The true cost of warehouse errors

Warehouse mistakes cost money. But how much – and how can a warehouse management system help you save?



In all areas of life, mistakes are inevitable. But in the arena of warehouse fulfilment, they're not just frustrating. They're expensive, too.

Mis-picks, mis-packs, mis-deliveries – all deliver the double blow of customer dissatisfaction and wasted money.

And it's not just the fulfilment process that can create costly errors. It's also the intricacies of inventory management.

Luckily for you, these costly errors can be minimised. There are several ways to do it, but chief among them is the deployment of a cutting-edge warehouse management system (WMS).

So, let's explore the real cost of warehouse errors – and how a good WMS can help you minimise or eliminate them.

Dispatch errors

Dispatch errors cost warehouse managers money in a variety of ways.

First, there's suboptimal routing. When order volumes are high, pickers must travel along the most efficient paths to meet demand. The alternative is to fall behind on fulfilment targets – a productivity failure that will cost you money.

Alongside suboptimal routing goes suboptimal batching. Orders should be grouped by zone or batch to stop pickers from traipsing around the warehouse.

Secondly, there's a reliance on manual picking, packing and shipping. This is a key driver of warehouse errors and directly leads to customer dissatisfaction. Voice-picking systems and barcode scanners remedy this – and save you money in the process.

Thirdly, there are inefficiencies in packing. Don't have processes in place to match an order to the most appropriate box or other packaging? You're wasting money on materials and, in some cases, paying extra for unnecessarily oversized shipping.

Fourthly, there are errors related to courier choice. We live in a time when there are more courier companies than ever. So, warehouse leaders need to ensure that processes are in place to choose the most cost-effective service for each delivery.

Finally, there are administrative errors caused by manual paperwork. These mistakes take time to fix – and as the saying goes, time is money.

There's no silver bullet to solve all these problems all at once. But implementing a cloud-based WMS like our CORE solution can save you 80% on dispatches – and that's before you consider operational savings.



Operational errors

It's not just dispatch errors that cost warehouse leaders money. It's also operational blunders – from inventory management to reverse logistics to the misuse of physical space.

In the case of inventory, many warehouses lack real-time visibility. This creates discrepancies between what's ordered and what's available.

To forestall these kinds of errors, many warehouse managers invest in safety stock. The irony is that this attempt to avoid costly mistakes itself costs money.

Then there's the question of reverse logistics. Processing returns involves shipping and administrative costs – and it's often because of avoidable dispatch errors.

Finally, warehouse leaders are often throwing away money by failing to utilise space effectively. This is often down to a lack of efficient put-away processes – and it often means overspending on space or paying third-party logistics firms to pick up the slack.

All three of these operational errors can be mitigated or solved with a WMS – and in the process, you could be looking at a 14% saving.

This is because a modern WMS solution gives you real-time visibility, forecasts demand to avoid over- and under-stocking and automates the returns process. And if you integrate your WMS with a voice picking system, you can expect a 99.97% picking accuracy rate.

Administrative errors

The third and final category of warehouse errors is administrative errors. These, too, can lead to unnecessary spending – and as with the other two categories, these can be remedied with a cloud-based WMS.

It's not just manual picking processes that lead to expensive mistakes. It's also manual data entry, with human error creeping into inventory logs, shipping updates and other essential records. The same goes for mistakes on shipping labels, invoices and compliance documents.

Audits, too, can be compromised by human error. Without real-time inventory visibility, you have to painstakingly count stock – a process that's as disruptively time-consuming as it is vulnerable to mistakes.

These errors don't just cause confusion. They also waste paper and printing supplies. Automating these essential processes keeps these wasteful errors to a minimum.

Mis-picks and mis-deliveries lead to customer complaints, refunds and returns. All these make back-office staff less efficient (translation: more expensive to management).

As with the other errors we looked at, all of these administrative errors can be fixed with a cloud-based WMS. This will automate inventory logs and audits, reduce paper waste and cut the complaints and returns that office staff need to deal with.



Cost reductions with Minster WMS

It's not for nothing that one of our customers reported "a 60% cost saving year on year". A quick example will show the kinds of savings you can make with our entry-level CORE solution.

Let's say your warehouse supplies other businesses. You handle 50 orders a day with 20 cases per order. If you do this for 260 days a year, you're looking at 260,000 cases.

With a three percent margin of error, those 260,000 cases a year will lead to 7,800 mistakes.

If each error costs you £10 per product and £10 in administrative costs, you're spending £156,000 a year on error handling. That's £156,000 a year that could be banked or spent on profit-making improvements.

This hefty sum can be brought down to zero with one of our WMS solutions. And as if that wasn't enough, they can be up and running within 24 hours (for CORE) or six weeks (for EDGE) – and saving you money soon after.



Minster WMS has helped businesses optimise their warehousing and logistics operations since 1978. Learn more about our warehouse management software solutions, or get in touch today to book a demo with our UK experts.