Lost & Found – Use our simple formulas to find hidden value in your business. In Lost & Found, we investigate an area of your business where you may be losing money due to unnecessary costs or lost revenue. We highlight a specific business issue and quantify the lost revenue or the excessive cost of errors to help you focus on areas where you can improve the financial health of your business.
In this Lost & Found, we will investigate what your company is potentially losing due to shipping errors. For any company that ships goods to customers, shipping errors are a fact of life. Shipping errors are costly in numerous ways. Some of the related costs include the inbound complaint call, return freight, receipt of returned goods and potential scrap of goods, accounting hassle, processing the replacement order, outbound freight and loss of goodwill and potentially future orders. What other costs does your business incur due to shipping errors?
There are many ways to reduce errors and the benefits can be significant. How much are your shipping errors costing your company? Fill in the blanks below and find out!
|Average number of orders shipped per week||500||____________|
|Error rate (if 2%, enter as .02)||x .05||x___________|
|Your average number of weekly errors||25||____________|
|Your estimated cost per shipping error||$75||____________|
|Average number of weekly errors||x 25||x___________|
|Cost per week of shipping errors||$1,875||____________|
|Annualized cost of shipping errors||$97,500||____________|
|(multiply weekly cost by 52 weeks per year)|
What did you find? How much would your business save if you reduced your number of errors by 50%? What are you going to do about it?