Accuracy Errors and the Impact on Customer Satisfaction
Accuracy Errors and the Impact on Customer Satisfaction
In today's retail and eCommerce environment, the customer has never had so many choices for order fulfillment. They expect options like Buy Online Pick Up in Store (BOPIS), Ship to Store and Ship from Store, Clienteling, Buy Online Return in Store (BORIS), and traditional cash-and-carry. Information is just a smartphone away.
Customers expect your associates to be able to check inventory across the company's network of stores and warehouses, modify orders, find a customer's order history, find the latest information on order status. They also serve in the roles of fulfillment staff by performing pick, pack and ship activities. Customers expect a seamless and consistent experience across all sales channels.
Customers Expect and Error Free Experience-Simple Right?
How does it all fit together? According to a PWC study, speed, convenience, helpful employees and friendly service matter most, each hitting over 70% in importance to consumers. 1 On any given day of the year, your company is being evaluated by customers on how well you are at meeting their expectations. Surprisingly, 54% of U.S. consumers say customer experience at most companies needs improvement. 1
In today's competitive landscape, each dissatisfaction is enough to lose a customer forever. Customers don't give you many chances to get it right. One out of three customers (32%) said they would leave a brand for just one bad experience. 2 Taking it a step further, it takes 12 positive experiences to repair damage caused by one negative one. And that same consumer will tell an average of 9 people about a good brand experience but will tell 16 others about a bad experience.2
Delivery speed and order fulfillment accuracy are among the essential metrics for achieving a positive customer experience. You would think that warehousing is straightforward. You store products on shelves and ship them when needed. Simple, right? Managing inventory is challenging. Trends in logistics are only going to keep making it more difficult. These expectations put ever-increasing pressure on warehouses and distribution centers to get fulfillment right the first time. Yet, many try to meet those demands while relying on legacy systems and processes such as manual order picking.
Accuracy Errors Have Deep Impact on Your Business
The cost of a fulfillment accuracy error has a rippling effect up and down the supply chain. The penalty can be significant in cost and, more importantly, customer satisfaction. You can expect the increased labor and transportation costs, repeated pickup and delivery, reduced productivity, order fulfillment experiences scheduling interrupts, and slowed payments. Depending upon the cost of goods and processing costs, accuracy mistakes can range from $10 to $250 for each error.4 This can easily translate into millions of dollars in hidden costs.
What does it mean to have just a 1% error rate? Consider this simple example for a company that ships 1,500 orders a day, 260 business days a year. If you review the conservative cost of the operation, $50 per error, you can expect an increased cost of $195,000 annually for a 1% accuracy error rate.3
The following represent frequently reported areas where accuracy errors have a direct impact on costs.
· Time spent working with clients, validating errors, and determining the proper course of correction
· Time spent re-issuing orders to correct errors
· Time spent adjusting existing invoices, issuing credits, and documenting account actions
· Time spent administering the return material authorization (RMA) process
· Time spent re-picking orders
· Time spent re-packing orders
· Time spent re-delivering orders
· Time spent collecting RMA items
· Return freight expenses for RMA returns, as applicable
Associated Warehouse Costs
· Receiving returned items, updating RMA information
· Inspecting returned items and deciding the re-inventory status
· Put-away (return to inventory)
· Update inventory information
Lost Margin and Revenue
· Lost profitability from selling mis-delivered items at an unusually deep discount
· Lost sales downstream at company retail outlets due to lack of product
What are the Sources of Fulfillment Accuracy Errors?
Every company seeks to achieve 100% fulfillment accuracy, but few realize those expectations. Operational processes that involve people are filled with opportunities for human error, especially when done with legacy systems and processes. The following are two metrics that warehouses and DCs watch closely for opportunities for maintaining and improving accuracy to help drive better customer satisfaction.
Inventory Accuracy. This metric reflects the physical count of inventory available compared to the count of inventory as recorded information systems. Having an accurate inventory count helps to ensure that orders are accurately processed with no delays or errors. Inventory accuracy is critical to reducing stockouts which lead to backorders. If your customers see a product is in stock online, but in actuality, it is not available, this is cause customer dissatisfaction. Inventory accuracy has a direct bearing on being able to maintain high and accurate fulfillment rates. Being able to accurately know the inventory at any location at any point in time will drive velocity and efficiency in your fulfillment process. This is a requirement to align operations to meet customer fulfillment demands without sacrificing service levels.
