Published on: April 12, 2016
If you are like the average manufacturer or distributor, your picking error rate is between 1% and 3%. Whether your warehousing and distribution errors are average, below average, or above it, increasing profitability in the warehouse requires striving for error-free picking. Industry studies have shown that each picking error results in an 11-13% cut in profitability for that order. The real total cost of a picking error generally ranges from $50 to $300. Multiply that times your error rate and your yearly picking volume for the total annual impact. Reducing picking errors makes business sense.
The real cost of picking errors
Have you considered all of these costs of picking and fulfillment errors in your warehouse management strategy?
- Lost sales. Picking errors usually mean shipping errors and shipping errors result in lower customer satisfaction and customer retention. One picking error can affect the customer’s perception of an entire order. That is why it is important to improve the picking and fulfillment process before it has an impact on the customer.
- Returns. Returns are expensive. You have the cost of documenting the problem, return shipping, and retagging, to name a few.
- Additional shipping. There are even more shipping costs than the expense of the return; you also need to consider the cost of expediting the correct order.
- Customer service costs. Errors that impact the customer mean more time spent in customer service to field the complaint and solve the problem.
- Repackaging. Don’t forget that if you can reuse the returned item, it has the added expense of being repackaged.
- Warehouse labor costs. In addition to restocking costs, you have the wasted labor hours spent on that unit. A picking error could be a stocking error, meaning that you may have the cost of doing a cycle count at that location.
- Sales costs. Costs rise as more people need to get involved in the process. Persistent fulfillment problems can damage the sales process—now your sales force is spending time placating customers rather than making new sales.
Warehousing and distribution automation makes business sense
When you add up these costs, the benefits and return on investment (ROI) for a warehouse management system integrated with your ERP just got easier to prove. In fact, the majority of warehouse managers believe that increasing automation and adopting mobile technology in the warehouse can have the greatest impact on improving profitability. (See Warehousing and Distribution Efficiency Gains with Mobility.) Choosing warehouse automation makes a lot more sense than the cost of doing nothing.
Warehouse management and automation solutions increase your profitability by reducing inventory errors and even more. Not only do you reduce error, but you increase productivity and simplify training. Inventory accuracy is critical to reduce error, and automation tools that are directly connected to your ERP can validate your inventory in real time. In addition, when you automate simple functions, you eliminate unnecessary labor costs. Picking is significantly faster which means greater processing capacity. With mobile warehouse devices, workers can be more flexible and more productive. Automation even simplifies training as workers know what to do, when to do it, and where to go. That makes it easier for your company to grow and be profitable.
Move to a warehousing and distribution solution
Using a warehouse management solution to manage your inventory and warehouse can help you take charge of the picking process and improve profitability. Mindover Software specializes in working with warehousing and distribution companies. Our warehousing and distribution software solutions, Sage WMS, Accellos WMS and Acumatica Distribution Management Suite feature intuitive, easy-to-use interfaces with seamless integration to leading accounting and ERP systems, scan guns, bar-code tags, shipping systems, and other warehouse technologies.
Contact us for more information on how products like Sage WMS, Accellos WMS or Acumatica Distribution Management Suite can increase inventory-handling accuracy, improve allocation of human resources, and control costs associated with obsolete and slow-moving stock. It may be time for you to maximize your operational efficiencies and reduce error with an improved WMS.