Supply Chain Logistics - Order Cycle Practices and Order Processing

Order Cycle Practices

• Order processing starts when the seller receives an order and ends when authorization to fill the order is given to a location (warehouse or distribution center).
• The quicker a supplier receives an order, the faster the process begins.
• Screening the order involves:
  • Deciding if the supplier is willing to fill the order based on payment history.
  • Determining if the supplier can fill the order, how long it will take, and if the customer is willing to wait.
• Automated decision-making systems are used in computerized order processes; without them, the process can be slow and error-prone as orders are shuffled between departments.
• The order initiates the process of assembling products from stock locations for a specific customer order.
• SKU (Stock Keeping Unit): A number or string of characters that uniquely identifies an item or product.
• SKUs can be a universal number, a supplier part number, or a unique identifier used by the company.

Chapter 3 Overview

• Purpose: To explain how the order process works from when an order is received until it is assembled for packaging.
• Order picking is a critical component of material handling.

Objectives

1. Describe best practices in order cycle and procurement processes, including information flows.
2. Explain pick ticket inspection.
3. Identify processes for accurately pulling products from storage identified on pick tickets.
4. Explain how audits are conducted to ensure that pulled products are as ordered.
5. Describe staging of pulled products for shipping.
6. Describe steps involved in developing a packing manifest.

Order Picking Importance

• Order picking is the most costly activity in a typical warehouse, accounting for over 60% of warehouse operating costs.
• Picking can account for approximately half of the labor costs in a distribution operation where pickers often spend 50% or more of their time moving between locations.
• Order picking activities have become more complicated due to programs like just-in-time (JIT) and cycle reduction, which require smaller orders to be delivered more frequently and accurately.
• Quality improvements and customer service emphasize re-examining order picking to minimize product damage, reduce transaction times, and improve picking accuracy.

Process

• When it is time to ship an order, the warehouse management system (WMS) generates a pick list that indicates the quantities of each item in the order.
• Order picker instructions describe the SKU, direct the picker to the SKU pick position, indicate the quantity required, and state the customer’s name or order identification number; these instructions should be simple and clear.
• Instructions can be printed on paper, displayed on a screen, or communicated through an audio headset.
• Instructions often include alpha/numeric characters that identify specific aisles or SKU pick positions.
• Most companies use their own SKU numbers to label products to track their inventory using their own database systems.
• Order picking is the highest priority activity for productivity improvements.

Terms to Know

• Batch Pick: A method of picking orders in which order requirements are aggregated by product location across orders to reduce movement to and from product locations.
• Item: Any unique manufactured or purchased part, material, intermediate, subassembly, or product.
• Line: A specific physical space for the manufacture of a product that in a flow shop layout is represented by a straight line.
• Order: A general term that may refer to a purchase order, shop order, customer order, planned order, or schedule.
• Order Processing: The activity required to administratively process a customer’s order and make it ready for shipment or production.

Picking Schemes and Methods

• Three common picking schemes:
  • Area System/Single Order Pick: The picker goes through the warehouse and picks the items on the order. Used in small warehouses where there is a set place for each item.
  • Zone Pick: The warehouse is divided into zones, and order pickers only work in their own zone or area. Each order must be handled separately before another is begun by the picker. Zones are set up for related parts.
  • Multi-order Batch Pick: Pickers handle multiple orders at a time within a defined zone and collect all the items they need for that group of orders. The items are then sent to the general collection area where they are sorted into individual orders for shipment.
• Picking can be carried out in three ways:
  • Single-order picking: One picker in one zone collects the items for a single order.
  • Batch picking: A picker assembles all the items for a group of orders at one time.
  • Pick-by-line or Pick-to-zero: The exact numbers of cases or items within one product line are present for picking. The picker picks the required number of cases or items from one product line to fill waiting customer orders.
• A WMS allows a pick list to be generated in a productive sequence for the pickers.
• The location of an item is tracked, so it can be retrieved when needed to fill a customer order.
• Generating pick lists confirms that everything has a place and a pre-determined use.
• An order picker takes the pick list (electronically displayed on a mobile device or on paper) with instructions and retrieves the items in the order in which they appear on the list.
• This set of steps is designed to take the picker on the shortest path to the items.
• Multiple orders picked by a single order picker can reduce costs.

Processes for Improving Accuracy and Efficiency

• Ways to improve order-picking accuracy and productivity:
  • Pick task simplification: Re-evaluating the process and eliminating/combining order picking tasks.
  • Order batching: Grouping two or more orders in a single batch reduces travel time.
    • If an order picker picks one order with two items while traveling 100 feet, the distance traveled per pick is 50 feet: $\frac{100 \text{ feet}}{2 \text{ items}} = 50 \text{ feet/item}$
    • If the picker simultaneously picks two orders with four items, the distance traveled per pick is cut to 25 feet: $\frac{100 \text{ feet}}{4 \text{ items}} = 25 \text{ feet/item}$
  • Moving inventory to a forward pick location: Condenses the pick path by grouping needed inventory in a forward, consolidated location, often located by the outbound staging area.
• Examples of improving processes with technology:
  • Bar codes: Used to identify individual storage and picking locations, as well as individual products down to the SKU level. Scanning bar codes confirms picking accuracy electronically.
  • Radio frequency data communication terminals: Mobile devices that provide real-time communication between workstations and the WMS, often including a bar code scanner.
  • Pick-to-light systems: Uses racking, LED lights, and bar codes to direct order pickers’ paths and informs them of the accuracy of their pick.
  • Put-to-light systems: Identifies a location for the worker to place an item to fill an order, using bar codes, scanners, and lights.
  • Voice technology: Pickers hear voice instructions directing picking activities through a headset and confirm the pick through a microphone.

Order Inspection and Accuracy

• Orders must be inspected for accuracy once picked and assembled.
• The order picker must verify that the quantity picked is the quantity required or note any differences.
• A packing list is enclosed for each outgoing order, showing what items were picked.

Terms to Know

• Item: A specific SKU.
• Line: Multiple requirements for a particular SKU.
• Order: Customer requirements as specified by a picking document.
• Order Pickers: The people who select, count, and deliver customer merchandise (orders) to shipping.

Verification Methods

• Two ways to verify picked merchandise and quantity:
  • Manually (visual): A packing employee visually compares the picked merchandise and the packing slip items.
  • Hand-held barcode scanning: The packing employee uses a hand-held device to scan the barcode of each piece of picked merchandise and the customer’s barcode label on the packing slip.

Staging of Pulled Products for Shipping

• After picking, goods are consolidated to complete orders for delivery to customers, including packing and wrapping.
• Kitting: Individually separate but related items are grouped, packaged, and supplied together as one unit.
• Goods are marshalled or gathered together to form loads in the dispatch area.
• Loads can be floor loaded or palletized.
• Inbound-outbound staging activity is critical in shipping and receiving.
• Sufficient space must be available as close as possible to the dock doors.
• The staging area requires vehicular traffic aisles that connect the dock to the storage area.
• Creating a packing manifest ensures the customer’s order was handled and processed by the distribution facility.

Terms to Know

• Staging: The process of pulling material for an order from inventory before the material is required and collecting it all in a single location.
• Stock Keeping Unit: A single inventory item is an SKU.
• Zone Pick: A method of subdividing a pick list by areas within a warehouse for more efficient and rapid order picking.