Supply Chain KPI Killer #2: Receiving Errors and Digital Solutions for Inbound Process

Our Supply Chain KPI Killer series covers the most common KPI hits that can lower your overall Key Performance Indicators for your supply chain. We hire people with hands-on experience and projects in supply chain and logistics, both as software developers and operational employees, such as supply chain business analysts.

Within our 2nd article in the series, we tell you more about Receiving Errors that are often part of the inbound process in the supply chain. Errors during the receiving process can cause a serious drop in KPI performance, lowering customer satisfaction and even causing problems that eventually boil down to cutting performance bonuses. Regardless of your contractual agreement with your customer for your warehouse, you should be solely focused on this part of the business. See more in the short article about first-hand examples of receiving errors and how to solve them.

Receiving warehouse: how is the receiving process in the warehouse working?

Shipping and receiving warehouse processes work in quite a specific way for each warehouse or distribution center. If this is a manufacturing warehouse, most likely, the process remains the same, but due to developments like just-in-time or just-in-sequence, the receiving process will be more complex and require integration of the Warehouse Management System with the Manufacturing Execution System. Etc. If this is a typical e-commerce warehouse, it will most likely require integration of the WMS system with the B2B platform for order purchase management (which can be an ERP system), which is used often by Control Tower teams. There are many ways to solve that.

To not go too far, see what the receiving process in a warehouse combines:

Receiving preparation

Before unloading, the inbound clerk reviews purchase orders and shipping documents to verify expected items and quantities. Team leaders need to confirm that there is adequate space and resources available for incoming goods, checking all in the WMS system. They will most likely need to prepare the necessary paperwork for receiving and arrange the required space near the receiving stations.

Incoming inspection and verification

Pallets with items are unloaded from trailers and containers upon arrival and then located in certain areas. The next step is to inspect for damage or discrepancies. The inbound clerk must verify that the received items match the purchase order information (quantity, SKU, BIC, condition). When everything is checked for discrepancies or shortages, the pallets are moved to a workstation, such as a receiving station, where the system will process items. It is most common when registering Return Merchandise Authorization (RMA) in the system. In other cases, if pallets don’t require rebuilding, they are moved directly to the shelves within the put-away process. Before anything, pallets must be registered in the system and labeled with QR codes or barcodes, which link them directly to a specific location in the warehouse within the WMS system.

Put away

Here, the process is handed over to forklift drivers and EPT drivers assigned to the put-away process. They must use hand scanners and scan barcodes from the labeled pallets to determine the appropriate storage location based on product characteristics and warehouse layout. In the next step, they must place the items in designated storage areas, ensuring proper organization and accessibility. There will likely be an automated update for inventory records with the new quantities.

Quality control

Quality checks are a side process for incoming goods to ensure they meet specified standards. This process can be arranged to identify and address any quality issues at almost every stage, directly after unloading and further processes. For example, if items are just returned, they’ll mostly require double checking not only at docks after unloading but also at the receiving station. Receiving employees need to open boxes, check damages, etc.

Documentation

This step is solely related to completing receiving documents, including inspection reports, receiving slips, and updates to inventory records. Many of these steps are semi-automated through the Document Management System because the DMS system enables you to file or scan documents for future reference.??

Receiving procedures in the warehouse: improve your KPI performance?

The receiving process in the warehouse is one of the most error-prone inbound processes. This is where it all starts, and any error at this stage can boil down to more expensive errors with shipping.

Process Inefficiencies: Inefficient receiving procedures, such as slow inspection times or inadequate storage layouts, can contribute to errors and delays. Continuously evaluate and optimize your receiving process to identify and address bottlenecks.

