The Cost of Picking Mistakes for Small Businesses
A survey of 300 supply-chain and distribution managers across the United States found that distribution centers are losing an average of nearly $585,000 per year due to mis-picks. Although it may not seem like a big problem, the cost of picking mistakes includes the cost of the incorrect item, the cost of shipping and the cost of lost time returning it to stock. Even worse, that mis-pick may cost you a customer.
Hannah Kain, author of “Simple Fulfillment Errors Will Affect the Bottom Line,” further explains that time is also lost in correcting the mistake by picking, packing, and shipping the right item to the customer. And you’ll often need to expedite shipping to keep the customer somewhat satisfied. So, how much to picking mistakes actually cost and how can you minimize your picking mistakes?
Actual Cost of a Mis-Picked Item
An estimated 35 percent of facilities experience ongoing mis-pick rates of one percent or more. Although one percent may seem like an acceptable failure rate, it can quickly become a growing problem for you if not properly managed.
The data from supply-chain and distribution managers show that the cost of the average mis-pick is around $30 per incident. Less than one-in-five small e-commerce companies measure mis-picks in any form; the cost might be even higher than estimated depending on the warehouse.
One of the smartest ways to quantify picking mistake losses is to calculate it out using some simple math. Let’s say a facility runs one 8-hour shift per day, picks 200 lines per hour and averages four SKUs per order. Multiply each of these numbers to get the total number of items picked per day, which is 6,400 items in this case. If just one percent of those picks are incorrect, that translates to 64 mis-picks daily. If the cost of each mis-pick is $30, that means you lose $1,920 per day in revenue and almost $58,000 per month. That is detrimental!
Minimize Picking Mistakes
Great entrepreneurs with a great online product are not necessarily great at fulfillment management. If you’re not yet big enough to justify using a 3PL, you’ll quickly discover that fulfilling orders yourself is a big logistical web.
No one starts a business because they are experts at packing and shipping boxes. So, learning how to manage your inventory effectively may take a while without the right tools.
WarehouseOS® is a tool that will make your job a lot easier and help you become logistically organized. It helps lighten the load on your bottom line with tracked and organized SKUs and automated picking and packing abilities. However, one of the best benefits is that using WarehouseOS, you can be 100 percent accurate with your orders.
No picking mistakes = a more profitable business.
Every hour you don’t do something about those picking mistakes, you lose money that your business needs. Check out how WarehouseOS can help you.