Final answer:
In the DMLSS system, the transaction to process for picking up equipment on record is an Equipment Transfer, which accurately tracks the movement of assets.
Step-by-step explanation:
To properly pick up equipment on record in the Defense Medical Logistics Standard Support (DMLSS) system, the transaction that must be processed is B) Equipment Transfer. This transaction allows for the official recording of the movement of equipment from one location to another within the organization, ensuring that all assets are accurately tracked and accounted for. Other options such as Equipment Check-In, Equipment Disposal, and Equipment Loan serve different purposes in the management of equipment within the DMLSS system.