1.1 The purpose of the research project has been outlined in Appendix 5 of the report to the Research Fellowship Council Meeting on 10th November, 1955. 1.2 In this first report we consider the simplest model of a warehouse only, that is a warehouse that receives and issues goods in the same unit and in which storage locations, each holding exactly one unit, can be arranged in the form of rectangular blocks (7,xatfrple : pallet racking) with unhindered excess to any unit located in the block. We consider that there are N different types of goods to be stored, that the average rate of movement through the warehouse for each type is known, and that input and output is variable. 1.3 We assume that the aim is to minimise handling cost or handling effort, and that this can be measured by a value which is directly proportional to 2 horizontal and 1 vertical distances from reference points (goods receiving and despatch points) to unit storage location in the block. Further, in this simple model, no stock policies such as FI20 etc. are imposed....[cont.]