep lanes [3].
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22 The other influential factor that must be considered when designing a warehouse layout is transportation
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24 cost. The number of cross-aisles and their configurations (locations, directions, etc.) affect the material han-
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dling cost. This effect is escalated in warehouses operated under continuous multi-command pick-up/drop-off
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27 operations, where vehicles (pickers) perform replenishment or retrieval operations continuously in a working
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29 shift before going to their home/parking—a situation that frequently occurs in block stacking warehouses.
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In such warehouses, a replenishment or a retrieval operation starts by moving a vehicle from its last drop-off
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location to the pick location. Hence, vehicles travel between any points of the warehouse rather than only
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34 traveling from/to well-defined P/D points and storage locations. In such environments, it is very difficult
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36 to develop analytical models to formulate and assess the total transportation cost because the distance that
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38 vehicles travel depends on the sequence of the retrieval and replenishment operations and their assignment
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to the vehicles. Simulation is an appropriate tool to accurately estimate traveled distance for such cases
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41 while considering the stochastic nature of the problem.

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43 Material handling is usually performed in block stacking warehouses by unit-load forklifts that perform
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45 pallet retrieval and replenishment operations continuously based on a load assignment policy. Cross-aisles
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are used to facilitate travel. However, like aisles, they are not used directly for pallet storage and are
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48 subsequently considered a waste of storage space.
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50 We define bays in a layout as a set of adjoining lanes of the same depth separated by aisles (see Figure
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52 1). To better utilize the storage space, we assume that bays are back to back and that every pair of bays
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54 shares an aisle. Bay depths also affect the travel distances. Consider the two layouts presented in Figure 1.
55 One layout has two bays, each being seven pallet positions deep, and the other has the same dimensions but
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57 consists of six bays, each two pallet positions deep. The total area in both layouts is the same. Assume that
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59 aisles and cross-aisles are one pallet position wide and that pallets are stacked up to one pallet. The total
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61 distance a forklift has to travel from the P/D point to replenish a pallet located in the very first position
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23 Figure 1: Travel distance vs. space utilization with respect to the number of aisles.
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26 of a lane in the top bay of the left layout (as highlighted in Figure 1) is 44 pallet positions, which includes
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28 traveling 32 pallet positions in the cross-aisle and 12 pallet positions in the lane (round trip). This distance
29 for a pallet located in the same position at the bottom bay is 14 pallet positions, which includes traveling
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31 12 pallet positions inside the lane and 2 pallet dispositions to cross the aisle. Similarly, the total vertical
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33 distance to replenish all pallet positions in both layouts is
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36 Layout with deep bays: 9((14 + 12+, . . . , +2) + (44 + 42+, . . . , +32)) = 2898 pallet positions.
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38 Layout with shallow bays: 9((4 + 2) + 2(14 + 12) + 2(24 + 22) + (34 + 32)) = 1944 pallet positions.
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41 A longer distance must be traveled to replenish the layout with deeper bays. However, this layout has
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43 more storage positions (i.e., better space utilization). The total horizontal travel distance is the same for
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45 both cases and was disregarded in the comparison. Derhami et al. [11] used simulation to show there is a
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47 trade-off between space utilization and transportation costs with respect to bay depths. Moreover, studying
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cross-aisles is meaningless without considering the material handling cost. Hence, both of these objectives
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50 must be considered when designing a layout.

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52 In this paper, we develop a simulation-based optimization algorithm to find the optimal number of aisles,
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54 cross-aisles, and bay depths in the layout of a block stacking warehouse. Our algorithm optimizes two
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objectives: (1) maximizing space utilization; and (2) minimizing material handling costs. We develop a
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57 closed-form solution model to determine the optimal number of aisles in the layout and use it along with an
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59 experimental analysis to restrict the search space for the algorithm. Implementing the algorithm for a case
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4 in the bottled beverage industry shows that significant improvement is possible.
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6 The remainder of this paper is organized as follows. In section 2, we review the related research and
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8 depict the gap in the literature along with the contributions of this paper. Then, we present the proposed
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10 algorithm in section 3. We describe the three main components of the algorithm, develop a model to find
11 the optimal number of aisles in the layout, and show how the model is used to tighten the search space for

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13 our algorithm. Finally, we present a case study and extensive numerical analysis in section 4 and evaluate
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15 the results.

