For years, you've had a pretty simple process at your business: A customer places an order, you send Dave into the back to find the product, and then you package it up and ship it to the customer.
But things have changed in recent years. Your products have gotten a lot more popular thanks to a successful product development and marketing strategy, and orders are flying off the shelves. You invest in a small warehouse to house all of the products and move them out of the premises of your cramped rented office. You hire a couple of employees to help out Dave.
In some ways, this is all fantastic — a growing business is exciting. But it creates a new set of challenges, especially once orders start getting returned because the wrong product was sent to customers, or you get an angry phone call from a customer who has been waiting weeks for a delivery.
Your new problem probably comes down to inventory management and, specifically, order-picking. One method of order-picking that worked early on in the business — having Dave go back and grab the product — may not work so well now that your business has grown.
This guide breaks down what order-picking is and what strategies are available that might fit your business.
Overview: What is order-picking?
Order-picking refers to the process of selecting and pulling out the correct product from a warehouse after it has been ordered — the first step before the product is sent to the customer. While the process sounds straightforward and simple, warehouse managers and business owners spend a lot of time streamlining this process in order to increase the efficiency of warehouse operations.
A good order-picking system will cut down on necessary labor and save the company money, in addition to reducing mistakes and increasing customer satisfaction by getting them the right product on time.
5 types of order-picking methods
Order-picking strategies can be split up into many different subcategories, but generally they fall under five main picking techniques.
1. Single or piece-picking
This is the most basic picking process that typically involves a single warehouse picker and physical inventory counting.
With single-picking, a worker receives an order, finds the order in the warehouse, checks to make sure it is correct, and then retrieves it so it can be shipped to the customer. Because it is the most basic picking method, it is not optimized for efficiency and many organizations eventually outgrow this method.
This method is best for: Very small companies with limited customers and a handful of products
2. Case and pallet-picking
Case and pallet-picking go a little further than single picking because a worker grabs a case or even a full pallet of products at a time as opposed to just one unit. This method attempts to make some efficiency gains by not having the worker constantly going back and forth for a product each time it is ordered. However, it still doesn't optimize the worker's route or activities.
This method is best for: Small companies with limited products that are growing and handling an increasing number of orders each day
In batch-picking, workers collect multiple products at once in order to reduce the number of trips. Simply put, if a company gets orders for 10 widgets, the workers collect all 10 of those orders in one trip. Unlike with case and pallet-picking, batch-picking involves picking more than one type of unit to fill the orders for multiple customers as opposed to just grabbing a bunch of the same kind of unit.
This method is best for: Companies that typically sell multiple orders of one product at a time
Also known as pick-and-pass, this method is similar to batch-picking but goes a step further in terms of efficiency. The warehouse is divided into zones, and managers assign workers to different zones, collecting multiple SKUs in bins and filling multiple orders at once. Zone-picking ensures workers aren’t crowding certain areas or making unnecessarily long trips.
This method is best for: Companies that often sell multiple orders of multiple products at once, managing multiple SKUs and a large number of SKUs
Wave-picking gets into more complex warehouse management, combining multiple orders in one batch and using multiple bins to sort them by product to reduce the number of trips the worker has to make. A warehouse manager may introduce additional complexities, such as prioritized products, location, or shipping carrier.
This method is best for: Large companies with complex warehouse operations that move many different kinds of products in large volumes, and are seeking to cut costs by increasing the efficiency of their workforces.
6 benefits of using order-picking for inventory management
So, why should you carefully consider which order-picking system you use? Here are six key ways that optimizing this business process will add to your bottom line.
1. Reduced man-hours
By optimizing the routes your workers take and increasing the number of products they collect in each trip, you limit the number of man-hours needed to do the job, so you're not over-hiring. Considering that labor makes up a significant portion of warehouse overhead, reducing the amount you need will have an immediate impact on your profits.
2. Happier workers
The workers you do have will be much happier and less frazzled. They won't be stepping over each other trying to grab the same product, and they won't have to rush everywhere to get orders filled on time. This has the added benefit of preventing safety mishaps because workers aren't being rushed or pressured to handle products dangerously just to fill orders on time.
3. Better organization
When your warehouse is running smoothly, your business is better organized and all of the other departments work better as a result. Since orders are flying out of the warehouse promptly and to the right customers, you can focus on more important tasks, and your customer service team isn't dealing with a bunch of headaches caused by mistakes.
4. Satisfied customers
A warehouse that identifies the right product and gets it out the door quickly leads to happy customers. In contrast, a warehouse that ships the wrong product or causes it to be delayed by days or even weeks will result in unhappy customers who will leave a bad review or never do business with you again — or both.
5. Fewer costly screw-ups
Problems at the warehouse don't just result in unhappy customers, they're also expensive to deal with. When the wrong product is shipped to a consumer, for example, it gets returned and puts you on the hook for extra shipping to send out the right product as well as the labor to get the order fixed. With good order-picking practices, you limit those screw-ups and the costs associated with them.
6. Room to grow
You can't grow as a company when you're still struggling at the warehouse level. Any attempts to scale your business will only magnify your problems with order processing exponentially. By getting your warehouse in line and properly executing orders at maximum efficiency, you provide the foundation for future growth as a company.
Software will improve order-picking strategies
Regardless of which order-picking method you choose, you must use inventory management software if you want to be effective in implementing it. Most warehouses simply are too complicated to leave inventory control to spreadsheets or, worse, pen and paper.
As your business grows, you need more sophisticated tools to manage an operation that is increasing in complexity — and that's where software comes in.
And software will do more than just help with order-picking — it will handle all aspects of inventory management, improve warehouse maintenance, and help you dive into advanced metrics such as gross margin percent, fill rate, or inventory turnover ratio, to name just a few.
Examine a few top software options, and settle on one that best fits your business. The sooner you do it, the sooner you will enjoy the benefits of smoother and more automatic warehouse operations.