<div>Smart warehouses have become more popular in these days, with Automated Guided Vehicles (AGVs) being used for order pickups. They also allow efficient cost management with optimized storage and retrieval. Moreover, optimization of resources in these warehouses is essential to ensure maximum efficiency. In this thesis, we consider a three dimensional smart warehouse system equipped with heterogeneous AGVs (i.e., having different speeds). We propose scheduling and placement policies that jointly consider all the different design parameters including the scheduling decision probabilities and storage assignment locations. In order to provide differentiated service levels, we propose a prioritized probabilistic scheduling and placement policy to minimize a weighted sum of mean latency and latency tail probability (LTP). Towards this goal, we first derive closed-form expressions for the mean latency and LTP. Then, we formulate an optimization problem to jointly optimize a weighted sum of both the mean latency and LTP. The optimization problem is solved efficiently over the scheduling and decision variables. For a given placement of the products, scheduling decisions of customers’ orders are solved optimally and derived in closed forms. Evaluation results demonstrate a significant improvement of our policy (up to 32%) as compared to the state of other algorithms, such as the Least Work Left policy and Join the Shortest Queue policy, and other competitive baselines.</div>