Simulation-based optimization for driving innovation in manual order picking for a wholesale company

This paper considers organization and practice innovation in a typical warehousing system which acts as a distribution site for groceries and miscellaneous to final retailers. The need of integrating tactical decisions regarding storage positions in a rack-based system with operational decisions for retrieving palletized items, under an S-shape policy, calls for a simulation-based optimization approach. The unavoidable stochastic features in order arrivals and composition, coupled with the natural uncertainty related to the human operated order-picking process under interferences and queueing, suggests resorting to a detailed discrete-event simulation. We propose a system-generating algorithm to integrate the combinatorial tactical choices for storage positions. The search process for the best storage configurations is the core of our simulation optimization framework in conjunction with an effective ranking and selection procedure. Numerical results on scenario comparison and possible improvements in productivity for a specific order-picking process are presented, using data and rules from a real wholesale company.