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"Voice Directed Picking: Expected ROI"
By Tony Beales
Director
Business Computer Projects Ltd. - Supply Chain and Warehouse Management Software
Introduction
The use of voice technology in
the warehouse is starting to take off, particularly for order
picking.
Voice directed order picking involves the use of a
wearable computer with a headset and microphone so that the order
pickers are instructed by voice on what items to pick and where to
pick them, verbally confirming their actions back to the system.
The wearable computer communicates with the
warehouse management
system via a radio frequency (RF) local area network (LAN).
The list of potential benefits
is impressive:
-
Increased accuracy 99.9% plus
-
Increased productivity 15% plus
-
Removes trips back to assignment desk
-
Removes cost of printing and
distributing picking documents
-
Removes cost of re-keying order
amendments, picking confirmations and catch weights
-
Hands free & Eyes free makes picking
easier
-
Real-time feedback for proactive
management
-
Real time stock updating
-
Improved safety hands free & eyes
free
-
Reduced training verbal prompts
easier
The biggest benefits are
obtained in low margin, high volume, labour intensive case picking
operations, and because of this, the Foodservice Industry and
Grocery Retailers and Wholesalers are leading the way in adopting
the technology. Accuracy and productivity are critical in these low
margin, labour intensive operations, and the use of voice technology
delivers this by freeing both the hands and the eyes for the picking
task. The hands free operation is also particularly suitable for
picking Frozen Foods and Chilled Foods, where gloves hamper the
handling of paper or radio data terminals. Catchweights are easily
captured, and the subsequent re-keying of information removed.
Furthermore, the improved accuracy usually eliminates the need for
costly order checking altogether.
Accuracy
The biggest cost benefit is
increased accuracy, and this is frequently used on its own to cost
justify the adoption of voice technology. However, the cost of a
picking error is frequently underestimated, and of course differs
for wholesalers and for retailers distributing to their own stores.
The cost of a picking error also differs for short picks, over picks
and mis-picks.
Wholesaler:
Short pick The costs are the clerical
effort of handling the credit claim and the margin on the lost sale.
Over pick If reported, the costs are the
transport costs of returning the item, labour costs in handling the
return, and in some cases the cost of writing off stock if outside
acceptable shelf life or QA parameters.
If
not reported, the cost is the stock loss incurred, perhaps an
average of £10 ($15) per case.
Mis-pick If the error is correctly
identified and reported, the costs are the clerical effort of
handling the credit claim, the margin on the lost sale, the
transport costs of returning the item, the labour costs in handling
the return, and in some cases the cost of writing off stock if the
returned item is outside acceptable shelf life or QA parameters.
If
the error is incorrectly identified as a short pick (i.e. the item
sent is not returned, but also not paid for), then the costs are the
clerical effort of handling the credit claim and the cost of the
stock loss incurred a very costly error!
The
average cost per picking error for most wholesalers is in the range
of £5 to £25 ($8 to $40) per error, with £5 ($8) being a significant
underestimate in most cases.
Retailer:
Short pick The costs are the clerical
effort of recording an adjustment in the stock and accounts system
and the margin on the lost retail sales if the short delivery
results in a stock out in the store (typically 20% of short picks
might result in stock outs)
Over pick The costs are the clerical
effort of recording an adjustment in the stock and accounts system,
and if the overstocking is great enough to justify a return, the
transport costs of returning the item and the labour costs in
handling the return. The overstock situation may in some cases
result in writing off short shelf life stock.
Mis-pick The costs are the clerical
effort of recording an adjustment in the stock and accounts system,
and the margin on the lost retail sales if the short delivery
results in a stock out in the store. If the overstocking of the
incorrect item is great enough to justify a return, the costs
include the transport costs of returning the item, the labour costs
in handling the return. The overstock situation of the incorrect
item may in some cases result in writing off short shelf life stock.
For
retailers, the greatest cost arising from picking errors is often
the cost of checking orders on delivery to stores. In most cases,
the improved accuracy arising from the use of voice technology is
such that there is no longer any need to perform this check at all.
