BACHELOR OF PROCUREMENT AND SUPPLY CHAIN MANAGEMENT III

LOGISTICS AND DISTRIBUTION MANAGEMENT

TOPIC 5: CUSTOMER ORDER MANAGEMENT

Customer Order Management invlves Customer Order Fulfillment and Customer Order Picking.

1.0 Working Definitions

Yhe following are some of the definitions which help in understanding customer order fulfillment:
• Order fulfillment — This is the sequence of steps involved in processing an order to the satis-
faction of the customer and making the necessary changes in the inventory records. It may also
include processing of returns and re-adjustment of the records. .
• Order generation costs — These are costs incurred in obtaining orders from customers, such
as advertising, promotions, and sales person visit costs.
• Order cycle time — This is the period between placing of one set of orders and the next.
• Order — This is a confirmed request by one party to another to buy, sell, deliver, or receive
goods or services under specified terms and conditions. When accepted by the receiving party,
an order becomes a legally binding contract.
• Order entry — This is the process of recording an order into the company's entry system.
Once an order has been entered, the company can view information about this order and make
necessary changes for the entry.
• Order fill — This is the number of orders processed within a period without stockouts or need
to back order, expressed as a percentage of total number of orders processed within that period.
• Filling costs — These are costs incurred in filling orders from customers, such as clerical,
filing, data processing and transmission, transportation, warehousing, and payment collection
costs.
• Order getter — This is the type of salesperson who increases the firm's sales revenue by
acquiring orders from new customers and more orders from the existing customers.
• Order taker — This is the type of salesperson who only collects orders but does not make any
diligent attempt to find new customers, or to persuade existing customers to increase the size or
frequency of their orders.
• Order picking — This is the process of withdrawing items from inventory to fulfill an order.
• Order processing time — This is the expected period of time between the date an order is
placed and when it is shipped. Factors that may affect processing time include inventory levels,
errors in order picking, weather, public holidays, etc. Use of a warehouse management system
that automates various aspects of the picking and packaging process may help shorten the ave-
rage order processing time.
• Customer satisfaction — This is the degree of satisfaction provided by the goods or services of
a company as measured by the number of repeat customers.
• Order picker or picker — This is a warehouse or distribution centre (DC) employee that is
tasked with order picking.
• Picking device/cart — This is a device the order picker uses to collect picked products. The
picking devices vary between warehouses, but are usually a form of a cart or a motorised vehicle
with storage capacity.
• Pick list — This is an ordered list of products to be picked in specified quantities. A pick list
should not be confused with a customer order. The difference is that a pick list contains products
with assigned storage locations in the warehouse, whereas a customer order does not.

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• Picking tour — This is the path that the order picker traverses to fulfill a single pick list. It starts
at the depot with an empty picking device.

2.0 Customer Order Fulfillment

2.1 Overview of Customer Order Fulfillment

Customer order fulfillment (in American English: customer order fulfilment) is, in the most
general sense, the complete process from point of sales inquiry to delivery of a product to the cust-
omer. Sometimes customer order fulfillment is used to describe the more narrow act of distribution
or the logistics function; however, in the broader sense it refers to the way firms respond to customer
orders.
By definition, Customer order fulfillment is the process of receiving an order from a buyer or cust-
omer, then shipping the order to the buyer or customer to complete a transaction. In general, cust-
omer order fulfillment is about taking the right product, putting it in the right box, shipping it, and
gaining the customer’s approval on arrival — and it is a demanding task.
Customer order fulfillment has long been considered one of the core competencies of supply chain
— and business — success. Today, maintaining a core competency in customer order fulfillment is
more important than ever. At the same time, it has become tougher than ever. The reasons are
familiar to any company operating in the global arena. Here are just a few:
• An explosion of order and delivery channels
• The complexity of global supply chains
• The rising expectations of customers and consumers
Companies across all business sectors are facing a startling reality: How effectively they manage
their customer order fulfillment processes has a direct and immediate bearing on the success —
even survival — of their business.
Customer order fulfillment is a key process in managing the supply chain. It is the customers’
orders that put the supply chain in motion, and filling them efficiently and effectively is the first step
in providing customer service. However, the customer order fulfillment process involves more than
just filling orders. It is about designing a network and a process that per-mits a firm to meet cus-
omer requests while minimising the total delivered cost.
Cutomer order fulfillment involves generating, filling, delivering and servicing customer orders. In
some cases, it is only through this process that the customer interacts with the firm and therefore the
customer order fulfillment process can determine the customer’s experience. To accomplish these
tasks management must design a network and a fulfillment process that permits a firm to meet cust-
omer requests while minimising the total delivered cost. This requires integration of logistics, mar-
keting, finance, purchasing, research and development, and production within the firm, and coordi-
nation with key suppliers and customers. At the operational level, the customer order fulfillment
process focuses on transactions, while at the strategic level, management can focus on making criti-
cal im-provements to the process that influence the financial performance of the firm, its customers
and its suppliers. For instance, customer order fulfillment directly affects product availability which
influ-ences total sales volume. An optimised network minimises total delivered costs, including
sourcing costs. A streamlined process reduces the order-to-cash cycle which frees up capital, and
reduces the delivery lead time which allows for reduced inventory levels. Thus, custo-mer order
fulfillment can affect the financial performance of the focal firm, as well as other members of the
supply chain.

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2.2 Customer Order Fulfillment Process (or Customer Order Management
Cycle)

The customer order fulfillment process or the customer order management cycle (or simply the
customer order cycle) involves the following functions:

1. Pre-Sales Activities 2. Sales Order Processing 3. Inventory Sourcing

4. Billing 5. Delivery 6. Receiving Payment

2.2.1 Description of the Functions in the Customer Order Fulfillment process

[Link] Pre-Sales Activities

There are two categories of presales activity: Sales Support and Pre-sales Documents/Contacts.
• Sales Support allows for tracking of customer contacts by including sales visits, phone calls,
letters and direct mailings. Mailing lists can be generated based on specific customer
characteristics. Basically an Integrated CRM system is used.
• Pre-sales documents/contacts include inquiries and quotes.
▪ Inquiries document customer requests for information (eg “how much is . . .?”, “is the product
in stock . . .?”)
▪ Quotes are binding documents to a customer offering a specific quantity of material at a speci-
fic price if accepted within a specific period.
▪ Both Inquiries and Quotes can be used as a starting point to create a customer order.

