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Voice Directed Picking: Expected ROI
20 August 2007
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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).
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- 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 and eyes free – makes picking easier
- Real-time feedback for proactive management
- Real time stock updating
- Improved safety – hands free and 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 rekeying 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 two 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 and speak
while moving.
- 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 of 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 be 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 six
months. For a company with a single picking shift per day, payback within one year
would be a more realistic target.
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