Distribution
ERP
Inventory Management
Warehouse Management
Bin Location System: How to Set Up Warehouse Locations
Last updated: October 9, 2026 · Independent guide · We do not sell rankings or coverage.
A bin location system gives every storage spot in your warehouse a unique, scannable address and records which item and quantity sit at each address in your inventory system. To set one up, you map the building, choose a naming convention, decide where to use fixed or dynamic storage, label every location, load the addresses into your ERP or WMS, and write putaway and picking rules. The system only works if the records stay accurate, so the last stage is a set of controls for changes and counts.
The bin location setup process at a glance
- Map the building and define the location hierarchy (zone, aisle, bay, level, position).
- Choose a naming convention that is fixed-width, sorts in walking order and fits your software’s code length limit.
- Decide fixed vs dynamic storage by zone, usually fixed forward pick faces and dynamic reserve storage.
- Label every location with a barcode, human-readable code and, where your system supports it, a check digit.
- Load locations into the system and assign items, including capacities, location types and default or preferred bins.
- Set putaway rules that direct receipts to the right location in a defined order of preference.
- Set picking and replenishment rules so picks come from the right bin and pick faces refill before they run out.
- Maintain the system with change control, location-based cycle counts and periodic re-slotting.
| Stage | Responsible | Accountable / consulted | Main output |
|---|---|---|---|
| 1. Map the building | Warehouse supervisor | Warehouse manager; facilities consulted | Scaled layout with every rack, shelf and floor area |
| 2. Naming convention | Warehouse manager | Operations lead; ERP admin consulted | Written location code standard |
| 3. Fixed vs dynamic | Warehouse manager | Operations lead; purchasing consulted | Zone plan stating the storage method for each zone |
| 4. Labeling | Warehouse supervisor | Warehouse manager | Every location labeled and scan-tested |
| 5. System load | ERP or WMS administrator | Warehouse manager; finance consulted | Location master and item-to-bin assignments |
| 6 and 7. Putaway, pick and replenishment rules | ERP or WMS administrator | Warehouse manager; pickers consulted | Configured rules, tested on real orders |
| 8. Maintenance | Inventory control lead | Warehouse manager; controller informed | Count results, change log, re-slot list |
Stage 1: Map the building and define the location hierarchy
The warehouse supervisor produces a scaled layout showing every rack run, shelving unit, floor storage area, staging lane and dock door, with dimensions noted.
From the drawing you choose the levels of your hierarchy. A five-level hierarchy covers most buildings: zone (an area with a shared purpose, such as bulk, forward pick or cold), aisle, bay or section (the vertical column between two uprights), level (the shelf or beam height) and position (the slot within a level). Include receiving, staging, shipping, returns and QC areas too, so the system can track stock that is not on a shelf.
The common failure is mapping only the racks. Stock on the floor at an aisle end or in an overflow cage then has no address and drops out of the system.
Stage 2: Choose a location naming convention
The naming convention is the hardest decision to change later, because it appears on labels, reports and every pick list. Write it down as a one-page standard before you print anything.
| Segment | Format | Example | Rule of thumb |
|---|---|---|---|
| Zone | 1 letter | P (forward pick) | Keep the list short and documented |
| Aisle | 2 digits | 03 | Leading zeros so 03 sorts before 10 |
| Bay | 2 digits | 12 | Odd numbers on one side, even on the other |
| Level and position | 1 letter + 1 digit | C2 | Level A at the floor, counting up |
Illustration: the format above is an example, not a standard. It produces a code such as P-03-12-C2, which a picker reads as forward pick zone, aisle 3, bay 12, third level, second slot.
Use a fixed width for every segment so codes sort correctly. Number bays so the sort order matches the walking path; odd bays on one side and even on the other lets a picker work both faces of an aisle in one pass. Avoid characters that look alike on a worn label, such as the letters I and O and the digits 1 and 0.
Check the length against your software. Business Central bin codes can contain up to 20 characters, including separators (Microsoft Learn, updated August 21, 2025). If you share location data with trading partners, GS1’s GLN extension component (Application Identifier 254) identifies a sub-location such as a shelf within a site in up to 20 characters (GS1 UK, no date shown).
Stage 3: Decide fixed vs dynamic slotting by zone
Fixed slotting gives each SKU a permanent home location. Pickers learn where items live and replenishment is simple, but the slot stays reserved even when the item is out of stock.
Dynamic slotting, also called random or floating storage, puts stock in any suitable open location and records where it went. It uses space better but only works if every move is scanned.
A common setup for mid-sized distributors is fixed forward pick faces with dynamic reserve racking above or behind them. Decide which SKUs earn a forward pick slot using pick frequency and cube; our guide to warehouse slotting covers that analysis.
