Modeling the order picking function in supply chain systems: formulation, experimentation, and insights

Order picking is found at the interface of production and distribution networks within supply chain systems. In this study the order picking function is modeled to explore its role with respect to inventory deployment and centralized distribution planning, in the presence of production economies of scale and deterministic demand. The results of 5400 numerical experiments suggest that, for certain system cost structures, there may exist an inherent tension between commercially independent stages, owed to the consequences of decentralized planning. Increasing total system cost due to pull style planning over centralized planning appeared to be most heavily influenced by the proportion of costs shared by various system stages around the order picker, and this gap averaged over 30% in worst-case scenarios.