The reduction in picking
errors resulting from
voice picking can vary considerably (in some
environments 99.9% accuracy is exceptionally good, while in others
it is exceptionally bad!), but some recorded examples are error
rates of:
-
3 per thousand reducing to 0.3 per thousand (accuracy
of 99.7% improving to 99.97%)
-
8 per thousand reducing to 1 per
thousand (accuracy of 99.2% improving to 99.9%)
-
1.1 per thousand reducing to 0.1 per
thousand (accuracy of 99.89% improving to 99.99%).
These represent reductions in
picking errors of between 80% and 90%.
As an indication of the
magnitude of the possible savings, a wholesaler picking 500,000
cases per week with an error rate of 2 per thousand (99.8% accuracy)
is experiencing 50,000 errors per year. An 80% reduction to 0.4 per
thousand (99.96% accuracy) will reduce errors by 40,000 per year,
which at a cost of £10 ($15) per error represents savings of
£400,000 ($600,000) per year.
Picking Productivity
-
Typical productivity
improvements are between 10 and 20%, arising from:
-
Hands free no paper or bar code
scanner to handle. The benefit is even greater for frozen and
chilled foods.
-
Eyes free no stopping to read picking
instructions, pickers listen & speak while moving.
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No return to assignment desk to collect
next picking list.
-
Voice direction pushes pickers harder
workers respond well to verbal instructions.
-
Faster recording of catch weights
spoken rather than written or keyed. The benefit is even greater
for frozen and chilled foods.
-
Fewer re-picks due to fewer empty
picking slots because real time stock updating triggers
replenishment instructions
As an indication of the
magnitude of the possible savings, a distribution centre employing
50 pickers might have a total labour cost of £1 million, and maybe
significantly more if overtime payments are substantial. A 15%
saving on £1 million is £150,000 ($240,000) per year.
Administration Productivity
Improvements in administrative
efficiency arise from:
-
Elimination of the tasks of printing
and distributing picking documents
-
Elimination the re-keying of picking
confirmations, order adjustments for out of stocks, and catch
weights for variable weight items.
These cost savings are
significant, and for a large wholesaler there may be several
administrative staff no longer needed for those tasks.
Savings in Stationery Costs
Eliminating paper picking
labels brings a significant cost saving in the cost of the paper
alone. Many distribution centres spend in excess of £50,000
($75,000) per year on purchasing picking labels.
Real
Time Stock Updating
Real time stock updating
allows:
-
Triggering of letdowns to replenish
picking faces, optimising the use of fork lift trucks and preventing
re-picks or waiting time due to empty picking faces
-
Cycle counting can built in to the
replenishment (letdown) task, improving the efficiency of the stock
checking process.
-
Immediate action to be taken on stock
discrepancies if picking face is empty or from cycle counting,
allowing picking face replenishment to take place and improving
accuracy of stock recording.
-
In turn, the improved accuracy of stock
recording leads to improved service level and less time spent
investigating stock discrepancies
Improved Safety
The hands free and eyes free
operation leads to fewer accidents.
Eliminating paper leads to
less waste paper or label backing sheets, resulting in a cleaner,
tidier and safer warehouse.
Reduced Training
The training time for new
pickers is reduced by the use of voice, as a voice directed task is
easier to learn than interpreting a paper task. Training time can
often be reduced by as much as half.
Expected Return on Investment (ROI)
The expected ROI from
voice
directed order picking will, of course, vary significantly from one
company to another, depending on:
-
The current level of picking accuracy
and the potential for improvement
-
The current method of picking paper
based or radio data terminal
-
Whether orders are checked before
despatch
-
How many picking shifts are in
operation
-
What infrastructure is already in place
e.g. RF Network
-
Whether the existing Warehouse
Management software (if any) supports voice technology
One of the biggest factors is
the number of picking shifts in operation. If there is more than
one picking shift per day, then equipment can be shared between
pickers on different shifts. Typically each picker would have their
own headset (and microphone), but would share the wearable computer
or terminal, as their voice profile can be downloaded to the
terminal when they log on. For a company with more than one picking
shift moving from paper based picking to voice directed picking, the
cost of installing voice technology is now such that payback can
often be achieved within 6 months. For a company with a single
picking shift per day, payback within one year would be a more
realistic target.
BCP provide an
online payback
calculator for voice directed picking
www.BCPsoftware.com
Voice Directed Warehouse Management Software (WMS)
© 2003 Business
Computer Projects Ltd. All rights reserved
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