6.3 Storage zones & segregation rules

Physical inventory segregation is a key component of material control. A “rejected” digital flag in the ERP is less effective if the component reel is sitting on an open shelf next to active stock, where it might be picked by mistake. Enforcing a “Status = Location” policy helps prevent these errors. When a part’s digital status changes, its physical location should reflect that change.

The segregation map

Warehouse geography must be defined by clear status boundaries. Mixing digital statuses within the same physical bin must be avoided.

Zone 1: main stores (the “go” zone)

Content: Materials with an ERP status of Available, Pass, or Unrestricted.
Access: Open to authorized Picking and Kitting staff.
Logic: Material in this zone is considered verified and ready to be consumed by production without further checks.

Zone 2: incoming & inspection (the “hold” zone)

Content: Material recently received or actively awaiting Quality Control (QC) verification.
The Status: QC Hold or Pending Inspection.
Logic: If QC has not formally cleared the material, it stays in this zone. This area should be separated from Main Stores (e.g. using specific racking or clear floor markings).

Zone 3: quarantine (the “hold” cage)

Content: Suspect components, failed QC inspections, incorrect revisions, or damaged freight.
The Status: Quarantine or Blocked.
The Requirement: A secure physical barrier (like a wire cage or locked cabinet) is generally recommended to prevent accidental use.
Logic: Access is typically restricted to Quality Engineering or designated Warehouse Leadership.

Zone 4: the disposition zone (scrap/RTV)

Content: Material slated for disposal or Return To Vendor (RTV) shipment.
The Status: Scrap Pending or RTV Pending.
Logic: Material must be segregated clearly to prevent items from accidentally returning to active stock. Rendering high-value intellectual property scrap, such as proprietary custom PCBs, unusable before disposal should be considered to mitigate gray-market risks.

Visual control & labeling standards

Since digital ERP statuses are not visible on the warehouse floor, clear, color-coded visual management must be used to indicate material status.

Green (Accepted): Applied only after receiving and QC requirements are met.
Yellow (Hold): Applied to material awaiting a decision or inspection.
Red (Reject/Quarantine): Placed prominently to indicate blocked material. Applying this over the supplier’s picking barcode should be considered to prevent accidental RF scanning.
Blue/Purple (Customer Supplied Material - CSM): Used to identify and segregate material legally owned by specific clients, helping prevent commingling with internal stock.

Overflow management

When the primary Quarantine area reaches capacity, care must be taken to maintain segregation. Placing rejected boxes onto unassigned shelves in Main Stores must be avoided, as this increases the risk of quality escapes.

The Short-Term Solution: If the permanent quarantine cage is full, a temporary overflow area must be designated. Prominent markings, like red shrink wrap or clear “Quarantine Overflow” signage, must be used to maintain visual segregation.
The Long-Term Solution: The accumulation of blocked inventory must be addressed.
- Protocol: If items remain in Quarantine for an extended period (e.g. > 30 days), a Material Review Board (MRB) discussion must be prompted to drive a disposition decision (Scrap, RTV, or Use-As-Is).
- Protocol: If the decision is to scrap, the disposal must be executed efficiently to free up physical space.

Recap: Storage Zones & Segregation Rules

Zone	ERP Status	Physical Requirement	Visual Control
Main Stores (Go)	Available, Pass, Unrestricted	Open access for Picking/Kitting. No mixing with other statuses.	Green label
Incoming & Inspection (Hold)	QC Hold, Pending Inspection	Physically separated from Main Stores (e.g., specific racking).	Yellow label
Quarantine (Hold Cage)	Quarantine, Blocked	Secure physical barrier (e.g., wire cage, locked cabinet). Access restricted to Quality/Warehouse Leadership.	Red label (consider over supplier barcode)
Disposition (Scrap/RTV)	Scrap Pending, RTV Pending	Clear segregation to prevent return to stock. Consider destruction of high-value IP (e.g., custom PCBs).	—
Overflow (Temporary)	Quarantine, Blocked	Designated area with prominent markings (e.g., red shrink wrap, signage). Prompt MRB for items >30 days.	Red markings