[Link] Sales Order Processing

• Customers place orders with a customer service representative who creates a document with
information on:
▪ Customer ▪ Schedule lines — delivery dates and quantities
▪ Material ordered — material and quantity ▪ Delivery
▪ Pricing conditions for each item ▪ Billing
• Information is pulled from master data on customers and materials to minimise data entry errors.

[Link] Inventory Sourcing

• Inventory sourcing determines:

▪ If a product is available (availability check).
▪ How the product will be supplied:
 From stock on hand.  From make-to-order production.
 From production or purchase orders  Shipped from an external supplier.
that should be available.  Shipped from another plant or warehouse.
• Inventory sourcing occurs when:
▪ An order is created. ▪ When the delivery document is created.
▪ An order is changed.

[Link] Delivery

• Delivery activities include:

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 ▪ Creating delivery documents ▪ Provide packing information (if required)
▪ Creating transfer orders for material ▪ Goods issue (updating accounting and inventory
picking data)
• There are three main delivery approaches/methods and these are:
▪ Complete delivery approach — This involves creating a delivery for each sales order.

Sales Order Delivery

Sales Order Delivery

▪ Partial delivery approach — This involves splitting a sales order into multiple deliveries
(depending on item availability).

Delivery
Sales Order
Delivery

▪ Order combination delivery approach — This involves combining a number of sales

orders into a single delivery for efficiency.
Combined sales orders must have something in common like shipping point, delivery
processing date, ship-to party or route.

Sales Order
Delivery
Sales Order

[Link] Billing

• A Billing Document is created by copying information for the sales order and delivery document
into the billing document which is used to create the invoice.
• Creating a Billing Document will automatically debit the customer’s accounts receivable account
and credit the revenue account. Postings may also be made to other accounts.
• There are three main billing approaches/methods and these are:
▪ Separate invoice approach — This involves creating a separate invoice for each delivery.
Delivery Invoice

Delivery Invoice

▪ Invoice split approach — This involves using invoice splits to bill for different items like
materials and services which are in a single delivery.
Invoice
Delivery
Invoice
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 ▪ Collective invoice approach — This involves consolidating a number of deliveries onto one
invoice to minimise paperwork.
Delivery
Invoice
Delivery

[Link] Receiving Payment

• Receiving payment is the final step in the customer order management cycle.
▪ Final payment includes:
 Posting payments against invoices.
 Reconciling differences, if necessary.
• The Cycle may not always go as planned (eg material not in stock, defective material returned
for credit, etc).

2.3.2 Summary of the Customer Order Fulfillment Process

A number of steps are involved in the process of order fulfillment, the knowledge of which is
essential for customer order fulfillment. The steps are as follows:
1. Product Inquiry — In this step, the customer makes an initial inquiry about the product or visits
the supplier’s website or requests a catalogue.
2. Sales Quote — In this step, a budgetary or availability quote is made.
3. Order Configuration — In this step, ordered items need selection of options or order lines need
to be compatible with each other.
4. Order Booking — This step involves the formal order placement or closing of the deal (issuing
by the customer of a Purchase Order).
5. Order Acknowledgment/Confirmation — In this step, it is confirmed that the order is booked
and/or received
6. Invoicing/Billing — In this step, the commercial invoice/bill is presented to the customer.
7. Order Sourcing/Planning — In this step, the source/location of item(s) to be shipped is
determined.
8. Order Processing — This is the step where the distribution centre or warehouse is going to fill
the order (i.e. receive and stock inventory, pick, pack and ship orders).
9. Shipment — This step involves the shipment and transportation of the goods.
10. Delivery — This step involves the delivery of the goods to the consignee/customer.
11. Settlement — In this step, the payment of the charges for goods/services/delivery is made by the
customer.
12. Returns — In this step, in case the goods are unacceptable or not required, they are returned to
the supplier.

2.4 Customer Order Fulfillment Strategies

A firm has several basic customer order fulfillment strategies. These are described as follows:
1. Digital Copy (DC) strategy
Here, products are digital assets and inventory is maintained with a single digital master. Copies are

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created on-demand in real time and instantly delivered to customers by downloading and saving on
customers' storage devices.
2. Make-to-Stock (MTS) or Build-to-Stock or Build-to-Forecast (BTF) strategy
Here, the product is built against a sales forecast and stocked in anticipation of demand. The cust-
omer needs the product as soon as the order is placed. In this strategy, the product is sold to the
customer from the stock of finished goods. This strategy is common in the wholesale, distribution
and retail sectors. Most products for the consumer would fall into this category.
3. Assemble-to-Order (ATO) or Configure-to-Order strategy
Here, the customer needs a product in less time than is required for manufacturing a product. In this
strategy, the product is built/configured/assembled to meet unique customer specifications from a
stock of existing components. This assumes a modular product architecture that allows for the final
product to be configured in this way. A typical example for this strategy is Dell's approach to custo-
mising its computers.
4. Build-to-Order (BTO) or Make-to-Order (MTO) strategy
Here, the time duration for which a customer can wait for the completion of an order is slightly
longer than the time needed for manufacturing a product. In this strategy, the product follows a
standard design but component production and manufacture of the final product is linked to the
customer specifications. That is, products are built based on orders received. This strategy is
typical for high-end motor vehicles and aircraft. This is most prevalent for custom parts where the
designs are known beforehand.
5. Engineer-to-Order (ETO) strategy
Here, the time duration for which a customer can wait for the completion of an order is much longer
than the time required for manufacturing a product. In this strategy, the product is designed and
built after receiving the order according to customer specifications. This strategy is most common
for large construction projects and one-off products.

