A method controlling a material handling system having a plurality of storage locations, a track adjacent the storage locations wherein the track includes a plurality of interconnected vertical and horizontal sections, and a plurality of vehicles for delivering items to the storage locations or retrieving items from the storage locations, comprising the steps of: driving one of the vehicles along the track along a continuous path changing from a horizontal direction to a vertical direction, wherein the vehicle carries a first item that the vehicle retrieved from a first storage location; identifying a second storage location at which a second item is to be retrieved by the vehicle; identifying a storage location available to receive the first item, wherein the step of identifying a storage location available to receive the first item comprises minimizing the travel distance along the track between the storage location identified for receiving the first item and the storage location where the second item is located; driving the vehicle along the track to the storage location identified as being available to receive the first item; transferring the first item into the storage location identified as being available to receive the first item wherein the step of transferring the first item comprises actuating a transfer mechanism on the vehicle; driving the vehicle along the track to the storage location at which the second item is located after the vehicle discharges the first item; transferring the second item onto the vehicle and conveying the second item to an output location, wherein the step of transferring the second item comprises actuating the transfer mechanism on the vehicle to pull the item onto the vehicle; transferring the second item from the vehicle at the output location. driving one of the vehicles along the track along a continuous path changing from a horizontal direction to a vertical direction, wherein the vehicle carries a first item that the vehicle retrieved from a first storage location; identifying a second storage location at which a second item is to be retrieved by the vehicle; identifying a storage location available to receive the first item, wherein the step of identifying a storage location available to receive the first item comprises minimizing the travel distance along the track between the storage location identified for receiving the first item and the storage location where the second item is located; driving the vehicle along the track to the storage location identified as being available to receive the first item; transferring the first item into the storage location identified as being available to receive the first item wherein the step of transferring the first item comprises actuating a transfer mechanism on the vehicle; driving the vehicle along the track to the storage location at which the second item is located after the vehicle discharges the first item; transferring the second item onto the vehicle and conveying the second item to an output location, wherein the step of transferring the second item comprises actuating the transfer mechanism on the vehicle to pull the item onto the vehicle; transferring the second item from the vehicle at the output location.