• Mixed items. When items from different orders are mixed, it can lead to incorrect storage, delayed shipments, and customer dissatisfaction.
• Poor quality control. Inadequate inspection can result in damaged or defective items being accepted, leading to rework, returns, and increased costs.
• Lack of communication. Ineffective communication between office staff and warehouse personnel can result in misunderstandings, delays, and errors.
• Complex communication systems. Overly complicated communication systems can hinder efficient information flow and increase the risk of errors.
• Flex workers issue #1 - lack of familiarity. Temporary or flex workers may not be fully trained on warehouse procedures, leading to mistakes and inefficiencies.
• Flex workers issue #2 - neglect of daily routines. Part-time or contract workers may be less likely to follow standard procedures consistently.
• Incorrect quantities. Receiving the wrong quantity of items can lead to stockouts or overstocking.
• Damaged goods. Receiving damaged items can increase costs for repairs or replacements.
• Missing documentation. Lack of proper documentation can create confusion and delay the supply chain.
• Product mismatch. Receiving the wrong product or a different version of the expected product. It can lead to incorrect inventory levels, delays in production, and customer dissatisfaction.
• Labeling errors. Incorrect or missing product labels can confuse storage, picking, and shipping. It can result in misplaced items, delays, and increased handling costs.
• Aging stock prevention and expiration date issues. Receiving products with expired or nearing expiration dates can lead to product recalls, waste, and financial losses. Proper inspection and segregation of products by expiration date are essential.
• Vendor errors. Vendor errors, such as incorrect shipping addresses or quantities, can disrupt the receiving process. Verifying vendor information and communicating any issues promptly can help mitigate these errors.

How to improve your shipping receiving warehouse

The above-mentioned issues are extremely important in overcoming KPI hits in your weekly KPI reports. Just imagine a volume of 50 weekly shipments with over 40,000 units received, with over 1,000 units received incorrectly. Ideally, this doesn’t happen, but keep in mind that in the put-away process, one pallet can contain up to 2,000 units, and incorrectly receiving a single pallet for put-away can result in shipping even up to 2,000 units to the wrong location. So, in fact, 40,000/2,000 * 100 = 5% drop in KPI, which significantly decreases your performance if you are handling high-risk, high-value items (just imagine that the cost of microprocessors can exceed 100,000€ per pallet).

Here are some more strategies to consider to improve your receiving process and avoid KPIs:

Process optimization

• Layout optimization. Ensure your warehouse layout is efficient for receiving, storage, and picking. Keep driving ways clear for forklifts and EPTs. Next, make sure there is a process in place.
• Lean principles. Implement lean principles to identify and eliminate waste in the receiving process. For example, you can reuse some damaged items for spare parts.
• Batching. Group similar items together for easier handling and processing. Add marks or colors on labels to differentiate units.

Technology integration:

• Use a voice-guide system. Integrate voice-directed systems with your WMS system technology to guide workers through the receiving process and reduce errors.
• Mobile devices. Equip receiving staff with mobile devices for real-time access to information and updates. This can be typical hand scanners or, just today, even mobile phones. So, all integrated with the inventory management system can have a huge impact on KPI improvement.?
• Advanced analytics. Utilize data analytics to identify trends, bottlenecks, and areas for improvement. Try to develop custom software that can perform more extensive analyses to give you a better outlook.
• DMS system. Document management system helps with digitizing shipping documents and then lowers all errors in the receiving process as all data is checked system-wise.

Performance measurement:

• More accurate key performance indicators (KPIs). Track more accurate events on Inbound to better map root causes within RCA (Root-Cause Analysis). Use more narrowed receiving processes' key metrics, such as receiving time, error rates, and on-time delivery, to measure performance.
• Continuous improvement. Use data analysis to identify areas for improvement and implement changes accordingly. Keep this process ahead of all your employees to let everyone expand.

Supplier сollaboration:

• Vendor-managed inventory (VMI). Work with trusted suppliers to manage inventory levels and reduce receiving workload.
• Advance shipping notices (ASNs). Receive electronic notifications from suppliers about upcoming shipments to prepare for receiving.

Employee engagement:

• Engagement. Implement incentives or recognition programs to motivate employees and encourage best practices.
• Job satisfaction. Create a positive work environment to improve employee morale and reduce turnover.
• Training in place. Set up clear onboarding procedures for flex workers. Crate guidelines, Standard Operating Procedure (SOP), Method of Procedure (MOP), etc. Create worker's guidelines for

Summary: how to minimize KPIs for receiving errors?

Receiving errors can significantly impact your supply chain's performance. Inaccurate quantities, damaged goods, and missing documentation are just a few of the common issues that can arise during this critical process, such as warehouse receiving. To mitigate these risks and improve overall efficiency, it's essential to implement robust strategies, which may include custom software.

Are you struggling with receiving errors in your warehouse? Contact us today to learn how our expertise can help you optimize your processes and achieve your business goals. We are experts in logistics and supply chain software development. Get in touch with us and check how to choose your software development partner.?

Check other articles from the series:

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