Picking technologies: When inaccuracy leads to lost customers
The true cost of a mispick is measured in service levels—and by a dwindling customer base when consumer and B2B buyers turn to sources that get orders right.
Victoria Kickham started her career as a newspaper reporter in the Boston area before moving into B2B journalism. She has covered manufacturing, distribution and supply chain issues for a variety of publications in the industrial and electronics sectors, and now writes about everything from forklift batteries to omnichannel business trends for DC Velocity.
Most organizations understand that mispicks can add up to big losses—in money, time, and labor—but the biggest bite comes from losing a customer due to service problems associated with slow deliveries, receipt of the wrong item, and the hassle of a return. In today's fast-shipping world, where two-day (or faster) delivery has become the norm thanks to the likes of Amazon.com and Zappos.com, companies serving both consumers and business-to-business customers must meet higher-than-ever expectation levels or suffer the wrath of a dissatisfied customer.
"Service is now the big issue," says Steve Mulaik, Atlanta-based director with global supply chain management consulting firm Crimson & Co. "[A mispick] can add two days to an order's processing time. This is huge in the cut-throat e-commerce world. This sort of thing ends up in complaints on Facebook and elsewhere that drive [customers] to sites that have better service."
The situation is putting pressure on distribution center leaders to improve accuracy in the picking process. The list of remedies is long and includes technology solutions, process changes, and new approaches to training DC workers. But before a DC can tackle any of that, managers and staff must understand what a mispick is, what it costs, and how to address the weak spots in their operation.
MISPICKS: WHAT THEY ARE AND WHAT THEY'RE COSTING YOU
A mispick occurs when the wrong item or wrong quantity of an item is picked, when an item is omitted, or when a damaged or mislabeled item makes its way into an order. Mispicks occur primarily through human error; a worker picks the wrong item, pulls from the wrong location, picks the wrong quantity or unit of measure, puts an item into the wrong tote, or in some cases abandons the pick task along the way. Mispicks also can occur because of vendor errors or because a product has been misreceived.
Experts say it's tough to put an industry-standard price tag on the cost of a mispick because so many factors come into play, including the value of the product being picked and the costs associated with shipping, returning, and restocking the item—as well as the labor required to handle it all. Soft costs—including resulting inventory inaccuracies and customer dissatisfaction—further muddy the waters.
Despite those challenges, there are some industry statistics that highlight the severity of the problem: A 2012 study by research company Vanson Bourne estimates that DCs lose nearly $400,000 a year due to mispicks, and Crimson & Co. estimates the labor cost of a mispick in cart-picking operations at $3 to $7 per error.
"It's different for every organization," says Peter Gerbitz, system sales manager for Lightning Pick/Matthews Automation Solutions, a Wisconsin-based provider of light-directed and advanced order fulfillment systems. He adds that awareness of the problem is growing, although he says efforts to mitigate it lag. "About half [of organizations] have really drilled in and can put a dollar amount on the cost of a mispick. In the half that haven't done so, they have a general idea of the elements and realize the severity of the issue. And there are a number of them that don't understand the cost associated with it [at all] ... For some reason, they may shy away from the investment needed to correct the problem."
Those reasons often include the high cost of new technology solutions or upgrades, and the time and training involved in developing new picking processes or redesigning existing ones. Gerbitz and others say DC leaders should look past such hurdles to find affordable and creative ways to address the problem. They also point out that, for some firms, a hefty high-tech investment will not only alleviate the pain of mispicks but may also yield game-changing productivity improvements throughout the DC. In either case, improving the picking process can mean the difference between a satisfied and dissastisfied customer base.
"Customers have zero appetite for mispicks and inaccurate orders," says Doug Card, director, systems and special applications, Americas, for Kardex Remstar, a Westbrook, Maine-based manufacturer of automated storage and retrieval systems. "Almost everyone has multiple sources they can get something from, so if you ship someone the wrong product, if it's not a perfect experience, they will go somewhere else."
There are three primary ways to mitigate the risk of mispicks: technology, design, and training. Technology is often the first thing that comes to mind, with solutions that range from simple bar-code scanners and radio-frequency identification (RFID) systems to more advanced voice- and light-directed picking technologies. Such solutions rank high because they make an impact.
"The more you automate, the more accuracy you are typically going to see," says Gerbitz. "On the flip side, the more you [automate,] the higher the cost."