Fulfillment accuracy rate. This metric reflects how many orders are accurately filled or shipped during a specific period. Every company has the goal of 100% accuracy, but few realize those expectations. Operational processes that involve people are filled with opportunities for human error. For example, accuracy errors can come in the form of
· Picking the wrong SKU from product lines
· Mislabeled SKUs
· Failure to pick an item
· Picking an item that is damaged
· Picking the wrong quantities
· Product was out of stock before the order was placed
· The product was oversold and back-ordered
· Paperwork does not match the quantity received
· Incorrect labeling
· Incorrect packaging
· Item not received in the committed timeframe
Every incorrectly filled order has the risk of causing customer dissatisfaction and losing their business. Customers do not like to receive items they did not order, orders that are delayed because of seller mistake, orders that are the wrong size or color. Fulfillment or mispics usually end up as returns that easily exceeds the cost associated with the fulfillment.
How Honeywell Voice Technology Addresses Accuracy Challenges
Managers of DCs and warehouses invest in solutions that reduce operational costs, improve accuracy, increase workforce productivity, improve customer satisfaction and enhance operational agility. These types of benefits can be realized with investment in voice-directed solutions in areas such as your picking workflow. For this article, let's focus on voice-directed picking and its influence on improving accuracy and cost savings.
Picking is easily among the most labor-intensive operations within a DC. The benefits of voice-directed solutions are realized because of the hands-free, eyes-up workflow. Workers wearing a headset are focused more on selecting the correct item instead of juggling between needing to interact with a device with a screen, keyboard, scanner or paper. Both hands are free and can be used to carry out a range of tasks.
Honeywell Voice allows associates to make better use of their hands, move more efficiently and quicker through the DC and pick orders at a higher accuracy rate. Voice-picking helps increase throughput and productivity, which helps the DC meet its customer expectations for accurate and speedy delivery. DCs and warehouses can typically see the following types reductions in errors with voice technology when compared to other picking process:4
· 10–35% for paper-based operations
· Up to 30% for pick-to-light operations
· 10–35% for RF scanning operations.
Where does the cost-saving come from? When fulfillment is correct the first time, cost savings come from across the value chain. Cost savings are typically derived from areas such as:
· Orders are accurately filled the first time
· Workers in the picking work can have increased efficiency in areas such as more lines picked per hour and reduced overtime
· New hire onboarding and training is more efficient, resulting in their ability to meet productivity expectations faster
· Reducing QA staffing (fewer audits required)
· Decreased staff churn
· Increased safety (lower insurance costs)
· Efficient regulatory compliance
· Inventory optimization (reduced holding costs)
· Fewer administrative, fixed asset and consumable overheads
· Real-time visibility and integration to business system decision making
Honeywell Voice has been proven to add impact in workflows and accuracy across the DC and warehouse. For example
Receiving. Honeywell Voice helps increase accuracy in receiving because the worker is focused on one thing, receiving the product. The receiving rate also increases as the receiver is not interrupted with stop and start steps in the process.
Put-away. Honeywell Voice helps to automate the specific needs of the WMS to match the demands of each environment. The advantages are realized by both driver- or system-directed put-away.
Replenishment. Voice enables associate multi-tasking, so the worker can carry out the replenishment and confirm the activity, all at the same time. This increases task accuracy and performance while gaining real-time data collection with the timely movement of pallets or cases dispensed at the correct location.
Cycle-counting (inventory). With Honeywell Voice, you can integrate cycle-counting as part of the picking process to update low-quantity items or as or stand-alone application that helps maintain more accurate inventory levels. You can eliminate the need for workers to spend days to get counts. Real-time updates are a daily activity that keeps the warehouse moving at top speed.
Returns. Honeywell Voice can help warehouses quickly break down, assess and improve the returns handling process to reduce the cost of handling returns.
Meeting Customer Satisfaction Expectations Begins with Accuracy
Competition for gaining and keeping customers depends on accuracy in every step of the supply chain and logistics network. No two companies determine the cost of an error or the definition of an error in the same way. Voice has proven its value and over-delivered in its results time and time again with measurable benefits accuracy, productivity, labor efficiency, and safety.
Voice solutions from Honeywell typically provide paybacks in the 3- to 12-month range. While every company's situation is unique, the combination of innovative, affordable Honeywell technology with rigorous financial analysis is a proven winner. The time to invest in voice technology to improve your bottom line is here.
Our expert assessment teams can work closely with you to understand business requirements, identify opportunities to optimize your workflows and increase efficiencies.
Contact a Honeywell Solutions Expert today! Call 1-800-934-3163.
4Results are based on Honeywell's global customer performance benchmarks. Results may vary per customer.