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T-I analysis helps to choose between several possible combinations of storage method, storage
height, handling and automation. NAVSUP 529
contains detailed design procedures and many pages of design data to assist this analyst.
The competing systems are ranked in order of increasing cost based upon a Transaction/
Inventory Ratio (T/I) for each height range. For a given T/I ratio, the least cost system for
each height can be determined. These alternatives are then compared to determine the optimum
height.
All labor costs are graphed in units of man-hours. Conversion to dollar cost can be
accomplished at the prevailing local wage rate.
Vehicle costs are accounted for by two methods. In the case of wheeled vehicles (free path
equipment), the vehicle count is independent of inventory. In these systems, vehicle cost is
allocated on the basis of labor hours. The cost figure includes equipment cost and regular
maintenance and operating costs averaging over 10 years at 2,000 hours a year.
In the case of captive equipment, such as the carousel and the S/R machines, the number of
units is determined by inventory quantity and the number of aisles or storage units, in addition
to the transaction rate. In these systems, the equipment purchase and operating cost is made an
integral part of the storage equipment cost figure.
The storage structure and handling equipment function is one unit and cannot be separated.
Vehicle count based upon transaction rate must be compared to the count based upon inventory.
When the count based upon inventory is greater than the count based upon transactions, the total
cost figure is then adjusted to lower costs by the amount of excess equipment.
Cost equations are developed in examples in the Guide. After the cost equations are
developed, compute the Transaction/ Inventory (T/I) Ratios, which compare the two systems.
With differing costs for the transaction and inventory equations, compare the two systems and
determine a level of inventory and transactions at which annual costs are equal. Higher values
of T/I favor the system with lower transaction cost. Lower values of T/I favor the system with
the lower inventory cost.
In making the comparison, a set of two equations with two unknowns is developed. If a value
for either inventory or transactions is inserted, the other variable can be determined. This
determines the T/I Ratio Line.
A T/I ratio greater than one is unusual, since this indicates that in one day all of the
inventory rotates. Transactions will normally be a small percentage of the available storage
locations.
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