Your customers have researched the market and decided that your product is the one they want, the right quality and the right price. They have placed an order. That’s good, but what you really want is for those customers to come back, or to recommend your service.
One thing above all others that will determine this result is whether the correct quantity of the correct product arrives on time. You may have the best product in the world, but failures at this stage will cost you dear.
This last stage of dealing with the customer is the fulfillment. It is the process by which you fulfill your contractual obligation to the customer. Not entirely by co-incidence, it is also the moment when the customer judges the level of fulfillment (i.e. satisfaction) that they have received through their involvement with you.
Very small and very large companies are likely to handle this stage of the business in-house. Either they are dealing with small quantities of goods, or they have the resources to manage their own warehouses and transport.
Most medium to large companies will find it is more cost-effective to outsource the work to a Third Party Logistics (3PL) business. These firms handle every step of the storage, packaging and delivery. There are many aspects to their work and therefore many things that can potentially go wrong. One of the most common and costly is the mispick.
A mispick is what it sounds like. A picker picks the wrong item, or the wrong quantity of an item, and enters it into the delivery process. An expensive combination of effects now results:
- All the labor from the moment the mispick occurred is wasted
- The correct item must be sent out
- The incorrect item must be collected and re-processed, or written off
- The stock record must be checked and revised
- Customer satisfaction is jeopardized
All these things cost money, either for you or for the 3PL (and their costs are going to be somewhere in the charges you pay in the end!)
How Much Do Mispicks Cost?
In 2013 a survey of 250 distribution centers in four technologically advanced countries, including the US, reckoned that the average cost of each mispick is $22. They found that the annual cost per distribution center is $390,000, and that 52% of companies have mispick rates of over 3%. A further 19% of firms didn’t even keep a record of mispicks. If a company handles 10,000 units a day and mispicks 3% of them, that will cost the company $6,600 per day, costs which have to be passed on if the company is to stay in business.
So mispicks are definitely something to be avoided. That will be down to the effectiveness of the procedures of the 3PL, either manual or automated
If a 3PL is mainly reliant on manual procedures, then human solutions to minimizing the mispicks are required. There are a number of weak links in the human chain, all of which need to be addressed
- The distances which pickers have to walk, and the impact this has on their fatigue levels
- The light levels of the warehouse, and the ease of identification of products
- The clarity of the requirements on the docket, and especially the number of items required
- The availability of staff to check the correct pick, preferably several times in the course of each operation
Dealing with human error tends to be expensive, requiring training and supervisory staff, and some businesses have to measure one cost against another.
Since most mispicks are caused by human error, it follows that a 3PL which has invested in automated picking procedures will have a lower mispick rate. An ecommerce fulfillment company that has invested in the technology to store and retrieve will be both faster and more accurate in the preparation of goods for delivery.
Computerized systems also build into the procedures ways to double-check accuracy. For instance, the packers might need to scan every item on its way into the parcel, to ensure it is complete before dispatch.
Choosing Your 3PL
A business does not have to grow very big before it needs the services of a 3PL fulfillment company. When looking for your new contract, insist on knowing what the mispick rate is and whether there is compensation payable. You are looking for a company to whom you can entrust the reputation of your business for delivering your goods accurately and efficiently.