The decision maps onto software settings. In Business Central, a fixed bin keeps its bin content record when empty, “and the bin is therefore selected again as soon as it has been replenished” (Microsoft Learn, updated February 28, 2023). NetSuite’s basic Bin Management requires bins to be associated with items before you can use them, while Advanced Bin / Numbered Inventory Management lets you use any bin for any item without that association (Oracle NetSuite Help, no date shown), which is the setting a dynamic reserve zone needs.
Stage 4: Label every location
Print labels from the location master so the printed and system codes cannot differ. Each label should carry a barcode of the location code and the same code in large human-readable text. On multi-level racking, use arrows on beam labels to show which level each refers to. Floor locations need floor labels or overhead signs.
Check digits are the main control at this stage. A check digit is a short code printed on the location label next to the barcode. The picker enters it to confirm the location, so scanning a label from the wrong slot no longer satisfies the system. Infor WMS lets you set location scan, check digit or no verification per zone for RF-assisted replenishment (Infor, no date shown). Stoneridge Software, a Microsoft Dynamics consulting partner, describes how Dynamics AX Advanced Warehouse Management stores a check digit on each location and requires it on the mobile device during picking when location confirmation is turned on for the mobile device menu item (Stoneridge Software, July 25, 2018).
Location labels are separate from rack load plaques. ANSI MH16.1-2023 requires rack systems to be identified with one or more load plaques on or near the rack, updated if the rack is modified, according to a summary by Damotech, which sells rack repair and protection products (Damotech, October 12, 2023). Moving beam levels to create new bin positions can change the rating. Scan-test every label with your handhelds before go-live.
Stage 5: Load locations into the system and assign items
The ERP or WMS administrator creates the location master by import or a bin generation tool. Business Central’s Bin Creation Worksheet can generate bins from From No. and To No. ranges for rack, section and level, with an optional field separator (Microsoft Learn, updated August 21, 2025). In Dynamics 365 Supply Chain Management, every location needs a location profile that sets its location format and type and whether it allows mixed items and mixed inventory statuses (Microsoft Learn, updated August 6, 2024).
For each location, record its type, its capacity by quantity, volume or weight, and whether it allows mixed SKUs. Then assign fixed or preferred bins and move opening stock into bins.
Plan the cut-over with finance. Business Central will not let you set up a location to use bins while it has open item ledger entries (Microsoft Learn, updated August 21, 2025), so a common workaround is to move stock to a temporary location, enable bins, and move it back by bin. In NetSuite, item costing is not calculated per bin and only on-hand quantity is tracked per bin; available, committed and backordered quantities are not (Oracle NetSuite Help, no date shown).
Stage 6: Set putaway rules
Putaway rules turn a receipt into a task with a specific location. Good rules follow an order of preference: the item’s fixed pick face if it has room, then a reserve location that already holds the same item, then an empty location of the right size and storage class.
Business Central implements this as put-away templates. Template lines are tried in sequence, and a Find Fixed Bin line can make fixed bins the first choice; the suggested bin also depends on bin rankings and on the minimum and maximum quantities set for fixed bins (Microsoft Learn, updated May 2, 2025). Warehouse class codes keep items such as frozen goods in bins and zones that meet their storage conditions (Microsoft Learn, updated February 28, 2023).
NetSuite offers a simpler model. With the Use Preferred Bin on Item Receipts preference, received items go to the preferred bin by default, or you can set that quantity to zero and assign bins later in the Bin Put-Away Worksheet (Oracle NetSuite Help, no date shown).
Control putaway with a location scan and a report of overridden suggestions. Watch for stock left in receiving for days, which is on hand but cannot be picked.
Stage 7: Set picking and replenishment rules
Picking rules decide which bin a pick comes from when an item sits in more than one place. Typical choices are forward pick face first, partial locations before full ones, and FIFO or FEFO when lot or expiry dates matter.
Business Central’s advanced warehousing suggests picks from bin content with a high bin ranking and suggests replenishment moves from lower-ranking to higher-ranking bins (Microsoft Learn, updated February 28, 2023). Rank forward pick faces high and bulk reserve low. NetSuite’s picking tickets list the preferred bin first when several bins are needed, and list bins in descending order of quantity when the preferred bin is empty (Oracle NetSuite Help, no date shown).
For replenishment, set a minimum and maximum on each fixed pick face, generate replenishment moves when quantity falls below the minimum, and run them before the pick wave rather than during it. A pick face that runs empty mid-shift sends pickers into reserve without a task, which puts the system out of step with the shelf. Our analysis of what mis-picks cost distributors covers the downstream cost of that kind of error.
Stage 8: Maintain the system
The inventory control lead owns three controls. First, change control: no one adds, renames or removes a location except through the location master, and labels are reprinted from the system. Second, location-based cycle counts that confirm both the item and the quantity at each address; our guide to cycle counting software explains count frequency and variance approval. Third, a review of slot assignments when demand shifts.