As an example of high-tech automation, he points to the light-directed order fulfillment solutions Lightning Pick provides. Pick-to-light technology, as it's commonly known, is an order fulfillment system that uses alphanumeric displays that light up to guide and expedite the manual picking process. Such solutions incorporate other technologies—including bar-code scanning and RFID tools—and are designed to integrate with a company's warehouse management system. But not all companies will benefit from such solutions.
"There are deltas on both ends, where [a company] may not have the order volumes to justify it, and we see that the [return on investment] won't be there. On the other hand, depending on the product, [a company's needs] may be beyond what we can provide," says Gerbitz. "But there is a very large group of customers in between that can benefit from this type of technology."
Outside of automation—and, often, in conjunction with it—experts urge DCs seeking to reduce mispicks to conduct a detailed review of their picking process to identify—and address—areas where errors are most likely to occur and evaluate how well they train and motivate their picking staff to get orders right. These are areas where DCs can get creative—but they must be persistent, Mulaik advises.
"Tuning or redesigning a picking process to produce 0.1-percent errors without outside help can take multiple quarters, if not years, and should start with a thorough review of the kinds of picking mistakes that occur most commonly in the organization," he says, adding that managers should then address those issues one by one.
"It's more about how we deal with [errors] so that they don't happen," he says. "Sometimes, I think people just don't get creative enough."
As an example, he points to a bar-code scanning system that gives the same auditory signal for a pick as it does for a mispick. Simply programming your system to use a different sound for each will help reduce some of the mispicks.
"You need to think through the design process—within your system's capability," he says, adding that developing training programs and creating awareness about how mispicks happen is also a key part of the process.
Card agrees that solid processes are the foundation of any good picking solution.
"[Reducing mispicks requires] a combination of technology, process, and other things," he says. "Implementing new technology like automation can certainly help, but if you don't have good processes and policies around it, you're not going to [achieve] peak accuracy."
People are the other key element in the mix.
"You have to buy into how important the work environment is, because it plays into being able to reach that peak accuracy," Card adds. "Technology is only going to get you part way there."
Training programs for order pickers become an important piece of the equation, especially if a DC is working with system limitations—in most cases, this means a situation in which a system upgrade or replacement is too costly. Mulaik says developing awareness of where problems occur and training workers on how to deal with or work around those problems is vital to improving accuracy. Card adds that managers should reinforce training by rewarding workers for picking accuracy. This can be done creatively—with bonuses, time off, or some other form of recognition.
"[DCs] should look at their overall processes and say, 'How can we incorporate technology?,'" Card says. "But then you have to say, 'Are we doing things the right way? Are people motivated? Are they being rewarded for accuracy?' It's a combination of all that."
Successful integration of these elements helps drive organizations toward the ultimate goal of providing the best possible customer experience.
"Ultimately, it's about service," Mulaik says. "It's not so much about the cost of the mispick itself. Companies get upset about how [inaccuracy] impacts service."
Congestion on U.S. highways is costing the trucking industry big, according to research from the American Transportation Research Institute (ATRI), released today.
The group found that traffic congestion on U.S. highways added $108.8 billion in costs to the trucking industry in 2022, a record high. The information comes from ATRI’s Cost of Congestion study, which is part of the organization’s ongoing highway performance measurement research.
Total hours of congestion fell slightly compared to 2021 due to softening freight market conditions, but the cost of operating a truck increased at a much higher rate, according to the research. As a result, the overall cost of congestion increased by 15% year-over-year—a level equivalent to more than 430,000 commercial truck drivers sitting idle for one work year and an average cost of $7,588 for every registered combination truck.
The analysis also identified metropolitan delays and related impacts, showing that the top 10 most-congested states each experienced added costs of more than $8 billion. That list was led by Texas, at $9.17 billion in added costs; California, at $8.77 billion; and Florida, $8.44 billion. Rounding out the top 10 list were New York, Georgia, New Jersey, Illinois, Pennsylvania, Louisiana, and Tennessee. Combined, the top 10 states account for more than half of the trucking industry’s congestion costs nationwide—52%, according to the research.
The metro areas with the highest congestion costs include New York City, $6.68 billion; Miami, $3.2 billion; and Chicago, $3.14 billion.
