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Shipping errors are a tremendous pain in the back end. They cost a fortune, hurt your reputation, tick off customers and generally cause many headaches.
Have you ever stopped to think about the cost of a shipping error? Here are a few things to think about before I start to discuss solutions.
First, if you ship something that is more expensive (or valuable to the customer), and the order was not related to an emergency to keep a plant running, many customers will keep the expensive stuff at the cheaper price and just reorder the cheap stuff. Not only does this cost you in gross margin on the sale, it messes up your inventory.
Now, you have fewer of the expensive items in stock than the computer thinks. This can set up a spiraling problem as salespeople start to hold product for orders after they have to tell a customer the computer was wrong and they cannot deliver the order on time.
You also have more of the less expensive item. Compounding the problem, when the customer who got the wrong product reorders, it increases the demand for the less expensive item and may cause the system to reorder in larger quantities than required.
Where the customer notifies you of the incorrect shipment, you now have the cost to retrieve the wrong materials (pickup, possible repackaging, restocking and (if the original package is damaged) possibly not being able to resell it. Plus the cost to pick, pack and ship the right item. Then comes all of the accounting to correct the inventory, debit and credit the customer account, plus the added time that is almost guaranteed to be spent explaining the paperwork to others.
So how do you eliminate errors? The first place most distributors start is to have a checker review each pick to make sure there are no errors. The question is: “Is this a case of do-do work?” (See the blog on getting out of do do or read the book Simplify Everything: Get Your Team from Do Do to Done Done with One Surefire Process available in the MDM Store.)
The answer is yes, if you have a barcoding system then this is pure do-do work. If your warehouse people are properly trained, managed and rewarded, the number of errors should be minimal. The cost of checking every package after it is picked would cost many times the cost of the few errors per month that might get through. If this last statement is not true, then the real problem is probably training and/or management. Barcode systems work.
If you do not have completely barcoded products (this is still a problem in many industries), then you have a few choices. You can barcode all product on receipt (expensive, but effective if absolutely necessary). You can request your supplier add barcodes (unless you are a very large customer, this request may fall on deaf ears). Or you can explore nontraditional alternatives.
Which alternatives you consider depend on the kinds of products you sell. For many distributors, a simple solution is to include weight information in your product database. Then, when a pick ticket is issued, the expected weight of the picked products plus the packaging is displayed. Before the box is sealed, it is weighed. If the expected weight and the displayed weight are different by more than one or two percentage points, you have a shipping error in the making.
This will not catch picking a blue one instead of a red one, but it will catch the most common errors. It will find a pick of the wrong pack size (one case instead of one each). It will also catch most incorrect picks unless many of your products all have the same weight.
In the end, there are many ways to reduce the amount of do-do work. Still, there are cases where a recount is the best, most effective way to catch shipping errors. Just do not go to this alternative before considering others. Reducing the transaction cost for each order will have an outsized (and positive) impact on your bottom line.
Steve Epner is principal in the Brown Smith Wallace Consulting firm based in St. Louis. He has been advising distributors for over 30 years. Epner also teaches Entrepreneurship and Innovation in the Graduate School of Business at Saint Louis University.
Epner is the author of Simplify Everything: Get Your Team from Do-Do to Done-Done with One Surefire Process, available from MDM.