2.5 Customer Order Processing

Customer order processing is a key element of Customer order fulfillment. Customer order
processing operations or facilities are commonly called distribution centres. Customer order
processing is the term generally used to describe the process or the work flow associated with the
picking, packing and delivery of the packed item(s) to a shipping carrier.
The specific customer order fulfillment process or the operational procedures of distribution centres
are determined by many factors. Each distribution centre has its own unique requirements or
priorities. There is no one size-fits-all process that universally provides the most efficient operation.
Some of the factors that determine the specific process flow of a distribution centre are:
• The nature of the shipped product — For example, shipping eggs and shipping shirts can
require differing fulfillment processes.
• The nature of the orders — For example, the number of differing items and quantities of each
item in orders.
• The nature of the shipping packaging — For example, cases, totes, envelopes, pallets can
create process variations.
• Shipping costs — For example, consolidation of customer orders, shipping pre-sort can change
processing operations.
• Availability and cost and productivity of workforce — This can create trade-off decisions in
automation and manual processing operations.
• Timeliness of shipment windows — That is, when shipments need to be completed based on
carriers can create processing variations.

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• Availability of capital expenditure shillings — That is, influence on manual versus automated
process decisions and longer term benefits.
• Value of product shipped — That is, the ratio of the value of the shipped product and the cust-
omer order fulfillment cost.
• Seasonality variations in outbound volume — That is, amount and duration of seasonal peaks
and valleys of outbound volume.
• Predictability of future, volume, product and order profiles — This can help to improve per-
formance.
• Predictability of distribution network — That is, whether or not the network itself is going to
change.
This list is only a small sample of factors that influence the choice of a distribution centre’s oper-
ational procedures. Because each factor has varying importance in each organisation, the net effect
is that each organisation has unique processing requirements.
The effect of globalisation has immense impacts on much of the customer order fulfillment but its
impact is felt most in transportation and distribution.

3.0 Customer Order Picking

3.1 Definition and Description of Customer Order Picking

By definition, Customer order picking is the process of pulling/retrieving items (or stock keeping
units) from inventory in a warehouse (or distribution centre) according to a pick list generated
from a customer order prior to the despatch of the completed order to the customer. A stock keep-
ing unit is just the smallest physical unit of a product that is tracked by an organisation. In many
cases, the process is so straightforward, employees and supervisors only need a minimum of training.
In some cases, order picking is entirely automated through the use of warehouse robots, and emp-
loyees may not set foot on the warehouse floor unless there is a problem.
Customer order picking is based on customer orders. A customer order consists of order lines, each
line specifying the product and required quantity. Customer order picking is therefore a warehouse
or distribution centre (DC) operation that satisfies customer orders by picking the required products
from storage locations and bringing them to an area dedicated for collecting the assembled customer
orders, usually referred to as a depot.
Generally speaking, Customer Order Picking is the process of receiving goods in a given unit size,
retrieving them from storage and shipping them in a different unit size. Of critical importance in
Customer Order Picking is selecting the correct item in the correct quantities to the satisfaction of
customer requirements.
Customer Order Picking is a labour-intensive activity. It cannot be done in a hurried manner be-
cause mistakes are difficult to catch, costly to correct, and have a devastating effect on quality. It
has long been identified as a very labour intensive operation in manual systems, and a very capital
intensive operation in automated systems.
Customer order picking is based on customer orders. A customer order consists of order lines, each
line specifying the product and required quantity. Customer order picking is therefore a warehouse
or DC operation that satisfies customer orders by picking the required products from storage loca-
tions and bringing them to an area dedicated for collecting the assembled customer orders, usually
referred to as a depot.

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Measured in time and money, customer order picking is without doubt the most costly activity in a
typical warehouse/DC. It is also the activity that plays the biggest role for customer satisfaction
within the warehouse/DC — and in the final analysis the entire supply chain.
It has been estimated that customer order picking accounts for up to 55% of the total warehouse/DC
operating costs. This is in large part due to the fact that customer order picking often still requires
the involvement of human order pickers, as automating order picking systems necessitates large
investments. Because of this, customer order picking has in recent years become an area of in-
creased interest among warehouse/DC professionals for improving productivity in warehouses/DCs.

3.2 Customer Order Picking Initiation and Process

3.2.1 Customer Order Picking Initiation

Customer order picking can be initiated in a number of ways. Two common methods are as
follows:
1. Printed Pick Lists that identify the location and quantity of the items to be picked.
2. Pre-printed bar coded labels that are stuck on pick carts, trays, tubs, etc. When passed by a bar
code reader, pick locations (and sometimes quantities) are displayed, or printed for picking.

3.2.2 Customer Order Picking Proces

Once a customer order has been received, the order picking process starts. Generally speaking, order
picking is the activity of gathering a prepared range of items following a set of customer orders.
Items can be picked either as a full pallet, case or broken case. For case and broken case picking,
the items can either be picked loose, in a special picking container or directly in their shipping
container.
The order picking process, illustrated in Figure 1, includes the sub-activities of:
• Clustering and scheduling of the customer orders;
• Assigning stock on locations to order lines (e.g., apples would be assigned to the fruit and
vegetables order lines, but not to a wine and spirits order line);
• Releasing orders to the floor;
• Order retrieval (ie picking items from the correct storage location); and
• Disposal of picked items (ie despatch of the picked items to the customer).

