Optimizing Order Picking through Operations and Warehouse Management in a Distribution Center (Case Study: Ecuadorian Hardware and Construction Material Distribution Center)

Every company's success depends on the efficiency levels of the implemented processes, therefore the operation chain's value-adding activities are highlighted. It is relevant to the operations’ proper management for resource control, boost competitiveness, reduce costs, inspire staff, and improve customer satisfaction. This research aims to optimize operation management, internal logistic flows, and process times within an Ecuadorian hardware and construction material distribution center. The company's current problem is the long time for order picking process, since standardized techniques that adapt the process to the operators’ needs are missing. To solve the problem, the Action Research (AR) methodology was proposed, along with tools such as the Traveling Salesman Problem (TSP) algorithm and programming languages (JAVA). First it was used the TSP algorithm to choose a practical path, so the average order picking distance and logistical flows were reduced. Then, by establishing it as a standard for product relocation and emphasizing high-turnover items, it was suggested a sale-by-package output approach instead of a unit sale. From both methods, the company’s operations improved satisfactorily. As a result of using the TSP algorithm, 70, Stock Keeping Unit (SKU) were relocated, all based on their turnover. These SKUs accounted for 41.65% of sales during the period analyzed. This relocation resulted in a 7.57% reduction in the average travel distance per invoice, as well as a reduction in the workload for operators. The overall travel distance in the invoice pick-up operation was reduced to 47%, giving the possibility to comply with 65% of all orders, due to the optimization of the movement within the warehouses and with the possibility to further minimize unnecessary travel, improving operational efficiency and reducing both time and costs associated with product collection.