Reduce Warehouse Inventory Errors

Reduce Warehouse Inventory Errors

If you’re in the warehouse industry, you’re probably already aware that your business is vulnerable to a host of threats, especially if you process overseas shipments of goods. If, like many, your warehouse conducts business on a global basis, your facility can be threatened by economic instability, rising oil prices, political unrest, natural disasters and mass protests, just to name a few risk factors.

While it is true that the success or failure of your business is at least partially dependent on factors that are out of your control, your warehouse’s success or failure is also reliant on things you have direct control over. One of the things you can control is the number of mistakes that are made within your walls.

When you consider the scope of the warehouse industry, it’s easy to understand how figuring out methods to prevent receiving errors and reduce manual picking errors can help save your business a significant amount of money. According to IBISWorld’s warehouse clubs and supercenters market research report released in May 2016, this niche of the warehouse industry generated $454 billion in annual revenue and it experienced a growth rate of 1.8 percent between 2011 and 2016. This market segment includes 24 players and it employs approximately 1,603,494 people. Just the top four companies in this niche account for 92.1 percent of market share.

If you think about the number of orders needed to generate billions of dollars in revenue and the number of people who are involved with processing them, it’s not difficult to imagine how susceptible the supply chain is to human error. In 2012, Amazon sold 26.5 million items on its peak day during the holiday season, which means the company received orders for 306 items per second. In the same year, ForeSee surveyed over 24,000 consumers between Thanksgiving and Christmas about the level of satisfaction they had with the leading 100 retailers. Amazon received a score of 88, which was the best mark any retailer had ever earned up until that point.

During the 2012 holiday season, Amazon reported that its customers purchased enough televisions to cover the field in every NFL stadium. Consumers also bought enough replicas of the leg lamp made famous by the movie A Christmas Story to reach the top of Mt. Everest if they were stacked on one another. Amazon also said that consumers purchased so many sports teams garden gnomes, the total would fill every seat in Madison Square Garden. Amazon’s third-party sellers sold so many HDMI cables over the holidays in 2012, they could be used to make three round-trips to the International Space Station.

While Amazon shoppers were clearly interested in a wide range of products in 2012, it wouldn’t have mattered what they wanted if the company wasn’t able to fulfill their orders quickly and accurately. If you assume that Amazon successfully fulfilled 99 percent of the orders it received per second on its peak day, it means the company sent out 3.06 incorrect orders for every second it took product orders. With a minute having sixty seconds, this means the company would have shipped 183.6 inaccurate orders for every minute that it received orders on its busiest day of the 2012 holiday season. This equates to more than 11,000 wrong orders shipped per hour that Amazon received orders from consumers.

Common Warehouse Errors

When you look at the things that contribute to the expense of warehouse mistakes, it’s easy to see how quickly the costs of just one packing or shipping error add up. First, you have to pay the employees who processed the order. You also have to pay shipping and, depending on your return policy, return shipping charges. You pay to have returned items processed and restocked on your shelves as well. Then there’s the cost that might be impossible to calculate, an unhappy customer who may refuse to shop with you again, or tell all of their friends about the negative experience the individual had with your company.

Too often, management is quick to blame employees for warehouse mistakes, even though 85 percent of quality issues are actually attributable to processes and materials. While pointing the finger at your warehouse operators is certainly the easy thing to do, it prevents you from discovering the real reasons for the mistakes. Just as importantly, it creates an atmosphere of fear and mistrust for both you and your employees.

Although human errors made by pickers, shippers and receivers are directly responsible for a considerable amount of shipping and receiving mistakes in a given warehouse, warehouses often make mistakes on a much broader scale. These errors can have a huge impact on the success of your facility because they affect your organization as a whole.

One of the most common errors warehouses make is to fail to incorporate technology in their day-to-day operations. This is especially true when it comes to smaller outfits. Since enterprise resource planning software (ERP) and warehouse management systems became prominent in larger corporations a few decades ago, these systems have become more affordable and easier to implement. This had made them more accessible to businesses of all sizes, including small warehouses.