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19 2 Related research
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Most of the papers studying warehouse layout focus on conventional warehouses with storage racks [37, 17, 2,
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23 18]. They mostly aim to design a layout to minimize the transportation cost (or distance) for order picking
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[19, 20, 30, 38, 7, 4, 14]. Interested readers are referred to [9] for further details on this research. The
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27 other objectives considered in warehouse layout design problems are operational costs [39, 28, 43], product
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allocation [27, 32, 25], storage space utilization[10, 6], warehouse throughput [29, 31, 23], and operating
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30 policies [8, 41, 36, 21, 1].
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32 There is a stream of research focused on the effect of cross-aisles on transportation costs. Roodbergen and
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34 de Koster [33] developed multiple heuristics to find the shortest path for order picking when multiple cross-
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aisles exist. Vaughan and Petersen [40] proposed a heuristic to find the shortest path for order picking and
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37 studied the effect of adding cross-aisles on transportation costs. They showed that the number of cross-aisles
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39 needed to maximum transportation efficiency depends primarily on the length of the storage aisles relative
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41 to the length of the cross-aisles. Roodbergen and Vis [34] proposed an analytical model to approximate the
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43 average length of an order picking route for two routing policies in a layout with one block (two cross-aisles).
44 Their approximation can be used as an objective function in a nonlinear model to obtain the optimal number
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46 of aisles. Roodbergen et al. [35] developed an analogous approximation for a layout with multiple blocks.
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48 Only a few papers have studied the design of block stacking layouts. Kind [22] considered the trade-off
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50 between honeycombing and accessibility waste to find the optimal lane depth. He proposed a model to
51 estimate the lane depth that optimizes this trade-off. However, he did not provide any insights into how
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53 to derive the model. Matson [26] developed another model to approximate the optimal lane depth under
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55 instantaneous replenishment (i.e., infinite storage rates). Her model was appropriate for warehouses receiving
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57 products from suppliers.
58 Goetschalckx and Ratliff [15] showed that if multiple lane depths are allowed, the set of optimal lane
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60 depths follows a continuous triangular pattern. They developed a dynamic programming algorithm to select
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21 Figure 2: Space utilization vs. travel distance [11].
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24 the set of optimal lane depths from a set of finite allowable lane depths to minimize the occupied floor
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26 space. Larson et al. [24] proposed a heuristic to design a class-based layout. Their three-phase algorithm
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28 characterizes the aisle directions and storage zone dimensions, determines the storage types, and assigns the
29 required storage space to each storage zone.
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31 Derhami et al. [12] proposed a closed-form solution to find the lane depth that maximizes volume utiliza-
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33 tion under finite storage rate constraints. Their model can be used for warehouses located in a manufacturing
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35 facility. They showed that using the traditional lane depth model with a finite replenishment rate produces
36 lane depths up to twice as deep as they should be, but the resulting loss of storage space might not be
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38 significant. This is because the space utilization curve, as a function of lane depth, is relatively flat as the
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40 lane depth increases.
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42 Derhami et al. [13] showed that the traditional lane depth model [12, 26, 22] underestimates accessibility
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waste when used to design a layout because it computes accessibility waste only for the time that a lane is
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45 occupied. They developed a new waste function to compute the total waste of storage volume as a function
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47 of bay depth and used it in a mixed integer program to find the optimal bay depths. Their model allows
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49 multiple bay depths in a layout and minimizes the waste of space by assigning SKUs to their preferred bays.
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Derhami et al. [11] used simulation to study the trade-off between space utilization and transportation
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52 costs with respect to bay depths. Using a common bay depth assumption, they simulated multiple layouts
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54 with various numbers of aisles (i.e., different bay depths). Figure 2 shows the simulation results for a
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56 warehouse with 50 SKUs. As the graph shows, utilization of the storage volume increases as the number
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of aisles increases from two to four (i.e., bay depth decreases), where it reaches its peak. It then starts
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59 declining as the bay depth becomes shallower because accessibility waste increases. On the other hand, the
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4 total travel distance improves as the bay depth decreases. The improvement becomes modest after a certain
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6 point, and then the travel distance remains steady. Hence, transportation costs improve at the cost of lower
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10 Most of the research on the design of block stacking systems focuses exclusively on the utilization of the
11 storage space [26, 12, 13] rather than transportation costs or both. As discussed, bay depths and cross-

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13 aisles affect both material handling costs and space utilization. Designing a block stacking layout includes
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15 determining bay depths and the number of aisles and cross-aisles; therefore, both space utilization and

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17 transportation costs must be considered. Considering a conventional block stacking layout similar to the one
18 presented in Figure 3, this research answers the following questions:
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21 • How many cross-aisles should a layout have?
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23 • How many aisles should a layout have?
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26 • How deep should the bays be?
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28 We develop a simulation-based optimization algorithm that finds optimal layouts with respect to space
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30 utilization and material handling costs. This paper contributes to the current warehouse design literature
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32 in three primary ways:
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34 • We find the optimal layouts with respect to two main objectives of the layout design problem (space
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36 utilization and material handling costs). This allows the model to determine the optimal number of
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38 aisles and cross-aisles while accounting for the effects these variables have on one another;
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40 • We develop a closed-form solution for the optimal number of aisles in a layout. In contrast with
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42 the traditional lane depth model, which optimizes the trade-off between block width and depth, it
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44 minimizes the total wasted storage space in the entire layout rather than a block; and
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46 • The simulation-based modeling allows the algorithm to capture the stochastic variations that exist in a
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48 real world situation. The stochastic variables considered in the simulation model are production rates,
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50 demand rates, production batch quantities, and forklift travel times. Moreover, the simulation model
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is an appropriate tool for accurately assessing the transportation cost in continuous multi-command
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53 pick-up/drop-off operations; analytical models are unable to accurately estimate the total distance
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55 traveled by vehicles in this context because it depends on the sequence of retrieval and replenishment
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57 operations, which is stochastic, and their assignments to the vehicles.
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20 Figure 3: Components of a conventional block stacking layout.
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23 3 Designing optimal layouts
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The major factors in designing a block stacking layout are the numbers of aisles and cross-aisles, bay depths,
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27 and cross-aisle types (unidirectional vs. bidirectional). Our algorithm takes all these design factors as
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29 decision variables and attempts to find the set of layouts optimizing space utilization and transportation
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costs. It simulates different potential layouts by varying values of the above variables and produces a Pareto
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32 frontier with respect to two objectives: maximizing space utilization and minimizing transportation costs.
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34 It has three steps: layout scenario generation, pre-simulation assessment, and simulation.
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36 The algorithm first generates different layout scenarios for simulation. The layouts are different from
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38 one another in terms of the numbers of aisles and cross-aisles and the cross-aisle types. We use analytical
39 and empirical approaches to bound the number of aisles and cross-aisles in the layout scenario generation
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41 and to efficiently limit the number of layouts being evaluated by the simulation without disregarding any
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43 optimal solutions. In the next step, the layouts are assessed with respect to the total travel distance, and key
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45 measurements, for example, the travel distances between all potential origins and destinations, are computed
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and stored to prevent having to re-calculating them when executing any event in the simulation. Finally,
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48 the generated layouts are evaluated by a steady state simulation and compared in terms of space utilization
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50 and material handling costs. Figure 4 demonstrates the flowchart of the proposed algorithm, and Table 1
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52 presents the definition of parameters and variables used in the algorithm. The components of the algorithm
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are described in detail in the following sections.
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13 Table 1: Table of notation
14 amin minimum number of aisles allowed in layout generation
15 amax maximum number of aisles allowed in layout generation

