5. Reduce the errors that are made. Most errors cost between $100 and $200 each. Items that make up this cost are 1) overnight freight on correct item which includes picking, packing and shipping. 2) cost for return freight including receiving, inspecting, and putting away. 3) Lost sales for the returned item in transit or potential write off for damaged goods. 4) Lost confidence in your company from the customer
As you can see making mistakes is extremely costly. For example, you ship 100 orders per day and have a 98% accuracy rate. This is 2 mistakes per day. Considering 220 working days per year, this is 440 errors per year. At the low end of $100 cost per error this is of course $44,000 per year. There are probably other things you can do with that $44,000 each year.
This can be a difficult one to correct completely without adding more processes for checking orders which of course means more labor and more cost. However, there are ways to reduce errors. You should start by looking at your ordering through picking process. Are there steps that you can improve upon? Do your employees thoroughly check each order before it goes out the door? Is each order checked by more than one person? This is a very costly verification system.
You need to have a system that is simple and easy to follow. Have an easy to read pick ticket. Don’t use a shipping document as a picking document. This has too much data on it for your customer and will be hard for pickers to find pertinent information. The information should be displayed in the order it is required: location, stock number, description, unit of measure and quantity required. Make sure that the document lists items in pick route order to save the picker time and avoid missing line items.
Make sure your employees follow the system. A system can be paper driven or fully automated with handheld Radio Frequency scanners. Do not let your warehouse employees make decisions on exceptions. For example, if an order comes along that shows a back order and there are plenty in the bin for the order, make sure the picker follows the order. What that means is do not pick the quantity on back order. Why? the quantity in the bin may be allocated or reserved for another customer or order. In this example not following the system will result in a mistake and unhappy customer that is expecting his or her order to be filled.
Yes, you can and should bar code everything you touch. But just because you have everything with a nice little code on it does not mean that now you are efficient. Sure you can receive things in with a bar code and put them away. If you are doing that now, nice job. However, most of your mistakes are made while picking. You should bar code everything so that you are prepared to take the next step and really manage your warehouse.
If you have your paper or manual system streamlined as best you can and still find that mistakes are being made, maybe it is time to look at an automated system. Let’s face it there are people involved and they can and do make mistakes. An automated system can drastically reduce errors and cut down on labor time tremendously when implemented correctly. This allows you to truly manage your warehouse and make money with it. There is a very short return on investment time in purchasing a warehouse management system with radio frequency scanners. These systems can in most cases pay for themselves within 12 to 18 months.
Make money here:
○ Reduce errors that cost you a lot of money. These are $100 to $200 each.
○ Invest in a warehouse management system to reduce errors and save labor
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