While you might be comfortable using paperwork and a simple spreadsheet or two to document the goods in your warehouse, manual inventory management systems are completely reliant on humans to track your products and enter the requisite information in a computer accurately and in a timely manner. This means your system is susceptible to human error at multiple points, including every time one of your employees interacts with a product in your inventory.

In addition to being vulnerable to mistakes, a paper inventory management system is inefficient, absorbing more of your employees’ time than a digitized system would and driving up your labor costs. You can increase your warehouse’s efficiency, reduce your labor costs and save money on the consumable items used to maintain your manual inventory management system by switching to a warehouse management system, or WMS. Using a WMS provides another meaningful benefit — the reduction of receiving, shipping, picking and packing mistakes.

Additional errors you’ll often see in a warehouse include the following:

  • Not Using Technology to Its Full Potential: A WMS is capable of doing many things that help you run your warehouse more efficiently. For instance, it can track your individual products from the moment they’re received until their delivery to your clients, all in real time. A WMS can also monitor the productivity and accuracy of your employees. You can even use a WMS to plan the routes your operators should follow as they pick products to fulfill orders.

Even though a WMS can do all of these things and much more, many businesses that have these systems don’t use them to their full potential. Instead of getting the most of their systems, some warehouses only use a few of the capabilities their WMS has. One underutilized capability that a WMS has is the ability to perform regular cycle counts of inventory. Performing regular cycle counts enables you to recognize discrepancies and patterns that may indicate there’s a problem with your inventory and helps you reduce incorrect inventory levels.

Doing regular cycle counts can also help you reduce or eliminate employee theft. When your employees know you do cycle counts often, this knowledge typically serves as a deterrent to theft. With employee theft responsible for approximately 44 percent of inventory shrinkage, doing everything you can to prevent your employees from stealing can add to your bottom line.

In 2011, the National Retail Security Survey suggested that retail outlets lost $34.5 billion worth of their combined inventory due to employee theft, consumer shoplifting, clerical mistakes and vendor fraud. This figure is the equivalent of around 1.4 percent of the retail sales recorded in 2011. If you use your WMS to its full potential, you can reduce stealing, administrative errors and supplier fraud.

  • Storing too Much Inventory: One effective way to prevent warehouse tracking errors is to reduce the size of your inventory in terms of the number of individual products you carry and the volume of each item you have on hand. Wholesalers are especially vulnerable to storing too much inventory, because they often buy large quantities of an item at once in order to benefit from bulk quantity discounts.

By reducing the size of your inventory, it will be easier for your employees to find the products they need and fulfill orders faster. Holding less inventory will also free up space you can use for other activities such as receiving and shipping. Many warehouses don’t allocate enough space for their receiving activities, which reduces the processing speed of deliveries. If you store less inventory, you can expand your receiving area which can help deliveries to be processed more efficiently. Reducing your inventory will also free up some cash you can use for other purposes, such as purchasing a WMS.

If a bulk deal is simply too good to turn down, talk to your supplier about breaking up the delivery into smaller shipments, delivered on an as needed basis. A WMS can send you an alert when your inventory of a certain item falls to a pre-determined level so you’ll know when to order more of that product. A WMS can also generate a purchase order for you so that you won’t have to prepare one manually. This capability not only makes it less likely that a mistake will be made, it also decreases the chances that you’ll run out of products when you need them the most.

  • Planning Picking Paths Poorly: If you’re wondering how to reduce warehouse errors and where you can start, you can begin by analyzing the paths your workers take to fulfill orders. Poorly planned picking paths extend your supply chain timeline, increase your labor costs and decrease employee productivity unnecessarily.

A WMS can help you plan efficient picking routes, which will enable your employees to complete orders faster. If your employees are able to fulfill orders quicker, they can get more done in a single shift which will make your business more productive overall.

  • Keeping a Disorganized or Messy Warehouse: If your facility is messy, disorganized or both, it can negatively influence your staff’s productivity levels in addition to jeopardizing their safety. When workers leave debris in the aisles of your warehouse, it can prevent them from following their prescribed picking paths because it’s in the way. You can prevent clutter from impacting your team’s efficiency by dedicating a certain amount of time to cleaning at the end of every shift.

