According to a study recently conducted by Intermec, Inc. (NYSE: IN), distribution centers are losing an average of nearly $390,000 per year due to mis-picks. With a new year bringing renewed pressure to boost efficiencies and drive costs down, the demands for faultless distribution processes have never been higher. Achieving productivity and accuracy goals is fundamental to improving profit margins, which is why more than half (59%) of managers are now turning to ‘The Perfect Order’ metric to identify areas for improvement.
The study, which surveyed 250 supply chain and distribution managers across the US, UK, France and Germany, found the average mis-pick costs approximately $22, with more than half (52%) of companies reporting a pick rate of less than 97%. A further 19 percent do not even measure the costs of mis-picks in any form, suggesting that the accumulated losses to the supply chain may be even higher.
Perhaps unsurprisingly, companies that have recently conducted a workflow process review found picking (47%) a key area where cost savings could most easily be achieved. For those using ‘The Perfect Order’ metric, opportunities for increased savings were clear, with complete shipments (43%) seen as the most profitable to the bottom line.
Improving profit margins in the distribution center:
Technology in the workplace
- With nearly eight out of ten (79%) managers tasked with finding a 19 percent cost saving, on average, from existing operations, managers are taking a closer look at existing processes and technology
- Nearly three-quarters (74%) of managers believe that increasing automation within the distribution center would have the greatest impact in increasing profitability. The same percentage also believe this to be true for adoption of new technology
- Despite this, more than half (51%) believe that ensuring adoption of new technology by workers is a ‘big challenge’ signifying that any new technology must be intuitive and simple to use. Nearly the same amount (49%) claim that being able to pinpoint areas in the distribution center where investment would yield the greatest result is difficult to achieve
- More than two-thirds (68%) believe worker mobility and flexibility is key to improving profitability – a sentiment felt strongest in the US (76%) and UK (84%)
- Despite recognition of the benefits new technology and automation could provide to the bottom line, nearly one in four (23%) of companies are still using paper to conduct distribution center processes
- Despite the continued use of paper, the vast majority of companies agree that up-to-date technology is needed to improve distribution center performance. Multi-functional devices, for example, are seen by 72% of managers as critical to ensuring workers are flexible and equipped to do more
- Growing technology trends include the use of RFID with more than half (52%) of managers using this within the distribution center. This is highest in Germany at 60 per cent. Close to a quarter (24%) of all managers currently use voice-directed work
Bruce Stubbs, Intermec Industry Marketing Director for Distribution Center Operations, said: “This research reaffirms just how much customer service levels and overall business profitability are affected by not meeting the Perfect Order Index goals. If left unmanaged, this will continue to erode overall revenues and performance. Faced with these losses, and in light of the cost savings that must be achieved across the distribution center, continued resistance to the processes and tools that can make a difference is no longer an option.”