Figure 1: The Customer Order Picking Process

Source: Koster et al. (2007)

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The actual order retrieval consists of travelling, searching, and extracting, together with paperwork
and other activities. Subsequent to the picking, the finished orders are packaged and packed on the
shipping unit load (e.g. pallet) before the actual shipping takes place.
Following this customer order picking process, an order picker starts off by picking up a pick list and
a pick device/cart. The products are picked and placed on the picking device according to the order
pick list. When the pick list is completed, the order picker returns to the depot where he/she started
from. This is where the order picker empties or leaves his/her picking cart when finished and conti-
nues by picking up a new pick list. The number of products that can be picked in a single picking
tour and therefore the number of products specified on the pick list is limited by the capacity of the
picking device.
The routing usually starts and terminates at the same spot (called the depot).
In order to operate efficiently, the customer order picking process needs to be robustly designed and
optimally controlled.

3.3 Customer Order Picking Strategies

Efficient customer order picking can be accomplished by selecting the right picking strategy. By
definition, A cutomer order picking strategy is the manner in which pickers navigate the order
picking area to pick items from storage locations. The primary objective of a customer order
picking strategy is to maximise throughput or minimise cost and/or response time.
There are many customer order picking strategies. Five of the basic (or most common ones) include:
1. Basic/Discrete/Single Order Picking — Basic/Discrete/Single order picking is an order picking
strategy where a picker completes one order at a time. Orders are picked one by one as they come
in. The process can be as simple as sending a warehouse worker out into the warehouse with an
order in hand, and having them pick items off the shelves until each order is filled. The advantage of
this strategy is that order integrity is maintained throughout the picking cycle — a completed order
arrives in shipping, usually picked by a single worker. Additionally, no downstream sorting is need-
ed. This strategy is easy to implement, but rarely is it very efficient in anything but the smallest
warehouse/DC. Discrict order picking works best when there are only a few line items to be picked
for each order. It is probably the most straight-forward picking method, and it is where most
companies begin.
2. Batch Order Picking — In batch order picking, multiple orders are grouped into small batches
and the order picker will pick all the orders within the batch in one pass using a consolidated pick
list. In this strategy, the picker selects items for several orders simultaneously. Thus, the picker
completes multiple orders in one tour of the warehouse/DC. This streamlines traffic through the
warehouse and allows more orders to be fulfilled quickly. Of all the process decisions, results
suggest that batch order picking yields the greatest savings and also has the largest impact on redu-
cing total fulfillment time, particularly when smaller order sizes are common and there is a bit more
traffic in the warehouse. However, as the batch size being picked increases, the rate at which order
pickers are expected to work (the picking standard) will increase but the expected rate at which their
colleagues sort and pack the picked goods (the packing standard) will decrease because larger orders
require less sorting. This strtegy reduces travel time but can result in mixing of orders if the appro-
priate systems and checks are not in place to prevent that from happening. Batch order picking can
be divided into pick-and-sort batch picking (where the orders are sorted after they are picked) and
sort-while-pick batch picking (that usually is assisted with a pick cart with separate compartments).
3. Zone Order Picking — In zone order picking, warehouses/DCs are divided up into discrete pick
zones/areas/regions. The zones are allocated to particular picking activities and order pickers are
assigned to pick items only from their assigned zones, not across the whole warehouse/DC. This

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allows multiple types of picking to occur within the same building. A cart will move through each
zone with workers adding products from their parti-cular area as specified in the pick list. If items
from multiple zones are required to fill an order, the boxes for those items move from one zone to
the next until orders are filled. Often, these boxes are moved via conveyor belt, but it can also be
done manually. Zoning can also refer to having areas designated for individual employees to work
in or where one type of item can be found. With this method, travel distances are significantly
reduced. (Travel is estimated to take up to 60% of a picker’s time!) Unnecessary handling can
occur when the cart is passed through a zone where no product is required for the order. In this
case, a bypass may be used to skip the no-pick zones. It is not unusual that the pickers put the SKUs
on a conveyor that transports the items to a sorting area.
4. Wave Order Picking — Wave order picking is essentially the combination of zone order picking
and batch order picking. In wave order picking, pickers pick items from all the zones and then the
items are sorted later and consolidated into individual orders. Therefore, customer orders are conso-
lidated into waves of work. The orders are picked in batches, with workers assigned to a zone
where they will pick batched orders. This occurs if orders in batch order picking or zone order
picking are required to be picked in a predefined time window (known as a wave). For even greater
efficiency, companies can move toward automated picking using either a sorting system method
(where orders are actually brought to the picker by conveyor and automated storage units) or the
pick-to-box method (which is similar to the sorting system method but involves multi-ple order
pickers at multiple stations, with boxes moving by conveyor between stations). However, auto-
mated picking can be expensive.
An advantage of this strategy is that waves can be created based on rules tailored to meet the needs
of the moment. Some examples are:
• Pressing orders can be filled first.
• The size and content of each wave can be modified.
• By a particular carrier, or even a given load.
• By a destination.
5. Bucket Brigade Order Picking — Bucket brigade order picking strategy is a control policy for
discrete order picking. According to this strategy, each picker follows the rule: Pick forward until
someone takes over your work; then go back for more. That is, as soon as the most downstream
picker completes an order, he/she walks back to take over the order the picker immediately upstream
of him/her is currently picking. The latter, in turn, takes over the order of his/her predecessor, and so
on until the most upstream picker begins a new order.

The five basic order picking strategies can be summarised as follows:

• Discrete/Single order picking, in which a single order is assigned to only one picker and that
picker is responsible for picking all the items in a single order during a pick tour;
• Batch order picking, in which several orders are batched (or grouped) together, assigned to one
picker and that picker picks all the items in that given batch;
• Zone order picking, in which each picker is assigned to a specific zone (or region) of the
storage area and is responsible for picking the items (for single order or batch of orders) in that
zone only;
• Wave order picking, in which orders are picked in batches, with workers assigned to a zone
where they will pick the batched orders; and
• Bucket brigade order picking, in which when the most downstream picker completes a cart
he/she moves upstream to take over the closest cart from another person. This person in turn
moves upstream to repeat the process.
The batch order picking and zone order picking strategies are the most common in today’s DCs.

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3.5 Types of Customer Order Picking

There are three types of customer order picking: piece picking, case picking and pallet picking.