Record discrepancies in a virtual adjustment location rather than editing quantities in place. Business Central, for example, uses an Adjustment Bin Code to record discrepancies from warehouse journal registrations and physical inventory when directed put-away and pick is on (Microsoft Learn, updated May 18, 2026).
Metrics to track
- Location accuracy: the share of counted locations where the item and quantity both match the system.
- Dock-to-stock time: hours from receipt to confirmed putaway.
- Putaway override rate: the share of putaways where staff chose a location other than the one suggested.
- Pick accuracy and lines picked per hour: the outcomes a good location system should improve.
- Pick face stockouts: the number of times a picker found an empty fixed location with stock in reserve.
- Location utilization: occupied locations as a share of usable locations, by zone.
How software supports each stage
Entry-level inventory systems cover stages 2, 4 and 5 for small operations. inFlow Cloud, for example, lets you break locations into sublocations for aisles and bins and star one as the default, on selected plans it does not name in its help article (inFlow, updated February 6, 2026).
Mid-market ERP adds stages 6 and 7. Business Central offers basic bins with default bins and, at the advanced level, bin types, rankings, capacities and put-away templates. NetSuite offers preferred bins and the Bin Put-Away Worksheet, and its separate NetSuite WMS adds pick and putaway strategies based on criteria you define and prioritized by sequence number (Oracle NetSuite Help, no date shown).
A full WMS such as Dynamics 365 Supply Chain Management adds location profiles and work confirmations that require a worker to register the location on a mobile device (Microsoft Learn, updated November 20, 2025). If you are comparing options, our warehouse management software research center lists the main products.
How we researched this
We read the pages ranking for “bin location system” in October 2026, mostly vendor blogs that define the term and suggest a code format but rarely cover putaway and picking rules, software settings or controls. We then used vendor documentation from Microsoft, Oracle NetSuite, Infor and inFlow, GS1 UK guidance, and secondary sources labeled where the publisher sells related products. All sources were checked on October 9, 2026. We have no commercial relationship with any vendor named.
Related guides
Frequently asked questions
What is the best way to number warehouse bin locations?
Use a fixed-width code built from zone, aisle, bay, level and position, such as P-03-12-C2, with leading zeros so codes sort correctly. Number bays so the sort order matches the walking path, and letter levels from the floor up.
Should I use fixed or random bin locations?
A common setup is fixed locations for forward pick faces and random (dynamic) locations for reserve storage. Fixed slots make picking predictable, while dynamic reserve storage uses space better, provided every move is scanned.
Can a basic inventory app track bin locations?
Some entry-level tools record a sublocation or bin for each item, and inFlow documents sublocations for aisles and bins. Once you need directed putaway, bin rankings or replenishment triggers, you need an ERP with warehouse functions or a WMS.
How do I move an existing warehouse onto bin locations?
Label locations, load the location master, then move stock into bins item by item, counting as you go. Check cut-over rules first; Business Central will not enable bins at a location with open item ledger entries.
Sources
- Microsoft Learn, Create Bins (Business Central), updated August 21, 2025. learn.microsoft.com
- Microsoft Learn, Set Up Locations to Use Bins (Business Central), updated May 18, 2026. learn.microsoft.com
- Microsoft Learn, Set Up Locations and Items for Directed Put-away and Pick (Business Central), updated August 21, 2025. learn.microsoft.com
- Microsoft Learn, Set Up Put-away Templates (Business Central), updated May 2, 2025. learn.microsoft.com
- Microsoft Learn, Design Details: Warehouse Setup (Business Central), updated February 28, 2023. learn.microsoft.com
- Microsoft Learn, Create a location profile (Dynamics 365 Supply Chain Management), updated August 6, 2024. learn.microsoft.com
- Microsoft Learn, Set up mobile devices for warehouse work (Dynamics 365 Supply Chain Management), updated November 20, 2025. learn.microsoft.com
- Oracle NetSuite Help, Bin Management, no date shown. docs.oracle.com
- Oracle NetSuite Help, Advanced Bin / Numbered Inventory Management, no date shown. docs.oracle.com
- Oracle NetSuite Help, Warehouse Management Strategies (NetSuite WMS), no date shown. docs.oracle.com
- Infor (vendor), WMS 11.5 RF-assisted replenishment verification methods, no date shown. docs.infor.com
- Stoneridge Software (Microsoft Dynamics consulting partner), Required Setup for Check Digits in Dynamics AX Advanced Warehouse Management, July 25, 2018. stoneridgesoftware.com
- inFlow (vendor), How to track sublocations in inFlow (aisles, bins, etc.), updated February 6, 2026. inflowinventory.com
- GS1 UK, What is a GLN extension component?, no date shown. gs1uk.org
- Damotech (sells rack repair and protection products), Do I need load capacities displayed on my racks?, October 12, 2023. damotech.com
Sherman Hsieh
Independent analysis of enterprise software — ERP, CRM and more