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16 cmin minimum number of cross-aisles allowed in layout generation
17 cmax maximum number of cross-aisles allowed in layout generation
18 Qi production (storage) batch quantity of SKU i
19 Pi production (storage) rate of SKU i
20 λi demand (retrieval) rate of SKU i
21 Hi height of a pallet of SKU i, in units of distance (e.g., meters. feet, etc.)
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Zi stackable height of SKU i, in units of pallets
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Sw warehouse width, in units of pallets
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warehouse height, in units of distance (e.g., meters. feet, etc.)
26 na number of aisles
27 A aisle width, in units of pallets
28 xi assigned lane depth to SKU i, in units of pallets
29 I set of all SKUs
30 x̄ common bay depth, in units of pallets
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31 Ns number of SKUs stored in the warehouse
32 Sl warehouse length, in units of pallets
33 n∗a optimal number of aisles
34 x̄∗ optimal common bay depth, in units of pallets
35 α parameter to set amin
36 β parameter to set amax
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37 (xo , y o ) coordinate of the origin for a shipment

38 (xd , y d ) coordinate of the destination for a shipment
39 Nv total number of vehicles required
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Du total distance loaded forklifts traveled in the simulation
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Dl total distance unloaded forklifts traveled in the simulation
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43 Ts simulation period
44 Tw simulation warm-up period
45 V average speed of a forklift
46 nc number of cross-aisles
47 C cross-aisle width, in units of pallets
48 Nb number of bays in the simulated layout
49 Nl number of lanes in a bay
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50 WijH honeycombing waste generated at the jth lane of bay i in simulation

51 Lmin minimum number of lanes between two subsequent cross-aisles
52 Lmax maximum number of lanes between two subsequent cross-aisles
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24 Figure 4: Flowchart of the proposed model.
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26 3.1 Layout scenario generation
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29 The optimization problem at hand is a multi-objective optimization problem with two objectives: maximizing
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space utilization and minimizing transportation costs. The first step of our algorithm is generating layout
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32 scenarios for simulation. The number of aisles and cross-aisles and the cross-aisle types are decision variables
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34 and change over different layout scenarios. To perform a complete search of the solution space and obtain a
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36 comprehensive Pareto frontier, all potential layouts must be simulated. If the lower and upper bounds on the
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numbers of aisles and cross-aisles are denoted by amin , amax , cmin , and cmax , respectively, the total number
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39 of layouts generated for simulation by assuming a common bay depth is (amax − amin + 1)(cmax − cmin + 1).
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41 Hence, the ranges of [amin , amax ] and [cmin , cmax ] determine the number of layouts that must be evaluated
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43 by the simulation and affect the computational difficulty and solution quality of the algorithm. These ranges
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45 are usually too wide; this imposes too many potential layouts for simulation. The number of potential
46 layouts grows exponentially as the size of the warehouse increases because more aisles and cross-aisles are
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48 required. However, the simulation process is computationally intensive, and evaluating all possible scenarios
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52 We narrow the search space by bounding the number of aisles and cross-aisles allowed for generating
53 layout scenarios. The bounds must be tight enough to prevent an extensive computational burden from
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55 simulating too many scenarios but large enough to ensure that no potentially optimal solution is omitted.
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57 Once the bounds are set, the layout scenarios are generated using all possible combinations of the allowed
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59 values for the number of aisles and cross-aisles. In the next sections, we describe an analytical approach to
60 bound the number of aisles in the layout generation and describe how we do the same for the cross-aisles.
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18 Figure 5: Changes in the inventory of SKU i over its cycle time, Pi > λi .
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21 3.1.1 Bounding the number of aisles
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To avoid simulating too many layout scenarios with only marginal differences, we use a common bay depth
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policy. That is, all bays in the layout should have the same depth.This setup is widely used in practice
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27 because it discards the need for lane depth assignment to SKUs. This policy significantly shrinks the search
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29 space by disregarding many layouts that have the same number of aisles but slightly different bay depth
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profiles. For example, if bay depths are allowed to be between 5 to 25 pallets, then for every single layout of
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32 (amax − amin + 1)(cmax − cmin + 1) layouts, all variations of bay depths between 5 to 25 pallets for which
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34 the sum of bay depths and dedicated space to the aisles equals the warehouse length must be considered for
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36 simulation. This results in an enormous number of layouts differ only slightly from one another.
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38 Thus, setting the number of aisles in each scenario gives the bay depths (note that the dimensions of the
39 layouts are kept fixed in all scenarios). We develop a closed-form solution to obtain the optimal number of
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41 aisles to maximize space utilization under the common bay depth constraint and use it to determine amin
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43 and amax . This analytical model assumes deterministic production and demand rates, but this assumption
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45 is relaxed later in the simulation model.
46 Consider SKU i produced in batches of Qi pallets and stored at a rate of Pi pallets per unit of time.
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48 Assume it is retrieved at a rate of λi pallets per unit of time, where Pi > λi and the replenishment starts
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50 when the inventory reaches zero. Pallets of this SKU are Hi feet high and can be stacked up to Zi pallets.
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52 The changes in the inventory of this SKU are shown in Figure 5. Assume set I that consists of Ns SKUs is
53 stored in a warehouse whose length and width are S l and S w , respectively, and its aisles are A pallets wide.
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55 The following lemma determines the optimal number of aisles and lane depth for the warehouse.
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4 Lemma 1. The optimal number of aisles in the warehouse is obtained by
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8 4S w A
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11 Proof. As shown in [13], the average wasted storage volume generated in the layout is given by