3.5.1 Piece Picking

Piece picking occurs when order pickers pick individual pieces/items stored on shelving.

Piece Picking Methods are as follows:

• Basic Piece Picking — In this piece picking method, the order picker picks one piece/item at a
time following a designated route through the shelving until the entire order is picked. This
method works well for companies that have a small number of orders or a high number of items
per order.
• Batch Piece Picking — In this piece picking method, the order picker picks multiple orders at
once. The orders are grouped into small batches and the order picker picks all orders as they
move through the shelving. Orders are sorted using a multi-tiered cart or different totes for each
order. This method works well for companies that have a high number of orders which include
a small number of items.
• Zone Piece Picking — In this piece picking method, the each order picker is assigned an area of
the storage facility where they are responsible for picking orders in that zone. A conveyor
system moves picked items from zone to zone as the picking is completed. This method is ideal
for large operations with high order numbers and a low to moderate number of items per order.
• Wave Piece Picking — This method is similar to zone picking except all items are picked at the
same time. Once all items have been picked they are consolidated and separated into individual
orders. This method is fastest of all of the piece picking methods and works best for companies
with a large number of items per order but the separation process can be difficult.

3.5.2 Case Picking

Case picking occurs when order pickers pick full cartons or boxes of products.

Case Picking Methods are as follows:

• Basic Case Picking — This is the most common method for case picking. It involves order
pickers picking cases of product that are stored on pallet racks or in bulk. Pickers will use hand
pallet jacks (Walkies) or motorised forklifts to pick orders.
• Batch Case Picking — This method is rarely used when case picking. Pickers would not have
room to pick multiple orders due to the size of the cases being picked.
• Zone Case Picking — This method is not used very often in case picking but can be effective if
the company needs to pick a large amount of different items per order or has enough cases to fill
a pallet for one order.
• Wave Case Picking — This method is effective in case picking where there is a large amount of
picks per order and the company is looking to reduce pick time.

3.5.3 Pallet Picking

Pallet picking occurs when order pickers pick full skids/pallets for one order.

Pallet Picking Methods are as follows:

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• Basic Pallet Picking — This is the most common method for pallet picking. Pickers will use
forklifts to pick full pallets and stage them in the designated loading area or load them directly
onto a truck.
• Batch Pallet Picking — This method is not used for pallet picking as the picker will be picking
full pallets specific to one order.
• Zone Pallet Picking — This method is applied to pallet picking when order pickers are assigned
a specific area of the facility to pick from to avoid multiple forklifts picking in the same location.
• Task Interleaving — This is a method of combining order picking and putting away. The order
picker is instructed where to putaway a pallet on their way to their next pick.

3.6 Levels of Customer Order Picking

In general, Customer Order Picking can occur on one of five levels depending on the size of the unit
that is being picked. These levels are described as follows:
1. Pallet Picking — This involves the retrieval of full pallets.
2. Layer Picking — This involves the retrieval of layers of cases.
3. Case Picking — This involves the retrieval of cases.
4. Split Case Picking — This involves the retrieval of inner packs from cases.
5. Broken Case Picking — This involves the retrieval of individual, discrete items.

3.7 Customer Order Picker Routing Approaches and Strategies

The objective/goal of customer order picker routing is to determine a sequence for collecting
required items such that the travel time of the order picker is minimised and the time needed for
picking an order is reduced through improved efficiency of the order picking strategy without
changing layout or material handling equipment — not an easy task given the huge number of
possibilities.
In order to minimise the total distance walked, there are several different customer order picker
routing approaches and strategies to use.

3.7.1 Customer Order Picker Routing Approaches

Customer order picking can be divided into two principal approaches: in-the-aisle customer order
picking routing approach and end-of-aisle customer order picking routing approach.
The in-the-aisle customer order picking routing approach is that which involves bringing the
picking cart along into the aisles (like a shopping cart in a grocery store).
The end-of-aisle customer order picking routing approach is that which involves leaving the
picking cart at the end of the aisle, then entering and picking one or several items and later removing
them at the picking cart.
Picking carts have finite capacity but can be designed in several ways. Picking carts can be design-
ed for discrete order picking when only one order is treated at a time while others are designed for
batch order picking. For instance, some order pickers separate the orders with several
compartments in a so called sort-while-pick strategy.

3.7.2 Customer Order Picker Routing Strategies

Picker routing deals with the determination of the sequence in which the items of a given picking
order are to be picked and the identification of the corresponding (shortest) tour for the order picker
which connects the respective item locations among each other and with the depot.
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Because travel time can account for 50% or more of total order picking time, choosing the right
order picker routing strategy becomes very important.
Some common/customary routing strategies that are used for customer order picking are described
below. They are illustrated by the diagrams alongside them. In the diagrams, the black rectanges
symbolise the storage locations from which items have to be picked (ie pick locations).
The return, midpoint and largest gap routing strategies are likely to be used for end-of-aisle customer
order picking while the remaining three are likely to be used for in-the-aisle customer order picking.
Note that the narrower the shelf spacing is, the harder it is to enter with a bulky pickingcart.

1. The Transversal strategy

The simplest way to route order pickers
is by using the Transversal (also called
S-Shape) routing strategy. Any aisle
cont-aining at least one item is traversed
through the entire length. Aisles with
no picks are skipped. After picking the
last item, the order picker returns to the
depot or front aisle.
This method is likely to be the most
frequently used order pickers routing
strategy. It is especially useful if order
picking equipment is used that cannot
easily change directions within an aisle.
Also it is one of the better strategies if
equipment is used that requires much
time for changing aisles.

2. Return strategy
When proceeding according to the Return
order picker routing strategy, the order
picker enters each aisle in which an item
has to be picked from the front cross aisle,
walks up to the most distant pick location
in this aisle and then returns to the front
cross aisle. That is, the aisles are always
entered from the front and left on the same
side after picking the items in this aisle.
This method is only to be preferred if
there is only one possibility for changing
aisles in the warehouse/DC. If the
warehouse/DC has two (front and back) or
more possibilities for changing aisles, then
this method will be out-performed by
nearly all other methods listed.