By performing housekeeping at the end of each shift, you’re setting the following shift up for success, because they won’t have to begin their workday by cleaning up after your other employees. Cleaning at the close of every shift can help build a sense of comradery between your employees even if they work at different times because leaving a tidy workspace for others shows you respect the work they do and the space they do it in.

Not having the items in your inventory organized can also be a big drain on your budget. Similar to a disheveled warehouse, a disorganized warehouse can drive up your labor costs, because your employees won’t know where to find the items they need to complete orders in a timely manner. You can start organizing your facility by using your WMS to identify your fastest moving items and relocate closer to your shipping area. In general, it’s wise to keep your best-selling items at waist height so your staff members won’t have to bend or strain to get the things they need most often. This will reduce the amount of time and physical toll it takes for your staff members to put orders of your fastest moving items together.

You can establish a single location for each stock item in your inventory and limit the number of times you vary from your map of products, too. Making too many exceptions to your product floorplan will lead to confusion about the location of items that aren’t where your employees expect to find them. You should also label every product in your inventory with a SKU or UPC as well as a readable name when they’re received. In addition, you can label the aisles in your warehouse so that they’re easier to navigate. For items stored in bins, you should label the bin with the SKU of the items it contains as well as a picture of the product itself.

How to Reduce Warehouse Errors

With all of the capabilities that a WMS has to improve your facility’s efficiency, productivity and profits, it’s clear that implementing one in your warehouse is the most significant thing you can do to reduce warehouse errors. That is, implementing one can greatly influence the way you conduct your business for the better if you train your employees about how they can use your system to its full potential.

If you and your staff see the implementation of a WMS as a transformative event instead of just a technology update, it may increase the likelihood that all of you will embrace the software and use it regularly to optimize your entire operation. Unfortunately, many businesses don’t provide training that shows their employees how they can get the most out of their WMS. No matter how much your total inventory is worth, your employees are still your most critical asset when it comes to the success of your business and the use of your WMS.

One of the best ways you can reduce manual ERP input errors or the mis- or under-use of your WMS is to teach your staff how to enter information properly and show them how to operate the system. The training you provide should be very specific and include the exact steps a person needs to follow to complete a given task. You should advise your staff to view every movement of a product that’s tracked by your WMS as a transaction in and of itself regardless of whether the item was simply moved from receiving to a spot on the warehouse floor or it was shipped out of your facility. If necessary, you should consider hiring temporary staff members so that your permanent employees can attend these critical training sessions.

Personal accountability is another way you can prevent warehouse tracking errors and other mistakes. If you see someone using a spreadsheet instead of your WMS to address a problem with your inventory, check their behavior and instruct them to use your system. If one of your pickers deviates from an assigned picking path, correct the behavior immediately to keep your warehouse running at peak efficiency.

If there is a difference between how your WMS should be used or how things should be done and how your system is actually used and how tasks are actually completed, it’s an indication that your staff needs further training and your employees need to be held to a higher standard.

How FDM4 Can Help

At FDM4, we’ve been providing end-to-end software solutions for businesses since 1978, including ERP and WMS implementations. Our team is a “Total Solution Provider,” which means we provide everything you need for the implementation of your WMS to be a success over the short- and long-terms. More specifically, we provide:

  • Application Software
  • Database products
  • Operational Review & Analysis
  • Project Plans
  • Modifications
  • Sales & Support
  • Integration
  • Testing
  • Ongoing Support

Another component that’s vital to the success of your WMS implementation is training. We will teach you and your employees how to operate your system so that you can realize its full potential as well as the full potential of your warehouse.

No matter how specialized your niche market is, we have the experience and expertise to customize a software solution for you that has the ability to set your business apart from its competitors. We have an extended history of helping businesses grow and we can help you expand your current operation and reduce your warehouse errors. Contact FDM4 to learn more today.