Our friends at Insight Works, a provider of automated warehouse and software solutions, have pointed out the most common ways companies lose money through warehouse and inventory mistakes. Considering that these mistakes are common, and that the U.S. Bureau of Labor Statistics says that the number of U.S. warehouses has risen 15% since 2010, they are worth sharing.
Overstocking. It’s an expensive issue for all supply chain operations. Statistics show that U.S. companies are sitting on $1.43 of inventory for every $1 in sales – and that’s too much. Errors that range from incorrect bin labeling and putaway procedures, to lack of oversight or pure laziness are all contributors. But the bottom line is a considerable amount of tied-up working capital which, if recaptured, represents a sizeable bump in the bottom line.
That’s where automation helps, and often, very quickly once implemented. A warehouse management system can automate stocking processes and ensure accuracy in stock counts, while also supporting managers with insights into optimal time to restock.
Mispicks-and Mis-shipments. A single mis-pick costs, on average, about $22, and the average U.S. company has been shown to lose $390,000 annually due to mis-picks (yes, this obviously includes some pretty large firms, but not exclusively).
Here again, automation pays. A robust warehouse management system can pinpoint and address inefficiencies. Barcode scanners help reduce the chances of mispicks and mis-shipments by eliminating risks associated with manual data entry. Any picking errors are identified instantly by the barcode scanner, and incorrect items never make it to shipping, let alone customers.
Inventory count errors. Mistakes in cycle counts, prevalent in manual or paper-based systems, hurt efficiency and drive up mistakes of either too much, or occasionally, too little inventory.
As the folks at Insights Works note… While inventory counts are undertaken to help support accurate inventory records, manual counts are time-consuming and prone to error. A worker may, for example, accidentally group differently sized items together and count them as the same size, resulting in an incorrect count. Replacing these manual processes with an automated system that leverages barcode scanners can reduce time spent on cycle and inventory counts and cut down on errors. Best of all, when items are scanned and counted, data is automatically added to the inventory management system, further reducing administrative tasks and supporting accuracy without extra work.
Picking time. Today’s WMS systems can direct workers on the most efficient routes to make their picks when filling orders. Some can even provide optimal picking order based on certain order characteristics. Workers save time, increase pick rates, and substantially reduce picking errors compared to manual systems. This helps make even new, less experienced workers more efficient in short order.
Incoming inventory errors. Some warehouses still use time-consuming and error-prone manual processes for counting and reconciling incoming shipments, which delay outgoing orders awaiting updated inventory data. Instead, workers can leverage barcode scanning to more quickly receive and verify incoming shipments because scanned data is automatically sent to the warehouse management system — no extra steps needed. This supports speed and accuracy, and ensures that human errors related to incoming inventory are avoided.
The bottom line is this: Automated warehouse management systems have been around for years, and they greatly improve the efficiencies of all warehouse operations. In fact, probably no other ERP automation component provides a faster payback. If you’re not already fully automated ‘out back,’ perhaps it’s time you asked yourself why.