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3. Midpoint strategy
For the Midpoint order picker routing
stra-tegy, the warehouse is essentially
divided into two halves. Picks in the
front half are accessed from the front
aisle, and picks in the back half are
accessed from the back aisle. Only the
first and the last aisle are traversed
entirely.
This strategy could be a good alternative
to Transversal as long as there is, on
average, only one pick per aisle. But it
offers a simple approach that is easy to
implement.

4. Largest Gap strategy

The Largest Gap order picker routing
strategy essentially divides the aisle into
two parts by the largest gap. The gap
means the separation between any two
adjacent picks, between the first pick and
the front entrance, between the last pick
and the back entrance, or between a cross
aisle and the nearest item.
Picks in the front part are accessed from
the front entrance and picks in the back
part are accessed from the back entrance.
The order picker only traverses the aisle
in either the first or the last one to be
visited.
The picker enters the first aisle and tra-
verses this aisle to the back of the ware-
house/DC. Each subsequent aisle is entered as far as the largest gap and left from the same side that
it was entered.
The last aisle is traversed entirely and the picker returns to the depot along the front, entering again
each aisle up to the largest gap. Thus, the largest gap is the part of the aisle that is not traversed and
only the left-most and the rightmost aisles which contain items to be picked are traversed entirely.

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5. Composite/Combined strategy
This order picker routing strategy
combines features or elements of the
Transversal and Return order picker
routing strategies.
This strategy decides for each aisle
individually whether it is shorter to
traverse it entirely or to make a return
route. Aisles may be traversed entirely or
may be enter-ed and left from the same
cross aisle. This strategy tra-verses the
aisles with picks entirely or enter and
leave at the same entrance.
The Combined order picker routing
strategy may be a good candidate to use
for routing with volume-based storage
policies. This choice is determined by
using dynamic programming.

6. Optimal routing
All of the order picker routing strategies
listed above restrict the possibilities to
create an optimum route. For example,
the Transversal order picker routing
strategy forces order pickers to traverse
each aisle entirely.
As can be seen from the diagrams of the
previous order picker routing strategies,
no combination of the previous strategies
can make the last solution.
This strategy is used to obtain the shortest
route possible. It is capable of
considering all possibilities for travelling
in and be-tween aisles. It is computer-
based and calculates all possibilities to
find the optimal solution.

The six common/customary order picker routing strategies can be summarised as follows:
• Transversal strategy — With the Transversal (also called S-shaped) order picker routing stra-
tegy, the picker entirely traverses an aisle from the front-end or back-end if there is at least one
item to pick and enters the upcoming aisle from the other end.
• Return strategy — With the Return order picker routing strategy, the aisles are always entered
from the front and left on the same side after picking the items in this aisle. This is common
when there is no cross-aisle opening from the other end.

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• Midpoint strategy — The shelves section is divided into two halves. The only aisles traversed
entirely are the first and the last. The picker uses the same principle as in the return strategy but
only half enters the aisles. A circuit is made around the shelves section.
• Largest gap strategy — This order picker routing strategy is based on the Midpoint strategy but
always performs better. An aisle is however only entered as far as the largest gap and then back
to the cross-aisle. The gap is the distance between two SKUs in the same aisle or between the
SKU and the end. This method usually performs better than S-Shape when the number of picks
per aisle is small and is therefore to be preferred.
• Combined strategy — This order picker routing strategy combines features or elements of the
Transversal and Return order picker routing strategies. This strategy traverses the aisles with
picks entirely or enter and leave at the same entrance. It also requires programming. The
program then thinks several steps ahead.
• Optimal routing — This is an order picker routing strategy that is capable of considering all
possibilities for travelling in and between aisles. This strategy is used to obtain the shortest route
possible. It is computer-based and calculates all possibilities to find the optimal solution.

3.8 Customer Order Picking Technologies

There is a wide range of customer order picking technologies, which are either used in actual work
environments, or existing as concepts, which need to be tested and improved to get ready for
commercial use. The most important ones are described in the following paragraphs.
• Paper-Picking or Pick-by-Paper (PbPa) — This is a method where the worker gets the work
instructions handed over to him/her in paper form. The paper can either show a list of items to
pick or a graphical represent-ation, like simplified pictures of the shelves with marked fields on
it. In order to identify the correct parts, the shelves and part bins are marked with letters and
numbers (e.g. shelf A bin 5). A variation of the PbPa method is the use of picking labels which
contain for each picking task only one ins-truction. The advantages of PbPa methods are the
high flexibility and the low costs. On the other hand, are the high error rate and lower picking
speed which are the result of missing pick validation processes and guiding methods.
• Pick-by-Vision (PbVi) — For PbVi, special equipment for the picker is needed. One thing is
some kind of HMD, to visualse the picking instructions and the second one is a computation
device, in order to generate and process this information. The HMD offers different possibilities
to support the work process. With minimal hardware expenditure, the worker can be provided
with the same representations as with the PbPa method, which are text form and graphics that
visualise the tasks. With additional hardware, like a camera or a motion tracking system, this
picking system can be extended to an Augmented Reality system, which provides all information
in a visual real world overlay, which expands the physical environment. The benefit of HMD
Picking is the fast availability of the required information and the possibility of hands-free
guiding and working as well as the low costs that are the result of the high scalability and high
flexibility.
• Pick-by-Voice (PbVo) — PbVo also requires some additional hardware: A headset for input and
output and a wearable computer are needed. The wearable computer generates the picking
information and voice output provides the picker with instructions. The system can be controlled
by voice commands. Therefore a speech recognition software application identifies simple
commands to confirm, repeat or skip tasks. This method enables hands-free working but is
strongly dependent on environmental factors like noise.
• Pick-by-Light (PbL) — PbL is also a computer-assisted picking system, which guides the
picker to the correct part bin. Every part bin is equipped with a light signal, that indicates which

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 and how many parts have to be picked. A higher picking speed, the hands-free working and a
short famili-arisation period are mentioned as the main advantages of this system. The downside
is the poor scalability, which results in additional hardware that is needed for every new shelf
and part bin.

