It sounds simple enough. An order comes in, the warehouse fulfills it, the order is processed and delivered to the customer — a simple point A to point B exchange where everyone ends up happy. But with warehouse picking error rates hovering around 1- 3%, industry order picking accuracy data seems to indicate otherwise.
These numbers may not sound too bad until you realize the average cost of an error is around $50-300, meaning an 11-13% drain on profitability. Multiply that times your error rate, and you’re looking at a severe annual negative impact on your business.
Order picking accuracy is a huge concern for just about every 3PL and business owner relying on the precision of the fulfillment center they’re using to outsource their shipping. It’s important to understand why improving order management matters, because not focusing on it will result in customer dissatisfaction, lost time, and decreased revenue.
What Is Order Fulfillment?
The order fulfillment process encompasses all the steps a fulfillment center or business owner takes between receiving an order, processing it, and getting it into the customer’s hands. This includes picking, packing, shipping, and sending out confirmation emails and updates to the customer while the product is in transit.
Order Picking Accuracy
Around 23% of customers issue a return because they received the wrong item. This results from picking errors, and it reinforces the fact that order picking accuracy is the backbone of any successful 3PL and business. Errors in picking rates can result in any of the following:
- Lost Sales. Since shipping errors result in customer dissatisfaction, the likelihood of a customer purchasing again from the same company drastically falls.
- Returns. Returns cost time and money. Documentation of the problem, return shipping, and retagging are all a part of the return process.
- Repackaging Costs. Don’t forget that if you can reuse a returned item, you have to repackage and retag it.
Order picking accounts for around 55% of warehouse operating costs, so not having a partner managing it properly means you lose time and money.
Determining Warehouse Picking Error Rates
Before anyone can really begin to learn how to improve warehouse picking speed and accuracy, it’s important to figure out how to calculate error rates and have a baseline for what one should aim for.
Calculating Picking Accuracy
You can use two values to calculate your margin of error: (1) the number of accurately picked orders prior to shipment, and (2) the total number of orders picked for shipment during the same measurement period. You can calculate this KPI using the following formula:
(Number of Accurate Orders Picked / Total Number of Orders Picked) x 100
In other words, you want to know how accurate you or the 3PL you partner with is amidst the busyness of day-to-day picking and packing. Making sure the correct number of items are going out in any given shipment and that the correct items are being picked for each order isn’t necessarily that difficult. But when an influx of orders comes in and deadlines must be met, speed can sometimes have a detrimental impact on precision.
Remember, human error will never be completely eliminated. Mistakes happen, customers will change their minds on an order, and warehouse picking error rates will never stay at zero. The important thing to do is to partner with a fulfillment center that consciously aims for 100% accuracy, puts the necessary processes in place to help you be as efficient as possible, and follows the appropriate procedures when mistakes and inaccuracies occur.
How to Improve the Order Picking Process
Outsource Fulfillment
This is especially important for business owners currently handling their own shipping. With online orders on the rise, about 50% of ecommerce businesses outsource their fulfillment. Removing the complicated and tedious process of order fulfillment can:
- Relieve a lot of headaches for business owners.
- Improve accuracy by putting it in the hands of a team whose sole focus is ensuring accuracy.
As a business owner looking to outsource fulfillment, it’s crucial to understand what to look for in a 3PL so you know exactly what you’re getting into or how to gauge the expertise of your current 3PL.
Automation
A strictly manual process is detrimental to a 3PL’s order picking accuracy. In a paperless world, failing to implement up-to-date digital technologies that will enhance the ordering and shipping process puts a 3PL and the businesses it provides fulfillment for a step behind the competition.
By partnering with a 3PL that focuses on adopting the right technology and automation procedures, you remove a lot of unnecessary stress from your day-to-day business duties. Automated technologies like pick-to-light and put-to-light are a great way to reduce picking errors. To utilize this technology, 3PLs install pick-to-light LEDs on the racks throughout a warehouse.
By using barcode scanners, pickers can scan a barcode on a shipping carton, and the light LEDs for SKUs listed in the order begin to glow. Once a picker has identified an item, the displays will visually show the operator the locations and the quantity to place in the appropriate box. This way, sorting is performed on an item-by-item basis.
Refining Return Methods
Online buyers want and expect returns to be easy. A lot of potential customers are deterred from ordering from a company if they don’t offer free returns or their return policy seems difficult and confusing. A way to make returns easier in fulfillment centers is to create a return merchandise authorization.
