​@Alex_Mee 

check the shipment type in CO lines? does the picklist get created successfully?

That might be the problem.  Shouldn’t the Shipment Type on the CO Lines be the same by default at the Customer Order Header “Order Details”.  How does the CO Lines get defaulted?

Thank you,

​@Alex_Mee that is not always the case, which I for flexibility to handle complicated scenarios I assume. 

Shipment types can be entered per site, per customer delivery address or per supply chain relation as a default.  A default shipment type defined per supply chain relation has the highest priority, then per customer delivery address and at last per site. The default shipment type will be fetched to customer orders or shipments but it can be changed manually if required. For source ref type customer order, the control of the progress is handed over from the order type to the shipment type as soon as a shipment is created.