ATRI’s analysis also found that the trucking industry wasted more than 6.4 billion gallons of diesel fuel in 2022 due to congestion, resulting in additional fuel costs of $32.1 billion.
ATRI used a combination of data sources, including its truck GPS database and Operational Costs study benchmarks, to calculate the impacts of trucking delays on major U.S. roadways.
There’s a photo from 1971 that John Kent, professor of supply chain management at the University of Arkansas, likes to show. It’s of a shaggy-haired 18-year-old named Glenn Cowan grinning at three-time world table tennis champion Zhuang Zedong, while holding a silk tapestry Zhuang had just given him. Cowan was a member of the U.S. table tennis team who participated in the 1971 World Table Tennis Championships in Nagoya, Japan. Story has it that one morning, he overslept and missed his bus to the tournament and had to hitch a ride with the Chinese national team and met and connected with Zhuang.
Cowan and Zhuang’s interaction led to an invitation for the U.S. team to visit China. At the time, the two countries were just beginning to emerge from a 20-year period of decidedly frosty relations, strict travel bans, and trade restrictions. The highly publicized trip signaled a willingness on both sides to renew relations and launched the term “pingpong diplomacy.”
Kent, who is a senior fellow at the George H. W. Bush Foundation for U.S.-China Relations, believes the photograph is a good reminder that some 50-odd years ago, the economies of the United States and China were not as tightly interwoven as they are today. At the time, the Nixon administration was looking to form closer political and economic ties between the two countries in hopes of reducing chances of future conflict (and to weaken alliances among Communist countries).
The signals coming out of Washington and Beijing are now, of course, much different than they were in the early 1970s. Instead of advocating for better relations, political rhetoric focuses on the need for the U.S. to “decouple” from China. Both Republicans and Democrats have warned that the U.S. economy is too dependent on goods manufactured in China. They see this dependency as a threat to economic strength, American jobs, supply chain resiliency, and national security.
Supply chain professionals, however, know that extricating ourselves from our reliance on Chinese manufacturing is easier said than done. Many pundits push for a “China + 1” strategy, where companies diversify their manufacturing and sourcing options beyond China. But in reality, that “plus one” is often a Chinese company operating in a different country or a non-Chinese manufacturer that is still heavily dependent on material or subcomponents made in China.
This is the problem when supply chain decisions are made on a global scale without input from supply chain professionals. In an article in the Arkansas Democrat-Gazette, Kent argues that, “The discussions on supply chains mainly take place between government officials who typically bring many other competing issues and agendas to the table. Corporate entities—the individuals and companies directly impacted by supply chains—tend to be under-represented in the conversation.”
Kent is a proponent of what he calls “supply chain diplomacy,” where experts from academia and industry from the U.S. and China work collaboratively to create better, more efficient global supply chains. Take, for example, the “Peace Beans” project that Kent is involved with. This project, jointly formed by Zhejiang University and the Bush China Foundation, proposes balancing supply chains by exporting soybeans from Arkansas to tofu producers in China’s Yunnan province, and, in return, importing coffee beans grown in Yunnan to coffee roasters in Arkansas. Kent believes the operation could even use the same transportation equipment.
The benefits of working collaboratively—instead of continuing to build friction in the supply chain through tariffs and adversarial relationships—are numerous, according to Kent and his colleagues. They believe it would be much better if the two major world economies worked together on issues like global inflation, climate change, and artificial intelligence.
And such relations could play a significant role in strengthening world peace, particularly in light of ongoing tensions over Taiwan. Because, as Kent writes, “The 19th-century idea that ‘When goods don’t cross borders, soldiers will’ is as true today as ever. Perhaps more so.”
Hyster-Yale Materials Handling today announced its plans to fulfill the domestic manufacturing requirements of the Build America, Buy America (BABA) Act for certain portions of its lineup of forklift trucks and container handling equipment.
That means the Greenville, North Carolina-based company now plans to expand its existing American manufacturing with a targeted set of high-capacity models, including electric options, that align with the needs of infrastructure projects subject to BABA requirements. The company’s plans include determining the optimal production location in the United States, strategically expanding sourcing agreements to meet local material requirements, and further developing electric power options for high-capacity equipment.