RMA forms tell a warehouse what to expect when a customer issues a return. Things like the customer’s name, order number, tracking number, and when the return was initiated are documented on an RMA form.
When a return arrives in a warehouse, the team can compare the RMA to the product to ensure accuracy. From there, they can send out a notification that they received the return. If the warehouse you’re partnering with doesn’t have a strategic way to deal with returns, then you may want to consider looking for one that does.
Company Culture
Many 3PLs will often go straight for the data and overlook the importance of fostering intentional community culture right within the warehouse. But across the board, happy employees are more likely to be invested and more productive. When you’re looking to outsource fulfillment, finding a warehouse that prioritizes company culture should be just as important as your personal businesses’ focus on customer satisfaction.
The Importance of Order Picking Accuracy
Precision is another vital element to keep in mind when looking for a 3PL that prioritizes how to improve warehouse picking speed and accuracy. It’s important to partner with a fulfillment center that doesn’t just encourage their employees to work faster but focuses first and foremost on proper training. Simply encouraging workers to “move faster” isn’t going to help improve accuracy if the necessary warehouse optimization and company culture aren’t in place.
Assess Product Velocity
Optimization is key. Finding a warehouse that isn’t laid out in a manner conducive to order picking accuracy should be a bright red flag. If pickers are required to walk the full span of the building several times to pick their needed inventory, or the most popular items are stored on racks that aren’t easily accessible, the layout probably isn’t optimal for picking velocity, which means your customers have a higher chance of (1) receiving their product late or (2) receiving the wrong product altogether.
Strategically Organize Inventory
Along with the importance of storing the most popular inventory in easy-to-reach places, slotting is another key factor in making sure pickers can grab the right products quickly. Grouping (also known as zoning) is a helpful way to establish areas for distinct inventory types and categories. Grouping makes items easier to locate, which reduces picking time and picker frustration. Unhappy employees are more likely to work slower and with less inefficiency. They’re also more likely to quit a job than an employee who is happy and feels valued. You’ll want to make sure your 3PL is taking all of this into account.
Utilize Up-to-Date Technology
We’ve touched on this already, but finding a 3PL that utilizes up-to-date technology is instrumental in improving order management and order picking accuracy. Using a Radio Frequency Scanner is a great way to do this. RF scanners are wireless handheld devices using radio frequency wireless networks to seamlessly communicate with software and transfer information throughout the network.
The RF device works by directing employees to the proper pick location, providing them with the proper item description and quantity to pick. Upon completing the order, the picker can send a confirmation to the host signal by scanning the item or pressing product identification buttons on the terminal. The picker is then supplied with the next order in the queue.
Establish Picking Routes
If it looks like the fulfillment center you’re considering has their warehouse design laid out well, next you want to ask them about how they establish strategic picking routes. One of the most important things to look out for is backtracking. One way to determine how the fulfillment center handles this is by asking them how they structure orders in their queue.
Instead of giving pickers one order to pick at a time, which will cause them to backtrack through the warehouse, batch picking is often a much better picking strategy. If one item is needed for many orders in the batch, the picker will grab as many of that item as they need for the entire batch in a single visit.
Working to establish the best routes isn’t a guessing game, it requires digging into the data. With travel eating up about 50% of total order retrieval time, mitigating employee wandering helps improve efficiency, which means higher customer satisfaction for you.
Optimization Saves Time
Cutting down on the time it takes to complete an order also reduces the amount of time there is to make picking errors. Employees can only work as seamlessly as a warehouse is designed and their order queue is optimized, which is why it’s so important for 3PLs to prioritize optimization. It’s also why it’s important for business owners looking to outsource fulfillment to care about the culture and procedures of the fulfillment center they’re partnering with.
At the end of the day, your customers aren’t going to vent their frustrations to the 3PL you partner with, so the warehouse you use reflects directly on you and how much you value your customers getting the best experience possible. Customer complaints, poor reviews, and lost sales can all be avoided by choosing a 3PL that prioritizes order picking accuracy.
By focusing on the “little things” like layout optimization, you help improve the customer experience, which will directly impact your overall profitability.
Improving order picking accuracy takes time, and it’s important to embrace the age-old adage of baby steps when it comes to reducing picking errors. But over time, partnering with a 3PL that is dedicated to embracing new and strategic implementations of optimization, company culture, and data-driven technologies to move products with precision will go a long way towards customer satisfaction and profitability.
Looking for help on order fulfillment and improving order management? Contact us and we’d be happy to speak to you about your needs, our services, and how we can help.