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13 Sh X X 1 

14 W̄ = AS h S w na + xi + (Qi (S h − Zi Hi ) − Zi Hi )(Pi − λi ) − λi (2S h − Zi Hi ) , (2)
15 2 2Pi Zi
i∈I i∈I

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where S h is the warehouse clear height (in units of distance, i.e., inches, feet, etc.), na is the number of
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19 aisles, and xi is the assigned lane depth to SKU i. Variables xi and na are the only decision variables in (2);
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21 therefore, the optimal bay depths are obtained by optimizing (2) with respect to xi and na . Note that these
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23 two variables are dependent; that is, the sum of aisle widths and bay depths equals the warehouse length.
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The constant part of (2) is trivial in optimization and can be removed. Assuming a common bay depth,
26 denoted by x̄, we have
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28 xi = Ns x̄, (3)
29 i∈I
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31 where Ns is the number of SKUs. Replacing (3) in (2), the optimal common bay depth is obtained by solving
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33 the following constrained optimization problem:
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35  
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36 Minimize AS h S w na + S h Ns x̄, (4)
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38 s.t.
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40 2na x̄ + na A = S l , (5)
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42 x̄, na ∈ Z+ . (6)
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Constraint (5) guarantees that the sum of bay depths and aisle widths is equal to the warehouse length.
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47 Solving (5) for x̄ and substituting x̄ into the objective function (4) produces an unconstrained optimization
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49 model whose objective function is
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52 Minimize AS S na + S h (S l − na A). (7)
53 4na
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Differentiating (7) with respect to na , setting the results equal to zero, and solving for na gives n∗a . Expression
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57 (7) is continuously differentiable, has only one extreme point, and its second derivative with respect to na is
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59 non-negative. Hence, it is a unimodal function and n∗a is its global optimum.
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4 Variable n∗a must be an integer. To have an integer value for n∗a , we evaluate the two nearest integers
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6 smaller and greater than n∗a in (7) and select the integer that produces a smaller waste of space. Once n∗a is
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8 determined, the optimal common bay depth is obtained by
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S l − n∗a A
11 x̄∗ = . (8)

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14 When x̄∗ is not integer, arranging the layout into exactly 2n∗a equally deep bays is not possible. In this case,
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we create 2n∗a bays with the depth of bx̄∗ c pallets and split the remaining S l − n∗a (2bx̄∗ c + A) pallet positions

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18 equally among all bays.
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From an operational standpoint, deep lanes limit storage space availability, as it takes longer to fully
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21 deplete or replenish a deep lane. Storage space availability becomes more important when the SKU variety
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23 is high. In such a situation, it is important to have sufficient storage space available (empty) at any time to
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provide storage lanes for incoming SKUs and allow flexibility in production planning without any concerns
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27 about storage space availability. The following proposition discusses another property of n∗a for the layout
28 design problem.
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Lemma 2. n∗a maximizes storage space availability.
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33 Proof. Proof is provided in Appendix A.
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36 Using n∗a , we set amin = αn∗a and amax = βn∗a for layout scenario generation. Parameters α and β are
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set through a numerical experiment presented in section 4.1.
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3.1.2 Bounding the number of cross-aisles
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43 For each layout scenario, two alternatives are considered: unidirectional and bidirectional cross-aisles. Bidi-
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45 rectional cross-aisles are twice as wide as the unidirectional cross-aisles. Hence, in the layouts with unidirec-
46 tional cross-aisles, we put twice as many cross-aisles as the respective layouts with bidirectional cross-aisles.
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48 This allows a fair comparison between the two alternatives in terms of space utilization. For example, a
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50 layout with three bidirectional cross-aisles is compared to the layouts with six unidirectional cross-aisles.
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52 Cross-aisles are evenly spaced from each other, and the distance between any two subsequent cross-aisles is
53 the same. Unidirectional cross-aisles are added to the layout in pairs with opposite directions.
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55 Cross-aisles facilitate material handling in a warehouse. Developing a closed-form model to estimate the
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57 transportation cost (or total travel distance) as a function of the number of cross-aisles (similar to the method
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59 used for the number of aisles) is not possible because the shipment operations are performed continuously,
60 and the travel distance for a shipment depends on the sequence of operations assigned to a vehicle (i.e., the
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26 Figure 6: Components of the layout and their relative configurations.

