Integrating Mathematical Programming and Stakeholder Consensus for Warehouse Inventory Compression: A Case Study

The article discusses methods for averting irrational product placement in warehouses. This problem is relevant for many manufacturing enterprises and trade organizations. The most common embodiments of the problem are unoccupied areas, or a lack of free storage space, difficulty in locating a specific product, and challenges in shipping it from the warehouse. All this leads to unnecessary costs for the business entity and hurts its financial and economic activities. The author suggests an integrated approach to warehousing. It integrates both classical optimization models and iterative approval procedures for accounting for the human factor. The key criteria in this case are minimizing costs, the cargo flow in the warehouse, and maximizing the utilization factor of the usable area. The optimal placement of goods is to achieve maximum compression of their residues in the warehouse while minimizing their movement. The presence of two contradictory criteria makes the task a task of consistent optimization. The article discusses the possibilities for solving the optimization problem when conflicting target criteria and differing preferences are present. We are using the example of a storage room with 16 racks for water heaters and similar equipment. As a result of matching optimization procedures, it was possible to reduce the average cost of moving goods by 7.1% and increase the free warehouse area by 15 times. We performed the experiments over the seven days of the warehouse’s operation. The practical value of the research is that, through this approach, we find a compromise in conditions of conflicting opinions and interests.