3.9 Customer Order Picking Systems

Customer order picking can be performed in a variety of high-level approaches often referred to as
order picking systems (OPSs). There is a variety of order picking systems that are used in ware-
houses/DCs. These systems have several charatcteristics.

3.9.1 Characteristics of Modern Customer Order Picking Systems

The trends in warehousing have caused modern order picking systems to develop and maintain
similar characteristics. These characteristics are:
• Flexibility — The systems are able to meet the variable needs of a large customer base.
• Cost effectiveness — The systems are able to operate on a low cost-per-dollar-shipped basis.
• High quality — The systems make the right product be available at the right time for the
customer.

3.9.2 Categories of Customer Order Picking Systems

Depending on whether or not humans are involved in the system, there are three categories of
customer order picking systems that can be used, namely: manual customer order picking systems,
semi-automated customer order picking systems, and automated customer order picking systems.
A manual (or picker-to-product) customer order picking system is one in which the order pickers
travel to the point where the item to be picked is located (e.g., pick-to-tote/cart/truck).
A semi-automated (or product-to-picker) customer order picking system is one in which the
items to be picked are brought to a stationary picker through mechanical means (e.g., carousel,
vertical lift module, etc.).
An automated customer order picking system is one which has the potential of picking customer
orders without any human intervention (e.g., A-frame).

3.9.3 Types of Customer Order Picking Systems

There are several different approaches on how to classify order picking systems. This topic is based
on a classification which uses four main drivers to distinguish between five different system
categories. The four drivers are:
(i) Who picks the goods (humans and/or machines)?
(ii) Who moves within the picking area (pickers and/or goods)?
(iii) Are conveyors used to connect each picking zone?
(iv) Which picking policy is employed (pick by order or by item)?

According to this approach, there are five categories of order picking systems. These are picker-to-
parts, parts-to-picker, pick-to-box, pick-and-sort, and completely automated picking. The level of
automation is gradually increasing from picker-to-parts to completely automated picking systems.
This classification is illustrated in Figure 2

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 Figure 2: Classification of Order Picking Systems
Source: Dallari et al. (2009)

The types of order picking systems that can be employed are identified in Table 2.
Table 2: Order Picking Systems
System Description
Picker-to-parts This is the most common OPS used in warehouses/DCs. It can be
OPS considered as the basic system for order picking activity. Pickers walk or
drive along aisles to pick items to complete a single order, or a batch of
multiple orders. The picker immediately sorts picked items. This sytem can
further be distinguished between low-level and hig-level order picking types.
The underlying technology in picker-to-parts systems is described as Bin
Shelving, Gravity Flow Rack and Drawers. The advantages of this system
are easy implementation, easy adaptation, easy scaling and cost reduction (in
terms of labour hours and spaces required). The advantages of this system
are low productivity and high labour costs.
Because of thhe disadvantages of this system, it is preferrable where there is
a large number of items, a limited amount of SKUs and a small system
outflow.
Low-level picker- In low-level systems the items are stored in storage racks or bins that can be
to-parts OPS easily reached. Therefore, the order picker travels between pick slots and
retrieves items from picking location that can be accessed from ground level
High-level picker- In high-level systems high-level storage racks are used and a lifting truck or
to-parts (also crane is required to reach the items. Therefore, in this system, pickers on
known as Man-on- board order picking trucks visit picking locations at multiple racking levels.
board OPS)

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Table 2: Order Picking Systems (continued)
Pick-to-box (also In this system the warehouse/DC is divided into zones that are assigned to
known as Pick- one or more pickers. A conveyor connects picking zones. Orders are
and-pass) OPS picked sequentially by zone and sorted according to destination when
completed. Boxes filled with picked items are placed on the conveyor. Each
customer order corresponds to one picking box, which is passed on to the
next zone as soon as all required items are picked in the current zone. The
advantage of this system is reduced overall picker travel time. The
advantage of this system
is the difficulty to balance the workload amongst the multiple picking zones
Pick-to-box systems are preferable in contexts where item numbers are high,
item sizes are small, flows are medium and order sizes are small.
Pick-to-sort OPS A pick-and-sort system consists of a picking area and a sorting area.
Multiple customer orders are batched. Operators in the picking area retrieve
the correct total number of each SKU for a batch of multiple orders. After
the order pick-ing, the items are put on a transport conveyor which forwards
them to the sorting area. Pick-and-sort systems are normally operated in
picking waves, where all orders are completely sorted before the next pick
wave is released. This requires big batch sizes of at least 20 customer orders
per wave. Due to the high amount of orders, the sorting mechanism must be
quite advanced. A common setup is to use a circulation conveyor with an
automated divert mechanism. That is, a computerised system determines the
destination bay for each item.
This system works well where the batch size in constantly high and means
that pick slots are visited less frequently, which reduces pickers’ travel time.
Parts-to-picker As the name suggests, in a parts-to-picker system the goods are transported
OPS to the operator. An automated Storage and Retrieval (S/R) device brings unit
loads from the storage area to picking stations, where pickers extract the
required amount of each item. Subsequently, the unit loads are conveyed
back to the storage area. The underlying technology in parts-to-picker
systems is described as Automatic Storage and Retrieval Systems (AS/RSs),
which include vertical carousels, horizontal carousels, vertical lift modules
(VLM), miniload systems, shuttles or Automated Guided Vehicles (AGVs).
The picking costs can be reduced with parts-to-picker systems due to higher
space utilisation and less man hours required. A parts-to-picker system
should be used for low picking volumes, small order sizes and a high number
of SKUs.
Automated OPS Fully automated order picking systems are usually separated from other
ware-housing areas and connected via automatic conveyors. In fully
automated picking systems either automatic dispensers (A-frame or V-frame)
or are used. When the system uses automatic dispensers, it is said to be
automated and when it uses robots, it is it is said to be robotised. These
systems are still implemented very rarely, due to the high investment costs
and the limited, highly specific, application area. Those systems are
expected to be feasible for high-speed retrieval activities and special cases
with small relatively uniform and delicate goods with high values.