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29 last drop-off location of a vehicle must be known). For this reason, we use an experimental approach with
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31 simulation in section 4.1 to analyze the total travel distance with respect to the number of cross-aisles and
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33 determine cmin and cmax .
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36 3.2 Pre-simulation assessment
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38 We compute the rectilinear shortest distances between all potential origin and destination pairs in the layout
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40 and store them for simulation use. This is to avoid recalculating travel distances every time an event is
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42 initiated. For each pair of layout scenarios that only differ in cross-aisle type (i.e., the same numbers of aisles
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and cross-aisles but one with unidirectional and the other with bidirectional cross-aisles), we calculate the
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45 total travel distance between all potential pick-up and drop-off locations and consider only the layout with
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47 the smaller total travel distance for simulation. The total space dedicated to the cross-aisles is the same in
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49 both alternatives; therefore, the layout with a smaller total travel distance is the non-dominated solution.
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Figure 6 presents the relative locations of the main components of the layout. The locations of production
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52 lines, vehicle parking, and outbound docks, as well as the number of P/D points, are given and can differ
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54 from those presented in Figure 6. Although the main purpose of this model is not to optimize the location
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56 of these components, one can analyze their arrangements by simulating different scenarios while keeping the
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58 remaining design factors fixed. The following distances are required in the simulation:
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60 • Distances between all storage lanes.
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4 • Distances from storage lanes to the production line and vice versa.
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7 • Distances from storage lanes to outbound docks and vice versa.
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9 • Distances from storage lanes to the vehicle parking and vice versa.
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14 • Distances from outbound docks to the vehicle parking.
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17 • Distances from the vehicle parking to the production line.
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19 A rectilinear distance between two locations is obtained by adding the distances traveled along the x-axis
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21 and y-axis. Considering both unidirectional and bidirectional cross-aisles adds an extra level of complexity
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23 to the calculations because the directions of the move and the cross-aisle must match. As Figure 6 illustrates,
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we use a Cartesian coordinate system and assume that the origin is located at the southwest corner of the
26 layout. Instead of designing a web of P/D locations to find the shortest path, we take advantage of the
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28 special shape of the layout to simplify calculations.
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30 The shortest path between two points is given by the path that travels through one cross-aisle and at
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32 most two aisles (the aisles that the origin and destination points are located in). This is highlighted in Figure
33 6 by two paths connecting an example shipment between two P/D locations in two different bays. All other
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35 alternatives that produce the same travel distance are not evaluated for the sake of computational efficiency.
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37 The shortest path for each move is a direct path that passes either through the closest cross-aisle located
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39 north of the origin and allows moving toward the destination or a similar cross-aisle located south of the
40 origin (see Figure 6). Hence, the distances of the origin and destination points to the eligible cross-aisles (the
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42 closest cross-aisles located north and south of the origin that allow moving toward the destination) must be
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44 taken into account for each move.
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46 Consider a west-to-east move in Figure 6. The travel distance along the shortest path through the
47 cross-aisle located north of the origin is
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49 
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50 
    
|y c − y o | + y c − y d  + xd − xo  if y c ∈
/ ∅,
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DW →E = (9)
52 
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53 ∞ otherwise,
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where y c is the y-coordinate of the closest cross-aisle located north of the origin heading east, xo and
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57 y o are the coordinates of the origin, and xd and y d are the coordinates of the destination. If an eligible
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59 cross-aisle does not exist, the distance is set to infinity for this path.
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Similarly, the travel distance along the shortest path from the southern cross-aisle, DW →E , is obtained
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6 by replacing the coordinates of the respective cross-aisle in (9). The shortest path is then obtained by
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9 N S
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14 travel distance along the y-axis. Expressions (9) and (10) are valid in the layout in Figure 6 for all distances
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16 between the storage lanes. They are also valid for distances between the storage lanes and pick-up points,
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18 outbound docks, and vehicle parking if they are located on the short sides of the warehouse. Similarly, they
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are also valid for the distances between any pair of outbound docks, pick-up points, and vehicle parking if
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21 they are located on the short sides of the layout. If either of these components are on the long sides of the
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23 warehouse, the shortest distance between the storage lane and that component is simply obtained by
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26 DS→N = DN →S = y o − y d  + xo − xd  . (11)
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This is because aisles are bidirectional (to provide enough space to the forklifts to easily maneuver when
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31 replenishing/retrieving lanes), and the cross-aisles located in front of those locations are bidirectional for the
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33 ease of transportation. Expression 11 is also used to calculate distances between pairs of outbound docks,
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35 pick-up points, and the vehicle parking if either the origin or the destination is located on the long sides of
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the layout.
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40 3.3 Simulation model
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42 The core of the model is an event-oriented simulation of pallet storage and retrieval operations along with
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44 material handling for a given layout. The output reports performance metrics pertinent to space utiliza-
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46 tion and transportation costs. The model has four sources of variation: production rates, demand rates,
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production batch quantities, and vehicle transportation times. The company that we studied for our case
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49 study uses automated guided vehicles (AGV) for material handling. Accordingly, the simulation model is
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51 built assuming operations are handled by AGVs. If vehicles are operated by humans, human factors such as
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53 learning affect the performance of the system because order picking is a repetitive and cognitive task that
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involves human learning [5, 16, 42]. Incorporating the human learning factors in simulation is an extension
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56 to our model that provides more accurate prediction of the performance of the system for such cases.
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58 The simulation model consists of nine procedures: three events to simulate a replenishment operation,
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60 three events for a retrieval operation, two events for a vehicle release, and a warm-up event. In a replenish-
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4 ment operation, a vehicle is sent to pick up a produced (or inbound arrival) pallet from the production line
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6 (or inbound dock) and deliver it to a storage lane. In a retrieval operation, a vehicle is sent to pick up a
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8 pallet from a storage lane and deliver it to an outbound dock. The simulation events are as follows:
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10 • Production pick-up: The closest available vehicle to the pick-up point (production line or inbound
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12 dock) is dispatched to pick up a waiting pallet, and a “lane drop-off” event is scheduled taking into
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14 account the travel distance. The storage lane is determined for the pallet.
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16 • Lane drop-off: The dispatched vehicle picks up the pallet from the production line or inbound dock
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18 and starts traveling to the assigned storage lane. A “replenishment” event is scheduled considering the
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20 travel distance.
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22 • Replenishment: The pallet is stored in the target lane, and a “release vehicle” event is scheduled at
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24 the simulation time plus epsilon time unit.
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• Outbound pick-up: The closest vehicle to the pick-up lane is dispatched to pick up the requested SKU
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28 from its assigned lane. A “retrieval” event is scheduled taking the travel distance into consideration.
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30 An outbound dock is assigned for drop-off.
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• Retrieval: The dispatched vehicle picks up the requested pallet from the lane and starts traveling to
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34 the assigned outbound dock. A “truck drop-off” event is scheduled considering the travel time.
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37 • Truck drop-off: The requested SKU is delivered to the assigned outbound dock and a “release vehicle”
38 event is scheduled at the simulation time plus epsilon time unit if there is no waiting pick-up request.
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41 • Release vehicle: The empty vehicle is sent to parking. A “Park vehicle” event is scheduled considering
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43 the travel distance.
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45 • Park vehicle: The released vehicle is parked and becomes available.
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48 • Warm-up: This event is executed once at a given time and resets all variables used for performance
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52 Figure 7 shows the simulation flowchart and steps. The simulation model uses an event list to queue and
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54 execute all scheduled events based on their execution times. We assume the production and outbound plans
55 are known at the beginning of each working shift (i.e., which SKUs and how many are produced/shipped),
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57 though the exact times are stochastic. They are added to the simulation event list at the beginning of
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59 each working shift. Outbound events are sequenced based on the truck schedules, truck capacity, and SKU
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31 Figure 7: Flowchart of the discrete event-based simulation model.
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34 demands. The “Release vehicle” event is scheduled at the simulation time plus epsilon time unit to allow
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36 awaiting pick-up requests to be processed before an idle vehicle is sent to parking.
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38 Along with many performance metrics pertinent to space utilization and transportation costs, such as
39 total distance traveled by vehicles and vehicle utilization, the simulation model computes two major perfor-
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41 mance metrics reflecting the objective functions: the required number of vehicles (Nv ) and the percentage of
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43 wasted space (W ). We purposefully defined these two metrics such that they are sufficiently tangible for the
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45 decision making and easily convertible to a dollar amount. Multiplying Nv and W by the unit vehicle cost
46 and unit space cost yields the total transportation cost and space cost for the layout. Space cost includes
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48 direct and indirect space-related costs such as rent, insurance, lights, building amortization and repairs.
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50 The material handling cost includes the costs of operating vehicles such as forklift costs and amortization,
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52 maintenance, and labor.
53 Nv is obtained by summing the distance traveled by all vehicles in the simulation and then dividing the
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55 result by the total distance that a vehicle can travel. That is,
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58 Du + Dl
Nv = , (12)
59 V ∗ (T s − T w )
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5 Table 2: Preliminary experimental study to fine tune parameters: parameters used in the algorithm and the
6 minimum and maximum numbers of aisles and cross-aisles observed in the solutions of the Pareto frontiers.
7 Parameter values Pareto frontier solutions
Test problem
8 ∗
na amin amax cmin cmax M in(na ) M ax(na ) M in(nc ) M ax(nc )
9 10 SKUs 2 1 3 2 5 2 3 2 5
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13 150 SKUs 6 4 9 2 15 6 9 2 9
14 200 SKUs 7 5 11 2 17 7 11 2 5
15 300 SKUs 8 6 12 2 20 8 12 2 7

