The true cost of a mispick is measured in service levels—and by a dwindling customer base when consumer and B2B buyers turn to sources that get orders right.
By Victoria Kickham
Most organizations understand that mispicks can add up to big losses—in money, time, and labor—but the biggest bite comes from losing a customer due to service problems associated with slow deliveries, receipt of the wrong item, and the hassle of a return. In today’s fast-shipping world, where two-day (or faster) delivery has become the norm thanks to the likes of Amazon.com and Zappos.com, companies serving both consumers and business-to-business customers must meet higher-than-ever expectation levels or suffer the wrath of a dissatisfied customer.
“Service is now the big issue,” says Steve Mulaik, 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.”
The situation is putting pressure on distribution center leaders to improve accuracy in the picking process. The list of remedies is long and includes technology solutions, process changes, and new approaches to training DC workers. But before a DC can tackle any of that, managers and staff must understand what a mispick is, what it costs, and how to address the weak spots in their operation.
MISPICKS: WHAT THEY ARE AND WHAT THEY’RE COSTING YOU
A mispick occurs when the wrong item or wrong quantity of an item is picked, when an item is omitted, or when a damaged or mislabeled item makes its way into an order. Mispicks occur primarily through human error; a worker picks the wrong item, pulls from the wrong location, picks the wrong quantity or unit of measure, puts an item into the wrong tote, or in some cases abandons the pick task along the way. Mispicks also can occur because of vendor errors or because a product has been misreceived.
Experts say it’s tough to put an industry-standard price tag on the cost of a mispick because so many factors come into play, including the value of the product being picked and the costs associated with shipping, returning, and restocking the item—as well as the labor required to handle it all. Soft costs—including resulting inventory inaccuracies and customer dissatisfaction—further muddy the waters.
Despite those challenges, there are some industry statistics that highlight the severity of the problem: A 2012 study by research company Vanson Bourne estimates that DCs lose nearly $400,000 a year due to mispicks, and Crimson & Co. estimates the labor cost of a mispick in cart-picking operations at $3 to $7 per error.
“It’s different for every organization,” says Peter Gerbitz, system sales manager for Lightning Pick/Matthews Automation Solutions, a Wisconsin-based provider of light-directed and advanced order fulfillment systems. He adds that awareness of the problem is growing, although he says efforts to mitigate it lag. “About half [of organizations] have really drilled in and can put a dollar amount on the cost of a mispick. In the half that haven’t done so, they have a general idea of the elements and realize the severity of the issue. And there are a number of them that don’t understand the cost associated with it [at all] … For some reason, they may shy away from the investment needed to correct the problem.”
Those reasons often include the high cost of new technology solutions or upgrades, and the time and training involved in developing new picking processes or redesigning existing ones. Gerbitz and others say DC leaders should look past such hurdles to find affordable and creative ways to address the problem. They also point out that, for some firms, a hefty high-tech investment will not only alleviate the pain of mispicks but may also yield game-changing productivity improvements throughout the DC. In either case, improving the picking process can mean the difference between a satisfied and dissastisfied customer base.
“Customers have zero appetite for mispicks and inaccurate orders,” says Doug Card, director, systems and special applications, Americas, for Kardex Remstar, a Westbrook, Maine-based manufacturer of automated storage and retrieval systems. “Almost everyone has multiple sources they can get something from, so if you ship someone the wrong product, if it’s not a perfect experience, they will go somewhere else.”
MITIGATION STRATEGIES: REDUCING ERRORS, IMPROVING ACCURACY
There are three primary ways to mitigate the risk of mispicks: technology, design, and training. Technology is often the first thing that comes to mind, with solutions that range from simple bar-code scanners and radio-frequency identification (RFID) systems to more advanced voice- and light-directed picking technologies. Such solutions rank high because they make an impact.
“The more you automate, the more accuracy you are typically going to see,” says Gerbitz. “On the flip side, the more you [automate,] the higher the cost.”
As an example of high-tech automation, he points to the light-directed order fulfillment solutions Lightning Pick provides. Pick-to-light technology, as it’s commonly known, is an order fulfillment system that uses alphanumeric displays that light up to guide and expedite the manual picking process. Such solutions incorporate other technologies—including bar-code scanning and RFID tools—and are designed to integrate with a company’s warehouse management system. But not all companies will benefit from such solutions.
“There are deltas on both ends, where [a company] may not have the order volumes to justify it, and we see that the [return on investment] won’t be there. On the other hand, depending on the product, [a company’s needs] may be beyond what we can provide,” says Gerbitz. “But there is a very large group of customers in between that can benefit from this type of technology.”
Outside of automation—and, often, in conjunction with it—experts urge DCs seeking to reduce mispicks to conduct a detailed review of their picking process to identify—and address—areas where errors are most likely to occur and evaluate how well they train and motivate their picking staff to get orders right. These are areas where DCs can get creative—but they must be persistent, Mulaik advises.
“Tuning or redesigning a picking process to produce 0.1-percent errors without outside help can take multiple quarters, if not years, and should start with a thorough review of the kinds of picking mistakes that occur most commonly in the organization,” he says, adding that managers should then address those issues one by one.
“It’s more about how we deal with [errors] so that they don’t happen,” he says. “Sometimes, I think people just don’t get creative enough.”
As an example, he points to a bar-code scanning system that gives the same auditory signal for a pick as it does for a mispick. Simply programming your system to use a different sound for each will help reduce some of the mispicks.
“You need to think through the design process—within your system’s capability,” he says, adding that developing training programs and creating awareness about how mispicks happen is also a key part of the process.
Card agrees that solid processes are the foundation of any good picking solution.
“[Reducing mispicks requires] a combination of technology, process, and other things,” he says. “Implementing new technology like automation can certainly help, but if you don’t have good processes and policies around it, you’re not going to [achieve] peak accuracy.”
People are the other key element in the mix.
“You have to buy into how important the work environment is, because it plays into being able to reach that peak accuracy,” Card adds. “Technology is only going to get you part way there.”
Training programs for order pickers become an important piece of the equation, especially if a DC is working with system limitations—in most cases, this means a situation in which a system upgrade or replacement is too costly. Mulaik says developing awareness of where problems occur and training workers on how to deal with or work around those problems is vital to improving accuracy. Card adds that managers should reinforce training by rewarding workers for picking accuracy. This can be done creatively—with bonuses, time off, or some other form of recognition.
“[DCs] should look at their overall processes and say, ‘How can we incorporate technology?,'” Card says. “But then you have to say, ‘Are we doing things the right way? Are people motivated? Are they being rewarded for accuracy?’ It’s a combination of all that.”
Successful integration of these elements helps drive organizations toward the ultimate goal of providing the best possible customer experience.
“Ultimately, it’s about service,” Mulaik says. “It’s not so much about the cost of the mispick itself. Companies get upset about how [inaccuracy] impacts service.”