How Much Are You Paying for Errors in Your Inventory Management?

Inventory ManagementThere is no doubt that you are striving for as few errors in your inventory fulfillment as possible. Delivering the right product to the customer is crucial for your long-term success. Perhaps you are pleased with your picking error rate. After all, a one, two or three percent error-rate seems pretty good. But have you ever considered how much that error is costing your business?

The average picking error rate ranges between 1% and 3% which sounds great until you start to look at the cost of that error. In fact, picking errors can be expensive. When you add up all of the costs of inventory shipping errors, you may find that you have lost 11-13% of your profits. Some studies have shown the cost per error to be anywhere from $50 to $300. Multiply that times a 1% error rate and your picking volume and you will find a big impact on your company profitability.

The real cost of picking errors

Have you considered all of these costs of picking and fulfillment errors in your inventory management strategy?

  1. 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.
  2. Returns. Returns are expensive. You have the cost of documenting the problem, return shipping, and retagging, to name a few.
  3. 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.
  4. Customer service costs. Errors that impact the customer mean more time spent in customer service to field the complaint and solve the problem.
  5. Repackaging. Don’t forget that if you can reuse the returned item, it has the added expense of being repackaged.
  6. 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.
  7. 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.

Warehouse automation makes business sense

When you add up these costs, the benefits and return on investment (ROI) for warehouse automation 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. Choosing warehouse automation makes a lot more sense than the cost of doing nothing.

Warehouse 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 great 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.

Scanco Warehouse makes inventory management more profitable

Scanco Warehouse can help you improve the accuracy of your picking. With handheld devices, you can decrease errors and increase productivity. Not only that, inventory errors due to manual data entry are eliminated with seamless integration to Sage 100. With a direct connection to your ERP, Scanco Warehouse verifies every item as it is shipped or received, improving accuracy in your warehouse. You can do all of this without the cost of purchasing expensive equipment. On average, switching to a mobile iOS, Android, or Windows platform will cut hardware costs per unit by over 65%.

Contact us for more information on how products like Scanco Warehouse for Sage 100 (formerly MAS 200 ERP) can increase inventory-handling accuracy and reduce costs.