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18 where Du , and Dl are the total loaded and unloaded distances traveled by all vehicles, T s is the simulation
19 time, T w is the warm-up period, and V is the average speed of a vehicle. The percentage of wasted space
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21 is obtained by summing the total wasted space in lanes and dividing it by the total space-time. The total
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23 wasted space in the warehouse is the sum of waste from honeycombing and accessibility [10]. The volume
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dedicated to the aisles and cross-aisles comprises the accessibility waste [13] and honeycombing waste is
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generated in the lanes as they are being replenished and retrieved[3]. Hence the percentage of wasted space
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28 is obtained by
29 PNb PNl
S h (na AS w + nc CS l )(T s − T w ) + i=1 j=1 WijH
30 W = , (13)
(S w S l S h )(T s − T w )
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33 where nc is the number of cross-aisles, C is the cross-aisle width, Nb is the number of bays, Nl is the number
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of lanes in a bay, and WijH is the honeycombing waste at the jth lane of bay i. All simulation scenarios are
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36 compared with respect to these two objective functions, and non-dominated solutions produce the Pareto
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38 frontier.
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42 4 Numerical experiments
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45 In this section, we perform an experimental analysis to fine tune the parameters of the algorithm. Then, we
46 test the algorithm on a case in the beverage industry. Using data from the case study, we design various test
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48 problems to analyze the computational efficiency of the model and obtain some insights from the generated
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52 The proposed model was coded with Python 2.7 and run on a cluster whose nodes are equipped with ten
53 Intel Xeon processors E5-2660 (2.6GHz) and 128 GB of RAM. We ran the algorithm in parallel on ten cores.
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55 Following the simulation setups proposed in [11], we set the warm-up period to one month, the start-up
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57 inventory to zero, and the simulation time to 8 months. To reduce the number of replications, we used
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59 common random numbers across scenarios.
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7 We conducted a numerical experiment to set amin , amax , cmin , and cmax such that the computational effort
8 is minimized while no potentially optimal solution is removed from the search space. We generated random
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10 test problems with various sizes (10 to 300 SKUs) and tested the algorithm by setting wide ranges for the
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12 parameters without considering the resulting computational times. The goal was to analyze the solutions in
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14 the Pareto frontiers and use them to efficiently tighten the range of the input parameters.
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17 Lmax , respectively. Then, cmin = (S w + Lmax )/(Lmax + 2C) and cmax = (S w + Lmin )/(Lmin + 2C), where
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19 C is the width of a unidirectional cross-aisle in units of pallets. We tested the following setups: α = 0.8,
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21 β = 1.5, Lmin = 10, and Lmax = 40. Table 2 shows the resulting amin , amax , cmin , and cmax for each test
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problem and the minimum and maximum numbers of aisles and cross-aisles observed in the solutions of the
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Pareto frontier for each test problem.
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26 As Table 2 shows, the smallest number of aisles observed in all solutions is n∗a for all test problems,
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28 although smaller numbers were allowed in the experiment. This is because decreasing the number of aisles
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beyond n∗a deteriorates both objective functions. Therefore, the efficient value for α will be one for the final
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31 experiments. Increasing the number of aisles reduces space utilization but improves the total travel distance.
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33 However, as highlighted in [11] and shown in Figure 2, the improvement rate declines as the number of aisles
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35 grows and becomes negligible once the layout has many aisles. Beyond this point, savings in transportation
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costs do not justify the loss of storage space. Taking this into account, we set β = 1.4.
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38 The maximum number of cross-aisles observed in the Pareto frontiers is smaller than cmax for almost
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40 all test problems except the 10 SKU test problem, for which it is equal to cmax . This shows that cmax
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42 can be reduced without risking the removal of potentially optimal solutions. The largest Lmin that yields a
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44 cmax equal to or larger than the maximum number of cross-aisles observed in all Pareto frontiers is obtained
45 by setting Lmin = (0.1)S w . This setup limits cmax while preserving all solutions (including the 10 SKUs
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47 problem, for which this condition yields cmax = 5). We set cmin = 2 because we assumed, for ease of
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49 transportation, that one cross-aisle exists next to the long side of the warehouse.
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52 4.2 A case study in the beverage industry
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We used the algorithm to design the warehouse layout for one of the production facilities of a leading supplier
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56 of bottled beverages in North America. The company produces various types of bottled beverages and runs
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58 dozens of plants and warehouses across the U.S.A., Canada, and Mexico. The storage system in all of these
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60 facilities is mainly block stacking. The selected facility produces more than 100 SKUs and stores them in a
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5 Table 3: Results of a case study in the beverage industry.
6 Current layout Optimal layout
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8 Bay depths (pallets) (32 , 72 , 82 , 93 , 101 , 112 , 124 , 133 , 151 ) (222 , 218 )
9 Number of aisles 11 5
10 Number of cross-aisles 4 16
11 Cross-aisle type Unidirectional Unidirectional

