Mispicks: What They Really Mean for Your DC

The cost of picking and shipping errors go far beyond returns processing. Here’s why.

As warehouses strive to produce “perfect orders” for their customers at a much higher velocity, the cost of an error has only increased. A worst-case scenario for a distribution center is for a mispick to occur and make its way through the delivery process. Mispicks and other inaccuracies not only disappoint customers and initiate costly return processes, they also produce a ripple effect that generates additional costs and erodes customer loyalty.

Mispicks occur when employees pick the wrong item, neglect to pick an item, pick the wrong quantity, or pick a damaged or mislabeled item for an order. According to this article in DC Velocity, human error is most often the culprit, but labeling errors introduced by the supplier or at receipt can also lead to mispicks.

These errors waste time and labor, can lead to expensive chargebacks, and damage the customer relationship.  Receiving the wrong item can lead to missed deadlines or production issues for industrial customers, in addition to forcing them to deal with a return. On the consumer side, these picking/shipping errors can tarnish the company’s reputation with other potential customers.

"Service is now the big issue," says Steve Mulaik, an Atlanta-based director with global supply chain management consulting firm Crimson & Co. "[A mispick] can add two days to an order’s processing time. This is huge in the cut-throat e-commerce world. This sort of thing ends up in complaints on Facebook and elsewhere that drive [customers] to sites that have better service."

A Costly Mistake

Mispicks are an expensive problem. According to research from Vanson Bourne (quoted in the DC Velocity article), mispicks cost warehouses nearly $400,000 annually.  Crimson & Co. put the labor cost of a mispick at $3 to $7 per error, while other studies have placed that average error cost as high as $22. In some industries the price can be double or quadruple even that, depending on the type of goods involved.

What creates those costs? There are several elements worth considering, both direct and indirect:

  • Wasted Labor. A mispick leads to wasted staff-hours and wasted effort in re-picking and correcting the order. If there is a chronic problem with mispicks, the company may also have to invest in additional staff to help manage customer complaints and handle returns issues. All of this extra work and over-staffing drives up the cost of mispicks.
  • Expensive Reverse Logistics. Outbound shipping is streamlined and optimized; but returns processing is a disorganized, multi-step morass at most facilities. Returned goods have to be inspected and a determination made if they should be put back into stock, returned to the suppliers or destroyed. Returns make inventory management more difficult and require complex accounting procedures.
  • Loss of Customer Confidence. Returns are aggravating and customers don’t have much patience for mispicks and inaccuracy. In addition to whatever problems the mispick may have caused for the customer – anything from a missed deadline for a business customer to a missing Christmas gift for a consumer – they now have to package and return an item. That usually involves going to the post office or UPS/FedEx location or arranging for a courier. That level of aggravation has a cost, too. Customers lose faith in your ability to deliver what they need and are much less likely to do business with you in the future.
  • Fines and Chargebacks.. In some cases, there’s a monetary figure attached – if a service level agreement is in place, you may face fines or chargebacks.  Not to mention, this goes hand in hand with misdelivery fees for bad addresses charged by carriers.

Reducing mispicks will require a three-pronged approach that involves technology, process optimization, and employee training. Even if your shipping accuracy is relatively high, taking these steps to eliminate a small percentage of mistakes is still worth the effort in customer goodwill.

  1. Technology. This shouldn’t be surprising to anyone, but barcode scanning, mobile computing, pick-to-light solutions, and robotic goods-to-person picking systems, like Perfect Pick® can eliminate most human error from the picking process. Manual methods require much more labor and still wind up generating mistakes anyway.
  2. Process Design. Be sure to review picking and packing processes and identify when and where mispicks are occurring. Redesign those portions of the process that cause the most errors. It can be as simple as improving how you alert staff when a mispick has occurred – even with barcode scanning, they will need visual and audible alerts so they can fix the problem right away.
  3. Training. Make sure your employees understand the cost of mispicks and train them properly to use the new technology and picking processes to help reduce errors. They also need to know which procedures to follow when a mispick has occurred in each phase of the fulfillment process.

Employing these strategies will not only reduce mispicks but can also create substantial productivity improvements across a warehouse – along with happier and more loyal customers.

<<To learn more about the benefits of warehouse automation check out this case study >>

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