Issue 131 - Control Mistakes in Order Entry

We're off to a strong start on reducing the costs of incorrectly shipping items. Last week we reviewed ways to keep our warehouse inventory sorted and counted properly. Confident that we know where our product is, and how much of it, we are now ready to take an order. Accurate order entry is critical as it is the only step that you cannot "double-check" and correct in house.

Control Mistakes in Order Entry

In past issues we've discussed several methods of order entry and how they affect speed, accuracy, and customer satisfaction. Today we are narrowing our focus to look at methods to take and confirm an accurate order. We will start by breaking down order entry types into manual (pencil and paper), software assisted, and automated (online or EDI) order entry systems as described in Issue 122. We'll also break down order entry into its key steps:

Identify the Item the Customer is Interested in
Record the Quantity, Item Number, Price, and Specifications
Pass the Information to the Next Step (Picking, Cutting, Manufacturing)
In order to track our accuracy and increase the chance of catching any errors before they become costly going to add to this key step list:
Provide an Order Placement Confirmation to the Customer

Now that we have a framework, we'll take a look at how each step breaks down.

Step 1: Identify the Item the Customer is Interested In
"The chef calls and says he wants to order mushrooms...I've got 63 kinds of mushrooms!" - CC4F News Respondent
Food distributors carry hundreds if not thousands of inventory items, many offering several various specifications or cuts for each. This can lead to confusion at time of ordering. To combat this confusion distributors and processors frequently refer to previous invoices to see what a client has ordered previously. If order history does not clarify the customer's needs distributors must be able to quickly access product information and options.

Manual Systems must rely on the expertise of the salesperson. Small companies with minimal SKUs can use this method, but as the selections grow the salesperson finds themselves shuffling through old invoices, flipping through product literature for specifications, or running out to look at the product in the warehouse.
Software Assisted Systems provide a range of options to help the salesperson. Full featured food distribution systems will display a customer purchase history, item descriptions, and have searchable inventories. This greatly increases the salesperson's ability to identify the proper item.
Automated or Online Order Entry Systems move all of this information (and most of the responsibility) into the hands of the customer. Re-order information and detailed descriptions are displayed directly to the customer.

Step 2: Record the Quantity, Item ID, Price and Specifications
"Hold it. I said 30 of the chops, what's with all the boxes?...Oh, well I meant pounds not cases." Any customer, anywhere.
With the right item selected it is now time for numbers and details. Food distributors and processors frequently take orders in Cases, Eaches, and Pounds. The salesperson needs to clearly identify how much of which measurement the customer is ordering, note any pricing changes (broken case up-charges, or quantity discounts), and detail any custom specifications (cutting, freezing, packing instructions, etc.)

Manual Systems again rely on the salesperson, this time to have a good ear and excellent penmanship.
A solid Software Assisted Systems will provide options to quickly enter the information needed. Full Featured systems will provide automatic calculation for broken case, quantity discounts, or additional custom specifications.
Online Order Entry Systems eliminate this step. The customer passes the information directly into the system.

Step 3: Confirm the Order with the Customer
"Can you identify this man?"…"I'm not sure officer, does he have the $25 he owes me?" - Any friend to whom you might owe money.
As we mentioned at the beginning of this article Order taking is the only step that cannot be checked on in-house. In order to prevent a mistake in order entry from becoming a costly shipping error the customer must be presented with a chance to review the order.

Manual Systems have few options in this regard. Reading the order back to the customer, or manually faxing the hand-written order is frequently ineffective.
Assisted and Automated Systems really shine with this step. A well designed system will provide options to automatically issue fax or email confirmations of the order placed for the customer to review.

Step 4: Passing the Information
"Does this look like a 6 or an 8 to you?"…"Call it a 7 and get back to cutting." - Any two cutters, except those working in your shop.
We are going to be looking at this subject in detail next week, so we'll save this topic till then. Manual systems of course get a hand written ticket; Assisted and Automated systems however have a number of choices available which we will review.

Thinking inside the box:

Our sample company:
$2.5 million in revenue
15 Orders Per Day
10 Line Items Per Order
Losing $26,325 Correcting Mistakes

Each year up to 52 (15% of the total) of the errors are caused by Mistakes during Order Entry. Let's look at the savings if we prevent or correct these before they ship.

Total cost to Correct Order Entry Errors Shipped to Customer.
$26,325 x 15% = $3,948

Expected Error Reduction = 66%

$3,948 x 66% = $2,606

That's $2,600 in savings
if we only get 2/3 the savings most companies see.

Our Progress So Far:

Savings Goal: $26,000
Savings so Far: $6,600
$4000 in improved stocking
$2600 in improved order entry

So what can we do with the information above to save our sample company money? According to our survey's approximately 15% of errors that are "your fault" originate during order entry. According to recent case studies from Esker (a leading document management company) and several other sources distributors can exceed a 99% improvement in order entry accuracy with an assisted system. Since we're food guys and we know that not everyone is going to review their confirmation sheets we're going to go with a conservative 66% improvement in errors. Take a look at the Thinking inside the box to see how the math breaks down.

Next week we'll look at one of the areas where the Assisted system our Sample company invested in should shine; Generating Pick Tickets, Cutting Tickets, Labels, and working with Paperless systems.

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