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12 Wasted space (%) 47.69 65.13
13 Required number of vehicles 38.58 34.43
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32 Figure 8: Pareto frontier of the case study vs. the current layout, solutions format:(na ,nc , cross-aisles type).
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368,000 ft2 storage area. Material handling is performed by unit-load forklifts. The main characteristics of
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36 the current layout and the results from simulating it are presented in Table 3.
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38 The Pareto frontier generated by the algorithm is presented in Figure 8. Quantifying the objectives with
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40 their costs produces an optimal layout presented in Table 3. Like most facilities located in suburban areas,
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the material handling cost in our studied facility is greater than the space cost. As a result, the optimal
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43 solution is the layout that most reduces the travel distance by using 16 unidirectional cross-aisles in contrast
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45 with the current layout, which has four cross-aisles of the same type. This solution dedicates four times the
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47 current amount of space to the cross-aisles and consequently has lower space utilization compared to the
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current layout, but it improves the total travel distance by approximately 10%. The optimal layout has fewer
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50 than half the aisles of the current layout. This shows that the benefit of shallow lanes on transportation
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52 costs did not justify the cost of lost space utilization. Implementing the proposed layout would save more
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54 than half a million dollars annually on the total operational costs of the studied facility.
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5 Table 4: Computational experiments.
6 Warehouse # of simulated # of layouts Avg. Simulation time Computational
Problem amin amax cmin cmax
size (ft) layouts in Pareto frontier per scenario (sec) time (sec)
7
10 SKUs 200 × 400 2 3 2 8 14 2 16 36
8 50 SKUs 400 × 720 3 5 2 10 27 6 32 123
9 100 SKUs 400 × 920 5 7 2 10 27 10 54 160
10 200 SKUs 760 × 1400 7 10 2 10 36 9 237 977
11 300 SKUs 920 × 1600 8 12 2 11 50 12 337 1746

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400 SKUs 1080 × 1840 9 13 2 11 50 12 518 2676
12 500 SKUs 1200 × 2080 10 14 2 11 50 8 536 3084
13 600 SKUs 1320 × 2200 11 16 2 11 60 10 544 3421
14 700 SKUs 1440 × 2400 12 17 2 11 60 8 658 4177
15 800 SKUs 1600 × 2600 13 19 2 11 70 8 1034 11520
900 SKUs 1720 × 2880 14 20 2 11 70 12 1057 16080

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1000 SKUs 1840 × 3000 14 20 2 11 70 14 1159 17155
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34 Figure 9: Pareto frontier of the 500 SKUs test problem, solutions format:(na ,nc , cross-aisles type).
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37 4.3 Experimental analysis

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39 We randomly generated 12 test problems using the characteristics of the SKUs in our case study such as
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41 production rates, demand rates, and production batch quantities. The test problems cover small (10 SKUs)
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43 to industrial-sized (1000 SKUs) warehouses and are used to evaluate the computational performance of the
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proposed algorithm and obtain some insights into the Pareto frontier of the problem.
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46 Table 4 shows the computational times and the number of scenarios simulated for each test problem.
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48 The simulation times ranged from 16 to 1159 seconds depending on the size of the problem. The total
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50 computational time of the algorithm grows from 36 seconds (for the smallest problem) up to 17155 seconds
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for the largest test problem. The total computational times are smaller than the sum of the simulation times
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53 for all scenarios because the simulation scenarios were run in parallel. The computational times show that
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55 although the model simulates multiple scenarios in a steady state, it is capable of finding the Pareto frontier
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57 in a reasonable time for large-sized test problems.
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Figures 9 and 10 demonstrate the Pareto frontiers for test problems with 500 and 1000 SKUs, respectively.
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60 These test problems present extremely large warehouses that store a high number of SKUs and have high
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20 Figure 10: Pareto frontier of the 1000 SKUs test problem, solutions format:(na ,nc , cross-aisles type).
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23 inventory turnover. For example, forklifts in the 1000 SKUs test problem perform, on average, 3470 picks per
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hour. This explains the relatively large number of vehicles in these test problems. The following observations
26 and insights are inferred:
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29 • Solutions in the Pareto frontiers can be clustered into two groups. The first group covers a few solutions
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at the top left of the Pareto frontiers that impose a small amount of wasted space at the cost of high
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32 transportation costs. The layouts in this group have few cross-aisles and aisles. The second group
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34 consists of a larger set of solutions located at the bottom of the Pareto frontiers. These solutions
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36 mainly incur lower transportation costs and higher wasted space as a result of including more cross-
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38 aisles and aisles in the layout. The decision maker should select an optimal solution from the first
39 group when the unit space cost is considerably greater than the unit transportation cost. Otherwise,
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41 the optimal solution is among the second group.

