The Real Cost of Picking Errors in the Warehouse

Every error in your warehouse has an impact on profitability. The average industry picking error rate is between 1% and 3%. This sounds like a pretty good rate until you look at the full cost of picking errors in your warehouse. In fact, studies show that the average cost per error is anywhere from $50 to $300 dollars or an 11-13% drain on profitability. Multiply that times your error rate and your yearly picking volume for the total annual impact. This real cost of picking errors means that striving for error-free picking makes sense.

The real cost of picking errors

Have you considered all of these costs of picking and fulfillment errors in your warehouse 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.

A warehouse management system makes business sense

When you add up these costs, the benefits and return on investment (ROI) for an inventory 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, like Infor Warehouse Mobility, 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 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 warehouse management solution

Using an ERP solution to manage your inventory and warehouse can help you take charge of the picking process and improve profitability.  Sage 100 (formerly Sage MAS 90 and Sage MAS 200) is enterprise resource planning software made to meet the needs of small and medium-sized businesses. With advanced inventory control and seamless integration with your financials, the software will help you streamline processes and save time and money. Infor CloudSuite Industrial provides inventory management connected to manufacturing and financial software so that you can get your orders right the first time.

Contact us today to learn more about how an ERP system with inventory management, like Sage 100 or Infor CloudSuite Industrial, can help you reduce errors in your warehouse.

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  1. How to Justify Wholesale Distribution Software Investment | EmeraldTC.com - September 20, 2016

    […] toll on your business’ profitability. We discussed the cost of just one mistake in our blog, The Real Cost of Picking Errors in the Warehouse. In this article, we shared that a single fulfillment error can decrease profitability of that sale […]

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