The first four order picking systems (OPS), in order of increasing level of automation, while omit-
ting completely automated picking as it is rarely used in practice, can be summarised as follows:

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• Picker-to-parts order picking system — This system involves human pickers that move along
the aisles picking products on foot using carts or riding on specialised vehicles. Pickers can pick
a single order at a time or a batch of multiple orders. These OPS are further divided into low-
level picker-to-parts systems and high-level picker-to-parts systems. In low-level picker-to-parts
systems, products are directly accessible from warehouse floor. In high-level picker-to-parts
systems (also referred to as man-on-board systems), a lifting truck or a crane is needed to pick
products from high storage racks.
• Pick-to-box order picking system — This system divides the picking area in multiple zones
each assigned to one or more pickers. Each picker only picks the part of the order that is in
his/her assigned zone. An order can be picked sequentially, zone after zone, or simultaneously
in all zones. The picking area zones can be con-nected by a conveyor belt, which carries the
boxes of partially or fully comp-leted orders. The main benefits of pick-to-box systems
compared to picker-to-parts systems are the reduction of travel time of pickers as they are
confined to a smaller area, and the resulting reduction of traffic conges-tion.
• Pick-and-sort order picking system — This system does not require an order to be picked in its
entirety in one picker tour. Instead, products are picked independently of orders and placed on a
conveyor which takes them to a sorting area, where an automated sorter assembles individual
products into customer orders. As the picking locations are visited less frequently, this results in
a reduction in travel time and increase in productivity. However, implementing an automated
sorter requires a large investment.
• Parts-to-picker order picking system — This system uses automated devices to retrieve bins or
pallets from storage aisles to pick locations, where pickers select the required number of products
and the rest are returned to storage by an automated device. Types of automated devices include
carousels, modular vertical lift modules, mini-loads, and automated storage and retrieval systems
(AS/RS). As there is no need for pickers to move through picking area, use of such systems
results in reduced order picking time.

3.10 Customer Order Picking Errors

Faulty pickings not only have a negative effect on the customer’s trust of the logistic abilities of the
supplier/distributor, but also cause considerable financial loss and thus are a critical system para-
meter. In order to minimise errors, controls are performed at different stages of the order picking
process. Suitable order picking systems largely depend on the used picker routing system.
Order picks could have one of three types of errors: item mistakes, wrong number, and wrong order
bin.
Item mistakes have three subcategories:
• Substitution error — when one part was swapped for another — which could be wrong row,
column, or shelving unit;
• Missing-part error — when the participant omitted a part; and
• Additional-part error — when the participant placed an un requested part in an order bin.
Wrong number errors have two subcategories:
• Too many parts error — occurring when the order picker selects too many of the correct parts.
• Too few parts error — occurring when the order picker selects too few of the correct parts.
Wrong order-bin errors — occurring when the order picker places the items into the incorrect
order bin.
Errors of the types too many and additional part are not severe enough to stop an assembly line and
might be discounted or ignored depending on the order picking domain.

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3.11 Making the Order Picking and Packing Processes More Efficient

There are five steps to make organisation s’ order picking and packing processes more efficient:
1. Minimise Touches: Ideally, when an order is picked and packed, it should only need to be
touched once throughout the process. To accomplish this, the order must be error-free and packed
correctly the first time, moving directly from shelf to box to truck without having to be moved in and
out of totes or repacked into smaller or larger containers. Minimising this kind of rework helps
make the picking and packing process more efficient.
2. Optimise the Storage Strategy: How and where to store products in the warehouse/DC directly
affects picking efficiency, so this is an area to look at when trying to speed up processes. The most
common storage strategies are random storage (where items are assigned to any location that
happens to be open), and volume-based storage (where items are ranked by demand and assigned a
storage location accordingly. Most-used items are stored nearest pack stations to minimise worker
movement).
Class-based storage is a combination of the two. Items are classified into areas based on demand,
but then assigned to any open space within that area. If a random storage strategy is used, reorga-
nising the warehouse/DC based on a volume or class based system could help ease traffic within the
warehouse/DC and speed up the picking process.
3. Use the 80/20 Rule: The Pareto Principle says that 80% of effects come from 20% of causes, and
this is true in the warehouse/DC as well. So, this principle should be kept in mind. 80% of cust-
omer orders are likely to come from 20% of stock. If these items are stored and handled in the most
efficient manner, it can help to maximise the overall efficiency.
4. Consider a Different Picking Strategy: Most companies begin with manual piece picking, but as
they grow they find that this strategy cannot accommodate higher traffic and volume in the ware-
house/DC. Looking at zone order picking, batch order picking or wave order picking, along with
some level of automation is a logical progression to support further growth and efficiency.
5. Minimise Movement: Walking around a warehouse/DC all day makes people tired, and tired
people make mistakes. To maximise efficiency and order accuracy, it is important to look at ways
to minimise how many trips around the warehouse order pickers need to make. The storage and
picking strategies will have a direct effect on this, so if manual piece picking and random storage
strategy are used, switching to a zone-based picking sstrategy and volume-based or class-based
storage systems can allow minimisation of trips.

The pick and pack process is highly complex, and its success ultimately depends on getting a number
of factors right. The design of the warehouse/DC, the technology and tools used, how items in the
warehouse/DC are stored, the routes order pickers take through the warehouse/DC, the order picking
strategy, how customer orders are packd, staged and prepared — along with multiple other factors —
all play a role in whether the pick and pack process results in a properly fulfilled customer order and
a happy customer.

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