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• Increasing the number of cross-aisles from two (bidirectional or four unidirectional) to three improves
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45 transportation costs significantly with only a marginal loss in space utilization. The transportation
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47 costs continue to decrease but with marginal improvements as the number of cross-aisles increases,
48
49 while the utilization of the storage space deteriorates considerably. Therefore, adding too many cross-
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51 aisles not only reduces space utilization but also does not necessarily improve the transportation costs,
52 as pickers must traverse the cross-aisles as well.
53
54
55 • Fixing the number of cross-aisles, transportation costs (or total travel distance) decrease as the number
56
of aisles increases (consequently, bay depths decrease); however, the resulting loss in space utilization
57
58 may not justify the improvement. This is in line with the findings of [11].
59
60
61 • The locations of production lines and outbound docks (P/D points) significantly affect the material
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2
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4 handling cost, especially when the warehouse length-to-width ratio is large. In such cases, lanes are
5
6 arranged along the long side of the layout as presented in Figure 6. Our experiments show that
7
8 arranging the production lines and outbound docks on the long sides of the warehouse, as presented
9
10 in Figure 6, may result in up to 25% savings in material handling costs.
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12 • The improvement gained in transportation costs by adding a new aisle is not as significant as those
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14 gained by adding a new cross-aisle.
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16 • Unidirectional cross-aisles appear more frequently in the Pareto frontiers. However, the effects of the
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18 cross-aisle type on traffic congestion must also be taken into account.
19
20
• The number of solution points in a Pareto frontier increases as the size of the warehouse grows. This
21
22 is mainly because the range of the parameters increases.
23
24
25
re-
26 5 Conclusions
27
28
29 In this paper, we developed a simulation-based optimization algorithm to simultaneously optimize utilization
30
of the storage space and transportation costs in the layout of a block stacking warehouse. We developed a
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32 closed-form solution to find the optimal number of aisles to maximize utilization of the storage space. Our
33
34 algorithm finds the optimal numbers of aisles and cross-aisles and the cross-aisle type.
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36 A case study in the beverage industry shows that considering both space utilization and transportation
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38 costs leads to a different layout than when focusing exclusively on only one of these objectives and the
39 obtained layout significantly improves the operational costs. Exhaustive computational experiments show
40
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41 that the model finds the Pareto frontier in a reasonable time for large-sized test problems. Although adding
42
43 new cross-aisles improves the total travel distance, the improvement rate decreases as more cross-aisles are
44
45 added, while the reduction in utilization of the storage space continues. Hence, adding new cross-aisles
46 beyond some level does not justify the loss of storage space even if the transportation unit cost is higher
47
48 than the space unit cost.
49
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50 The solutions in the Pareto frontiers can be arranged into two clusters: layouts with high space utilization
51
52 but less efficiency in terms of transportation and those with high transportation efficiency but lower space
53
utilization. This can help the decision makers to identify the optimal layout considering transportation and
54
55 space unit costs. Layouts in the first group contain two to three cross-aisles, whereas the solutions in the
56
57 next group have relatively many cross-aisles (up to ten).
58
59 The number of aisles and consequently bay depths affects the material handling cost in addition to space
60
utilization. We found that increasing the number of aisles in a layout leads to a reduction in travel distance;
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2
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4 however, this reduction becomes less significant as the number of aisles grows. We also found that adding a
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6 new cross-aisle to the layout results in a greater improvement in material handling cost than adding a new
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8 aisle.
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2
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4 A Proof of lemma 2
5
6
7 Proof. Once a lane is fully occupied, S h xi storage volume becomes unavailable for the period that the lane
8
9 is partially or fully occupied. As described in [13], the total lane-time that SKU i occupies in Ti1 is
10
11  
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of
12 ((Iimax − 1) + (Iimax − Zi xi − 1) + (Iimax − 2Zi xi − 1) + · · · + (Iimax − Ki Zi xi )) , (A.14)
Pi − λi
13
14
15 where Iimax is the maximum inventory level for SKU i and obtained by

pro
16
17
18 Qi (Pi − λi )
Iimax ≈ , (A.15)
19 Pi
20
21
22 and Ki is the number of required lanes for storage and is given by
23
24
25 Ki ≈
re-Qi (Pi − λi )
. (A.16)
Pi Z i x i
26
27
28 Similarly, the total lane-time that SKU i occupies in Ti2 is
29
30  
1
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31 (Iimax + (Iimax − Zi xi ) + (Iimax − 2Zi xi ) + · · · + (Iimax − Ki Zi xi )) . (A.17)
32 λi
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34
Summing (A.14) and (A.17) produces the total lane-time that SKU i occupies in its cycle time. Multiplying
35
36 the result by S h xi gives the total occupied volume-time, and multiplying it by λi /Qi , the cycle time of SKU
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38 i, gives the average unavailable storage space occupied by SKU i
39
40
S h xi S h (Qi (Pi − λi ) − 2λi )
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41 Ui = + . (A.18)
42 2 2Pi Zi
43
44
Adding unavailable storage space dedicated to the aisles gives the total unavailable storage space in the
45
46 warehouse
47  X X S h (Qi (Pi − λi ) − 2λi )
h w Sh
48 Ū = AS S na + xi + . (A.19)
49 2 2Pi Zi
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i∈I i∈I
50
51 The variable part of (A.19) is equivalent to the variable part of (2). Therefore, assuming a common bay
52
depth, n∗a minimizes (A.19).
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