Supply Chain KPI Killer #1: Receipt Processing Delays - Automate for Accuracy

This article is the first in our series dedicated to overcoming a negative impact on Supply Chain Key Performance Indicators (KPIs). Using our experience as someone who has been responsible for KPIs on a daily basis within a Control Tower, we share tips on how to decrease the impact and improve your KPIs.

Today, we'll discuss a common KPI issue in Contract Logistics related to Receipt Processing Delays and how to automate your inbound processes cost-effectively to increase accuracy. Find out more from an expert with direct experience in global logistics and supply chains in the EMEA region and beyond.

What is the KPI hit?

A Key Performance Indicator (KPI) hit hurts your operational performance in logistics and supply chain. A KPI hit reflects your customer's level of dissatisfaction due to lower performance by your team within a specific time frame. A KPI hit depends on the contractual agreement between the customer and the logistics service provider, who have agreed to deliver a certain level of service. Any deviation from the agreement results in a KPI hit.

For example, if your logistics business agrees to provide a specific inbound volume, this agreement may cover three steps needed within 2 hours.

Within those 2 hours, you are obliged to unload goods upon arrival from the container or trailer, register them in the system, and move them from dock to stock. When you are delayed in that process, your performance can become subject to a KPI hit. In that case, the decision-making process may refer to a weekly KPI review, where your customer gets an outlook on the ongoing performance. If you had 2 shipments late in that process, and the agreement allows a maximum of 2 late shipments, most likely, you'll get a KPI hit.

It's worth noting that the customer may require data from you on shipment arrival, and all processes need to be registered in the system. They can also request data from the carrier to verify if everything aligns with what you mentioned in your KPI reports. Therefore, transparency and sharing the most accurate data with your customers is essential.

Goods receipt process: common causes of delays

Efficient goods receipt is an essential stage of warehouse operations' inbound process. As we mentioned above, delays in this process can negatively affect the entire supply chain performance and KPI reports. Issues with good receipts can impact everything from inventory accuracy to order fulfillment (mostly if some items are missing during receipt).

A smooth goods receipt process is often a subject of Key Performance Indicators, where the goods need to be traced upon arrival to allocate the purchase order for newly arrived items.

That means whenever items are registered in the warehouse and visible in the system, they can be automatically assigned to customers who made an online order on the website.

This process is relevant to e-commerce, and if you're offering fulfillment services, it will look like this in a typical supply chain distribution center. For example, goods are shipped from China to the EU, arriving at the port in Rotterdam in the Netherlands, and are tracked system-wise. Next, as the shipments become visible when the sea cargo reaches the dock at the ports, they are traced until the final step, when the container with goods reaches the distribution center. The right processes should be in place to manage unloading and receiving system-wise as fast as possible within the contracted time frame.

Of course, along the way, a lot of things can happen. Here are the common causes of late goods receipt process:

Documentation errors

It isn't a secret that missing or inaccurate purchase orders, incomplete invoices, packing lists, or other illegible shipping documentation are a huge problem. Resolving issues with shipping documents is time-consuming, as it requires reaching out to various stakeholders to determine what is correct. System receipt cannot be completed if the document doesn't match the physical quantity or condition. Issues with documents can result in manual data entry, a common cause of delays in receipt of goods. Imagine if someone receives handwritten paperwork where the digits aren't clear to read. Your warehouse personnel might input inaccurate data for processing.

Poor communication

Lack of clear communication between suppliers, transportation providers, and warehouse staff can lead to unexpected delays. For example, your warehouse could receive incorrect data on a shipment that arrives for unloading or accidentally process goods dedicated to different purposes. Unforeseen shipment delays or changes communicated promptly disrupt the receiving process.

Insufficient resources

Inadequate personnel levels during peak receiving periods and a shortage of equipment are enormous challenges. Imagine you run three different customers in your distribution center with the same people managing each. This situation can easily result in issues with time allocation, demand, and prioritization. You might also face equipment shortages such as forklifts, pallet jacks, and EPT trucks. All of this can hinder the goods receipt process and create bottlenecks.

