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The Cost of Inaccuracy in the Warehouse

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Companies are constantly searching for ways to keep costs at a minimum and are finding that a major area of loss every year is the warehouse. Through simple errors such as short picks, over picks and mis-picks, companies squander hundreds of thousands of dollars every year through shoddy warehouse accuracy. The numbers may be insignificant when looked at individually, however the difference between 99.8% accuracy and 99.9%+ accuracy in the warehouse can result in substantial gains to the company.

Picture this scenario: A large warehouse picks half a million items every week with an accuracy of 99.8%. This means that every week there are 1000 items that are incorrectly picked. If for arguments sake we say that each incorrect pick costs $15 then this results is a $15,000 weekly loss. Changing the accuracy of the warehouse to 99.95% a mere improvement of .15% proves to have a drastic effect. Instead of 1000 items incorrectly picked every week, there are 250 resulting in a $3750 loss each week. This saving of $11,250 each week adds up to substantial savings over the course of a year. Over a 50 week work year approximately half a million dollars is saved in the warehouse

In the warehouse there are different costs that are incurred when items are incorrectly picked. Items can be short picked in which the item is not picked in sufficient number. The costs associated with this result in manpower to handle the claim from the customer and the margin on the sale will be lost. An over pick results when more than the required amount is sent to the customer which if reported will cost the company in having the item shipped back, if not reported then the item is lost and the cost must be covered for. In a mis-pick the wrong item is sent to the customer that will incur costs in transportation of the item back and sending out the correct item as well as the margin lost on the sale. A recent Intermec study shows that distribution centres are losing on average $390,000 per year due to mis-picks, a figure that is staggering in its scope.

Mobile ComputersIt has become abundantly clear that accuracy in the warehouse is vastly important and can make or break a company, but how can we improve it? Distribution centres are incorporating warehouse management systems as well as technologies such as barcoding, RFID and voice in order to increase their accuracy. For many years devices such as the Intermec CK3 and ck70/ck71 lines, the Motorola MC9190 line, the Datalogic Quickscan line or Honeywell/LXE rugged handheld computers have been used in the warehouse and cold storage rooms to help improve accuracy. They save employees from using antiquated pen and paper methods and whilst improving speed will also improve the accuracy of the picks completed.

Recently voice technology has become a big hit in warehouses meaning that a picker can now have his hands free and be told what to pick and where to pick it from, all through an earpiece whilst confirming the pick via scanning and voice. Despite the obvious benefits technology brings with it in the warehouse many distribution centres (23% according to an Intermec study) still use pen and paper when picking.

Companies still seem to miss the importance of having an automated supply chain process that is both efficient in time and accuracy. Through implementing barcode scanners and wireless online systems companies stand to save substantial amounts of money. With a short return on Investment ranging from 6 months to a year, the reasons to upgrade to a technology based warehouse system have never been greater.

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Guest Thursday, 28 August 2014
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