Do you know how much picking errors cost your business?
According to the Swedish Trade federation, the cost of faulty picking per item is 1,850 SEK (€195).
But they’re wrong. The real figure is many times higher because 1,850 SEK only accounts for the direct costs – and there is so much money people don’t consider when analysing the effects of a simple picking fault.
Picking errors have far-reaching consequences…
At a recent Consafe Logistics user conference, we analysed the total cost of picking errors and found that a 0.2% difference in accuracy, the difference between companies that registered 0.72% picking faults contra 0.52% picking faults translated to a 5 million SEK (€500,000) greater loss.
One picking error results in a hassle-filled and expensive process for everyone involved. Here are typical scenarios:
Each of these points carries a direct cost and an opportunity cost for you and your customer.
…And they can cost you millions
Consider the customer experience outlined above. It doesn’t inspire feelings of satisfaction, does it?
In today’s connected world, picking errors cost your business in terms of loyalty, brand image and potential negative publicity, be it online or word of mouth. And these intangibles have a very real impact on your bottom line.
Let’s go back to our 5 Million SEK and where it came from:
|Order lines per day||6,270||6,270|
|Order lines per month||131,670||131,670|
|Faults per year||11,340||8,316|
|Faults per day||45||33|
|Average cost||1,850 SEK||1,850 SEK|
|TOTAL COST||20,979,000 SEK||15,384,600 SEK|
So how do you reduce picking errors?
Firstly, you need to have accurate measurement. Don’t just look at replacement and shipping costs – consider the entire chain.
Then start at inbound goods and work through to exit, analysing potential error points throughout your inbound and outbound flows.
At inbound, can you introduce scanning to improve processing through to put away and beyond? This gives you added traceability from the moment the product enters the warehouse.
For picking, what systems can you implement to boost accuracy? Consider voice control that guides workers on where to go and what to pick. Or RFID tags that enable you to track each item’s precise location in the warehouse.
Then you have your outbound flows. During packing, can you use smart scales to verify accuracy based on weight? And scanning on dispatch to provide a final check before exit.
When you take a holistic look at warehouse operations, you can perform an accurate cost/benefit analysis to make sure you’re investing in the right systems. This enables you to offer better service and more value to customers while protecting your business from the costly effects of a simple picking mistake.
Thord Sjölin is a Business Process Expert at Consafe Logistics
Joakim Gustafsson is Business Relations Manager at Consafe Logistics