Fulfillment performance management – getting the right item into the right box with the right label – is critical in cross-border e-commerce. The further you are from your customers, geographically speaking, the costlier each fulfillment error becomes.
For this reason, a zero-tolerance approach to picking errors (or mispicks, in warehousing parlance), is essential to limit unwanted losses for your e-commerce business.
It only takes a rough calculation of the costs they generate to highlight why mispicks are a menace and why you should root out and eradicate their causes in your warehouse or fulfillment center (or that of your 3PL provider, if you outsource).
The Various Types of Mispick
A mispick occurs when someone in your warehouse fails to pick products precisely as listed on a picking document or as guided by warehouse management software. The term encompasses all of the following picking errors:
- Failure to pick a particular product on the picking list or instructions;
- Picking a product not on the picking list or instructions;
- Picking more or fewer items than specified by the picking list or instructions;
- Picking the wrong item (it could be the wrong size or color for example, or it could be the wrong product entirely).
From the very moment such an error occurs, it begins to generate costs for your fulfillment operation—and they are costs that your enterprise can neither avoid nor recover.
As mentioned, mispicks begin costing money as soon as they occur. They continue to do so until the moment they are finally corrected—and even beyond, as the following scenarios illustrate.
Best Case: Mispick Discovered Before Shipment Dispatched
Until affected orders leave the distribution center, the only costs they generate will be for the labor involved in spotting the problem and correcting it. Warehouse labor costs are typically high enough, however, and in large operations picking thousands of orders a day, operatives can consume many hours in the detection and correction of mispicks, especially if there is a chronic underlying issue affecting picking accuracy.
Worst Case: Mispick is Not Discovered Before Dispatch
If your warehouse team is unable to identify and correct picking issues before dispatch, the mispick costs become much more significant. For one thing, a mispick will now be noticed only upon delivery to the customer, at which point a range of possibilities arises.
For example, in the case of a local or regional fulfillment operation:
- If items were over-picked, the driver could return them to the distribution center.
- If items were under-picked, the customer would need to decide if she can manage without the missing products, or if she will require them to be sent via a new delivery.
- If the wrong products were picked, the driver would need to return the incorrect items to the distribution center, and your company will need to send the correct ones on a new delivery to the customer (or lose the sale of those products if the customer decides to manage without them).
At this point then, your logistics operation is burning time and money while your driver is updating delivery paperwork or electronic data, reloading any incorrectly picked products onto his vehicle, and offloading them at the distribution center.
Back at the distribution center, there is a cost burden on your warehouse operation for reconciling the returned inventory.
If the customer requires delivery of items that were missing because of the mispick, you must process, pick, pack, and deliver them as a new order. If the customer does not want redelivery, your company incurs the cost of lost sales.
The scenarios above relate to a company selling products locally, although the cost elements are similar to those involved in cross-border e-commerce. So consider the effects of Scenario 2 above, on an enterprise shipping e-commerce orders to overseas customers, in the Middle East for example.
Both the returns process and the redelivery are now subject to the costs of international shipping, including expenses associated with customs clearance.
Furthermore, there is no opportunity to “put goods back on the truck.” The returns must now be transported as a separate shipment. Depending on the nature of your business and the products, you might have to expedite that shipment at an even higher cost, and do the same for redelivery of the correct items.
In cross-border e-commerce, the financial and service impact of just one mispick can be tremendous. The scenarios described above did not even touch on the following costs, which also escalate as a direct result of warehouse mispicks:
- Customer support team costs (when a customer makes contact after discovering the delivery does not match the order).
- The costs of inventory discrepancies in your warehouse (which can become significant in larger enterprises).
- Damages or losses to over-picked products that “go for a ride” unnecessarily.
- Service level agreement penalties if you are a B2B supplier.
- Other costs that may not immediately be manifest in financial terms, but serve nonetheless to hinder the progress and success of your business.
Mispicks obviously are not conducive to customer satisfaction, and if your company has an ongoing problem with short or incorrect deliveries, word gets around quickly in this age of social networking. Every undiscovered mispick leads to a frustrated customer, and an opportunity for your competitors to prosper at your expense.
In a future post, we’ll share some tips and guidance to minimize mispicks. In the meantime, a positive first step would be to start tracking them (if you don’t already do so), not only as a percentage of orders, lines, or units picked, but also by mispick type. Mispick tracking will help your team to unearth the root causes of errors, and begin starving the mispick menace out of your fulfillment operation.