Based on our 32 years in business, we’ve found the average cost to you of a fulfillment error is between $35 and $50. But the most severe error not in this number is an error that causes you to lose a customer and their lifetime value.
In our March 2015 blog, “What’s The Real Cost of a Fulfillment Error to Your Business?”, we discussed ways to identify the cost of a fulfillment error. We’ll now concentrate on identifying the major causes of errors and practices which will decrease or eliminate them.
Five Companies and Their Error Rates
The table below shows fulfillment error free rates of five companies we did benchmarking with. In general, we find companies with voice picking and barcode applications have error-free rates that are 98% or higher. We hate to say a 2% error rate is acceptable because your objective should be no errors. As these technologies are implemented, the error-free rate is usually above 99.5%. Company size does not always translate to great results – Company C has the second-best result but the smallest order volume.
| Company | Orders Shipped (thousands) | % Error Free | |
| A | 260 | 99.16% | |
| B | 552 | 97.00% | |
| C | 176 | 99.60% | |
| D | 1,000 | 99.90% | |
| E | 1,000 | 95.10% | |
| Source: F. Curtis Barry & Company benchmarking | |||
Major Sources of Error
Here are seven major sources of fulfillment errors and how to reduce or eliminate them:
Errors from Order Sources
While these are not controlled by fulfillment, they contribute to the error rate. In smaller companies, marketplace orders and even those hitting their own ecommerce site may not be directly interfaced to the order management system, relying on manual edits and in some instances re-keying. Obviously, this leaves open the possibility of fulfillment errors. Consider having ecommerce and Amazon systems interface directly to your OMS.
To combat contact center keying errors, have the agent repeat quantity and product numbers back to the customer before closing the order.
Receiving
As an industry best practice, receiving starts with having the purchase order accessible online to the receiving department. Several things can happen in the receiving process which create errors later in order processing. You may accept damaged product inadvertently or items you didn’t order, or there may be errors in identifying products. All these may not be discovered until later in the process.
One way to decrease these issues is to implement advanced shipping notices (ASNs). This gives receiving additional time to know what will hit the dock so they can schedule personnel and deliveries accordingly. All this brings order to what can be a chaotic operation.
Another way to reduce and eliminate receiving errors is through a checking process. Most companies use the vendor’s history of errors as the basis for inspections. The highest-quality vendors do not justify detail inspection beyond each/case counts. Sloppy vendors generally are sampled 5% to 10% of the time. If the situation warrants, all quantities are inspected. Exclusives and proprietary product require a higher percentage, up to 100% inspections, to meet specifications.
Product Marketing
The assortments of many companies have grown to tens of thousands of SKUs. Tribal knowledge of knowing what specific products look like and where they’re stored no longer works. Marking all products with barcode or UPC, and using item numbers and descriptions on pick tickets, eliminates most errors. This allows product confirmation in the picking and packing process.
Locator Systems
All product storage media and floor stacked areas should be marked with barcode and scannable marking.
Product Storage
We often see companies attempting to reduce the number of bin and slot locations dramatically by putting multiple SKUs in the same location. Not only will this create the potential for mis-picks but it also slows down the picking process. The best practice is to have a single SKU in a bin and slot location.
Facility Characteristics
Are there physical aspects of your facility that contribute to fulfillment errors? An obvious one is lighting. Is it sufficient to pick product and see pick tickets throughout the facility?
Product Damage
Track damage by shipper and product. As companies have been dealing with dimensional weight pricing from the major carriers for the past couple years, boxes and packaging materials are sometimes too lightweight. How can it be improved? With ship-alone products, is the tensile strength of packaging strong enough to protect the product?
Technology
As we have illustrated, technology is a critical component in squeezing out fulfillment errors. Implement barcode labeling and scanning in receiving, stock locations, put-away, picking, packing and confirmation processes. Also look at how voice technology can be used not only in picking but anywhere data entry happens in your warehousing processes.
Brian Barry is President of F. Curtis Barry & Company