Transforming Picking in the Retail Industry in Mexico: Automation in Order Processing 

In Mexico, retail has a significant impact on the national economy. It is the third-largest sector in terms of GDP, behind manufacturing and real estate and rental services. Since 1993, the sector has shown an upward trend, with an average annual growth rate of 11%, affected only by the 2009 economic crisis and the COVID-19 pandemic in 2020. 

This performance highlights the strength of the sector and the importance of meeting market needs, which remain relatively stable due to the type of goods retail manages, particularly essential and semi-essential products. 

This GDP growth is also reflected in the size of the retail workforce. Over the past 10 years, the sector has followed a similar trend, growing by an average of 2% annually. However, the most significant change was observed after 2019, when supply chain operations were restructured due to the restrictions imposed during the COVID-19 pandemic. 

This event, combined with the exponential growth of e-commerce, forced logistics processes to become more flexible in order to respond to sharper demand fluctuations, dynamic distribution planning, additional service offerings, and the expansion of smaller points of sale located closer to customers. These factors led to an increase in both permanent and temporary staff, driving up operating costs across the board and reducing profitability. 

Source: Retail Trade: Wages, Production, Investment, Opportunities, and Complexity | Data México 

Retail companies today face major day-to-day challenges in order preparation due to the highly dynamic nature of their operations. Fulfillment strategies and assigned operational resources must be able to handle significant variability in order behavior, including the number of items, quantities, and destinations. 

For this reason, the process design must be flexible and allow for effective picking and consolidation by order type, without overloading the installed operational capacity. 

The factors with the greatest impact on order fulfillment in this industry include: 

• 1. High order fragmentation: A higher number of picks is required when primarily processing cases or pieces, resulting in longer travel distances due to the greater number of locations visited.
  2. Omnichannel operations: Multiple fulfillment strategies are needed to serve different sales channels with independent SKU and volume profiles, such as large-format stores, small-format stores, dark stores, and e-commerce.
  3. Demand variability: Changing picking patterns make it more difficult to plan operational capacity and design efficient picking and consolidation processes.
  4. Seasonality: Commercial events can lead to partial or full saturation of order preparation and/or distribution resources due to increased material flows.
  5. Extensive SKU catalogs: Designing efficient slotting becomes more complex when rotation levels and storage characteristics must be considered, especially when multiple, larger picking zones are required. 

Automating a process is one way to improve the standard productivity of any activity by eliminating idle time and reducing errors caused by human factors. However, it is also an important financial decision. Depending on the technology being implemented, automation can require significant CAPEX compared to traditional solutions. 

For this reason, the level of automation used for order preparation must be aligned with the actual needs of the operation. 

Specifically, the decision on which technology to implement depends on four key elements: 

• • Average order lines per order: The higher the number of order lines in a single order, the more complex, costly, and time-consuming the picking process becomes, mainly due to longer travel distances across multiple locations.

• • Daily volume: Material flow determines the throughput capacity the system must provide in order to balance area size, labor, and equipment requirements, while accounting for productivity limitations.

• • Case type: Not all systems are suitable for processing every packaging format. System performance can be affected by the final handling unit, such as totes, corrugated cases, or inner packs.

• • Infrastructure strategy: The functionalities and components of each alternative are designed to support specific operational criteria to a greater or lesser extent, such as absorbing growth or adapting to demand peaks. 

It is important to note that if the final design includes multiple preparation zones, the same level of technology is not necessarily required across all picking and consolidation processes. Each system is individual and complementary, functioning as part of a holistic process that is properly coordinated based on specific item and order profiles. 

However, all technologies should ideally be managed through a single control system, such as a WCS. This enables a global view of flows, real-time workload balancing, and simultaneous processing of the same order across all areas, reducing overall preparation time. 

Today, a wide range of automation systems is available on the market to improve overall productivity in order preparation and optimize labor requirements. Each solution reduces human interaction in the process to a different degree and serves a different function, either supporting manual picking or fully replacing traditional picking with a goods-to-person approach. 

Solutions supporting traditional picking: 

Once products have been picked, order sorting may be required depending on the operation and the processes designed. This need arises when, due to high order complexity and a large variety of SKUs, a single-order strategy becomes inefficient and a multi-order strategy must be established by zone and/or by batch. 

This order processing strategy can become a bottleneck. If the area is not structured correctly, consolidation by destination or customer can become highly vulnerable to daily disruptions, requiring a large workforce and/or a larger space. 

To mitigate operational risks, the process can be optimized through the implementation of an automated sorter. This significantly increases productivity by allowing staff to focus on building pallets by customer. Using barcode readers, these systems identify each case’s order number and sort cases via diverters into work areas designed to process a defined number of destinations. 

However, it is important to determine whether the operational scenario truly requires this technology. Due to its configuration, components, and performance requirements, a sorter represents a significant investment for any company. There is also a wide variety of sorter alternatives available, each suited to different types of operations. If the consolidation task is not properly analyzed, the selected equipment may be underutilized or may itself create process saturation. 

The most important factors in determining whether this type of technology is required include: 

Any automation strategy requires an appropriate level of maturity in information systems. This maturity must be aligned with the complexity and type of technology being implemented. 

This means having platforms capable of managing and integrating automated processes, ensuring that each solution receives the required information about products, orders, and all other data needed to execute operations. If systems are not properly fed through the right channels, system efficiency and productivity can be compromised, reducing the expected benefits.