Ineffective warehouse layout

Poorly designed receiving docks and staging areas often cause rapidly growing stock levels. It is very difficult to manage dock layouts if the number of goods is rising exponentially. This all boils down to inefficient storage location assignments and leads to delays in the receipt process. Warehouse clerks might mix up pallets from different customers.

System issues

A Warehouse Management System (WMS), often adapted as off-the-shelf software, can crash and cause many failures or slower performance. In fact, this can significantly impact goods receipt efficiency. Sometimes, system integration causes many problems for systems such as WMS, ERP, and TMS. So, it's quite important to choose the right software partner.

Quality control issues

If you're dealing with high-value, high-risk goods, sometimes extensive product inspection and testing will be required. A high rate of damaged or defective goods can undoubtedly prolong the goods receipt process. Sometimes, you can explain this to the customer without receiving a KPI hit, but sometimes, it will result in a KPI hit not only for delays but also for damage.

Lack of standardization

The most important thing is to maintain certain standards in the inbound area. Inconsistent processes across different product types or suppliers and a lack of clear guidelines for handling exceptions can lead to confusion and delays in system receiving. So, having very simple and standardized procedures for efficient operations is good.

Automated receipt process: prevent receipt processing delays

At this point, I would like to share more tips on tackling these problems and complying with your KPI agreement. I believe that timely receipt is a huge issue for the companies I have worked with and far beyond. It's worth highlighting that we have gathered experience in certain industries, and these requirements and issues can differ slightly. Nevertheless, they are still valid for most logistics and warehouses in the supply chain.

Let's see how automation in the receipt process can improve your performance and help avoid KPI hits:

Document automation

Manual data entry from physical documents is a significant bottleneck in the goods receipt process. Nowadays, many logistics companies use Document Management Systems with OCR technology, which can extract data from various document formats. Moreover, DMS systems automate data input and reduce errors, even when people make typos on paperwork. Document validation ensures accuracy and completeness. All the processes go through a centralized document repository system that compares original documents with those delivered to the warehouse.

Improved communication

Real-time updates on shipment status are crucial. So, if you provide your warehouse clerks with arrival times through logistics custom software, they can see all the data independently from office clerks. As you may know, changes are crucial for efficient warehouse operations, and office staff may not update them frequently or on time. Automated notifications keep all stakeholders informed and prevent delays caused by miscommunication. So, suppose you start using collaboration tools, such as a TMS system with an interface dedicated to the warehouse. In that case, you can facilitate efficient communication and problem-solving in minutes.

Optimized resource allocation

It's demand forecasting helps anticipate peak receiving periods. If you have a WMS system that allows for optimal workforce and equipment allocation, task management is easier. You see all your people and assets in one place. This ensures efficient workload distribution and helps prevent bottlenecks caused by resource shortages.

Intelligent warehouse management

I need to say again that advanced WMS systems can optimize storage location assignments based on various factors. No matter what happens, you can improve picking and put-away efficiency if you have a WMS. You can measure your personnel's performance time. The WMS system's real-time inventory tracking prevents stock discrepancies. Moreover, it provides a clear guide for the put-away process and reduces errors and training time.

Enhanced quality control

As I said above, a QMS system is very important. Your customer will want you to run inspections, and automated processes can help with defect tracking. When you implement tight integration with quality management systems, you can streamline the receipt process with quality control. This all reduces delays caused by product issues.

Standardized procedures

Like everywhere, your warehouse needs organization, so enforcing standardized procedures through automation ensures consistency and reduces errors. Please consider putting clear guidelines for handling exceptions, such as goods that require customs clearance, to minimize confusion and delays.

Conclusion

Manual receiving processes are very error-prone. You can always expect delays and inefficiencies. Implementing automated solutions, such as custom software like a WMS system, can significantly improve accuracy and speed up the overall process in a warehouse.

If you want to revolutionize the receiving process of your goods, contact us today. We can share more tips and tricks and have a proven track record of helping many logistics companies. Learn how our custom logistics software can help you eliminate bottlenecks and reduce errors.