Beware the Hidden Costs of Mispicks

Do you really know how much mispicks cost your business? And do you, or should you, care? By Nick Hughes, Sales Manager at Invar Integration

Sending a customer a replacement item may sound a relatively small price to pay when pick accuracy is up on 97% or so. But over the year, those costs can add up to a significant financial impact. Much more importantly, several other potentially damaging factors come into play with every mispick and those hidden costs can be far more harmful to the business.

Firstly, looking to the more obvious direct costs. A global survey of some 250 supply chain managers, undertaken some years ago by Intermec, put the average figure of a mispick at around £16, adding up to £282,000 annually for the average business. Most organisations believe they have good or excellent pick accuracy, but good or excellent can be pretty subjective. Even with 98% accuracy that still means two orders in every 100 are incorrect, and with every 1000 orders there are 20 unhappy customers. As order volumes climb, the issues escalate.

Each error costs the business in terms of customer care personnel time, return postal costs, warehouse staff time in checking and processing returned items, materials used in repacking the goods, time taken placing the item back into stock, and then, of course, all the costs associated with generating and processing a new order for the correct item and delivering it to a somewhat disgruntled customer. And if the mispicked item isn’t returned, or is unable to be resold as new, you’ve got the costs of that too.

What’s more, it’s worth noting that the £16 figure mentioned in the survey is just the average. High value items, or those despatched overseas, may involve costs exceeding £70. However, all these costs may well be dwarfed by the potential impact of mispicks on future sales.

What are the costs associated with an unhappy customer? In a fiercely competitive commercial world every customer is valuable. A happy, loyal customer makes repeat purchases and is more likely to be tempted by products from a trusted, reliable brand – much less effort and cost per sale than trying to win over a new customer. However, receiving a mispicked item can be irritating, to say the least. A Voxware survey found that 73% of consumers that receive incorrect items are much less likely to order from that business again.

Bad enough that you might lose that customer to the competition, and miss out on their future business, but with an unhappy consumer empowered by social media, a poor customer service experience can be shared to devastating effect.

Trust is hard to gain and easy to lose. According to a survey of 2000 shoppers, undertaken by retail operations platform, Brightpearl, 46% of shoppers regularly check star ratings for online retailers before purchasing, and two in five consumers have been put off a brand or a retailer they might have shopped with by a single unfavourable review. With negative reviews heavily influencing buying behaviour, a few mispicks can have a very large impact on sales.

Brand reputation is a valuable asset that should be protected. And with that in mind a further point concerning mispicks should be considered.

Consumers are increasingly guided in their purchasing behaviour by a brand’s environmental performance – such as how products are packaged, emissions associated with delivery and waste. Mispicks result in wasted packaging, unnecessary road miles and increased CO2 emissions. So, how many extra lorries are totalled-up over a year taking mispicked products to customers, returning them, and then delivering the correct item? How much packaging is wasted? As businesses are progressively pressed to report their environmental impact, such factors will play an increasingly important role in shaping consumer opinion and where purchases are made.

In just about every case, mispicks are down to human error, and the act of picking is still, essentially, a manual process – albeit, these days, often assisted by technology. Types of errors include: Items may be misidentified, the wrong colour, size or pack quantity selected, single items picked in the wrong quantity – either fewer or more than ordered ­– placed incorrectly into the wrong order tote or box, items may be omitted from the order – and this presupposes that the correct items were placed in the correct picking locations in the first place.

Unfortunately, humans get tired, become distracted and when asked to repeatedly take quick decisions over a long shift, mistakes happen. Even providing the picker with a picture of the item to be selected may prove difficult to mentally process time and time again, and may slow the process down. But there are many technologies that can help, such as: Pick-by-light, pick-by-voice, user friendly and ergonomic workstations or even removing the person entirely with robotics. Regardless of solution, verification of the pick is absolutely essential in driving error rates down.

Radio Frequency technology is an under utilised solution. RF tagging has moved on considerably in recent years and now tags are cheap and accuracy is high.

There are all manner of technologies that can be deployed to drive picking performance, as well as pick accuracy. Flexibility, scalability and accuracy will be important factors in the equation, but the best solution will be determined by the product characteristics, throughput rates and order profiles. A good integrator, with all the necessary software resources at its disposal, will be able to help you design the most appropriate solution using the very latest technologies.

Ecommerce is heavily dependent upon the efficient picking, packing and fulfilment of orders, and as volumes continue to rise, seemingly exponentially, the emphasis for most businesses will be on finding the right technology to boost throughput. But pick accuracy is just as critical. As the number of transactions grow, pick accuracy rises in importance – every negative customer review has the potential to damage sales.

Luckily, there are technologies available that can help increase capacity, whilst simultaneously driving-up pick accuracy. Using automation to bring goods to the person allows for higher throughput rates and when combined with directed picking technology, and item scanning for verification, can deliver the volume increases demanded of an expanding business, along with the near perfect picking performance that ensures excellent, as opposed to bad, reviews.