As a part of the 2021 Infrastructure Investment and Jobs Act, the BABA Act aims to increase the use of American-made materials in federally funded infrastructure projects across the U.S., Hyster-Yale says. It was enacted as part of a broader effort to boost domestic manufacturing and economic growth, and mandates that federal dollars allocated to infrastructure – such as roads, bridges, ports and public transit systems – must prioritize materials produced in the USA, including critical items like steel, iron and various construction materials.
Hyster-Yale’s footprint in the U.S. is spread across 10 locations, including three manufacturing facilities.
“Our leadership is fully invested in meeting the needs of businesses that require BABA-compliant material handling solutions,” Tony Salgado, Hyster-Yale’s chief operating officer, said in a release. “We are working to partner with our key domestic suppliers, as well as identifying how best to leverage our own American manufacturing footprint to deliver a competitive solution for our customers and stakeholders. But beyond mere compliance, and in line with the many areas of our business where we are evolving to better support our customers, our commitment remains steadfast. We are dedicated to delivering industry-leading standards in design, durability and performance — qualities that have become synonymous with our brands worldwide and that our customers have come to rely on and expect.”
In a separate move, the U.S. Environmental Protection Agency (EPA) also gave its approval for the state to advance its Heavy-Duty Omnibus Rule, which is crafted to significantly reduce smog-forming nitrogen oxide (NOx) emissions from new heavy-duty, diesel-powered trucks.
Both rules are intended to deliver health benefits to California citizens affected by vehicle pollution, according to the environmental group Earthjustice. If the state gets federal approval for the final steps to become law, the rules mean that cars on the road in California will largely be zero-emissions a generation from now in the 2050s, accounting for the average vehicle lifespan of vehicles with internal combustion engine (ICE) power sold before that 2035 date.
“This might read like checking a bureaucratic box, but EPA’s approval is a critical step forward in protecting our lungs from pollution and our wallets from the expenses of combustion fuels,” Paul Cort, director of Earthjustice’s Right To Zero campaign, said in a release. “The gradual shift in car sales to zero-emissions models will cut smog and household costs while growing California’s clean energy workforce. Cutting truck pollution will help clear our skies of smog. EPA should now approve the remaining authorization requests from California to allow the state to clean its air and protect its residents.”
However, the truck drivers' industry group Owner-Operator Independent Drivers Association (OOIDA) pushed back against the federal decision allowing the Omnibus Low-NOx rule to advance. "The Omnibus Low-NOx waiver for California calls into question the policymaking process under the Biden administration's EPA. Purposefully injecting uncertainty into a $588 billion American industry is bad for our economy and makes no meaningful progress towards purported environmental goals," (OOIDA) President Todd Spencer said in a release. "EPA's credibility outside of radical environmental circles would have been better served by working with regulated industries rather than ramming through last-minute special interest favors. We look forward to working with the Trump administration's EPA in good faith towards achievable environmental outcomes.”
Editor's note:This article was revised on December 18 to add reaction from OOIDA.
A Canadian startup that provides AI-powered logistics solutions has gained $5.5 million in seed funding to support its concept of creating a digital platform for global trade, according to Toronto-based Starboard.
The round was led by Eclipse, with participation from previous backers Garuda Ventures and Everywhere Ventures. The firm says it will use its new backing to expand its engineering team in Toronto and accelerate its AI-driven product development to simplify supply chain complexities.
According to Starboard, the logistics industry is under immense pressure to adapt to the growing complexity of global trade, which has hit recent hurdles such as the strike at U.S. east and gulf coast ports. That situation calls for innovative solutions to streamline operations and reduce costs for operators.
As a potential solution, Starboard offers its flagship product, which it defines as an AI-based transportation management system (TMS) and rate management system that helps mid-sized freight forwarders operate more efficiently and win more business. More broadly, Starboard says it is building the virtual infrastructure for global trade, allowing freight companies to leverage AI and machine learning to optimize operations such as processing shipments in real time, reconciling invoices, and following up on payments.
"This investment is a pivotal step in our mission to unlock the power of AI for our customers," said Sumeet Trehan, Co-Founder and CEO of Starboard. "Global trade has long been plagued by inefficiencies that drive up costs and reduce competitiveness. Our platform is designed to empower SMB freight forwarders—the backbone of more than $20 trillion in global trade and $1 trillion in logistics spend—with the tools they need to thrive in this complex ecosystem."