Mathematical model for warehouse design and product allocation

The two primary functions of a warehouse include (1) temporary storage and protection of goods and (2) providing value added services such as fulfilment of individual customer orders, packaging of goods, after sales service, repairs, testing, inspection and assembly. To perform the above functions, the warehouse is divided into several functional areas such as reserve storage area, forward (order collation) area and cross-docking. The paper presents a mathematical model and a heuristic algorithm that jointly determine product allocation to the functional areas in the warehouse as well as the size of each area using data readily available to a warehouse manager.