Lost & Found – The Cost of Shipping Errors

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!

Variable Sample Your business
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?

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