A solution procedure to minimize total carousel related costs has been developed under the carousel throughput rate and total storage capacity requirements. The carousel related costs include carousel facility costs which are proportional to the number of carousels and carousel operating costs which are directly related to the moving distances of carousels. The number of carousels is dependent upon the size of a carousel and the moving distances are determined by the size of a carousel, storage item assignment to each carousel, and the item positions in a carousel. When the storage/retrieval requirements for each storage item is equal, an optimal algorithm has been developed. When the storage/retrieval requirements is unequal, a heuristic solution procedure has been developed because of the complexity of the problem.