The real cost of failed deliveries and what to do about it
Every time a delivery fails to make it to its recipient, it costs the shipper both money and goodwill. But exactly how much does a failed delivery cost and what can shippers do to prevent failed deliveries?
The reasons for failed deliveries are many, ranging from mispacking or -sorting at the warehouse to damage during transport or delays. Regardless of the reason the experience remains the same for the recipient – unhappy and loss of goodwill, and the failed delivery will have negatively affected the entire buying experience. A study from ecommerce data expert, PCA Predict, shows that 78% of consumers expect the retailer to resolve a delivery issue, regardless of whether it’s the retailer or the carrier that’s at fault.
RFID solution provider Lyngsoe Systems has made thorough studies which shows that failed deliveries can account for additional work of up to 90 minutes and cost between 170 and 300 Euro to correct, when you take all variables into account:
- Customer service phone calls
- Corrective actions in support systems
- Locating parcel or incorrect shipment
- Handling and coordinating freight to correct destination
- Financial corrections (new invoice, credit notes, new freight order, payment of new freight)
- Pick and return misplaced item and handle in WMS System (new warehouse receival, unpack and transport goods back on shelf, register and update WMS)
These are just the hard tangibles due to failed deliveries. Lyngsoe Systems also identify soft tangibles of failed deliveries e.g. unhappy customers, loss of customers and bad reputation.
“The number one reason for a customer to choose another place to shop is that they did not get their delivery on time. And unlike hard tangibles it is difficult to put a value on soft tangibles, as you cannot estimate how much a lost customer cost you, but you need to add these on top of the calculated cost,” says Christian Meinhardt, Sales Director at Lyngsoe Systems.
In situations, where the shipper is not responsible for the failed delivery, e.g. transport damages or delays due to traffic, they will still have to pay for some of the corrective work that the failed delivery generates e.g. customer service calls, handling in various systems and coordinating freight. And the shipper will again have to add the unknown costs of the soft tangibles on top of that.
What you can do to prevent failed deliveries
Most failed deliveries happen because of errors in the warehouse e.g. wrong freight label, wrong content of the shipment or mis-sorting before handover to the shipper. Luckily there are multiple ways to reduce these types of errors, as have been explored by Nordic sports retailer XXL, who has added RFID to their freight labels to reduce failed deliveries.
“We just run a pallet of RFID labeled parcels under the RFID scanner at our warehouse before dispatch to store. The RFID scanner scans all parcels on a pallet at once, and they are automatically registered, validated and status updated. That way, we immediately spot if there are parcels on the pallet that should not be there. It not only reduces failed deliveries, it also provides faster delivery,” says Kim Andre Nilsen, Logistics Manager at XXL.
The study from PCA Predict recommends that shippers implement verification solutions to ensure customers provide data that is as accurate as possible, as incorrect address data accounts for a huge part of failed deliveries. Removing any friction from the checkout process and making it as simple, quick and user-friendly as possible will also help to fix failed deliveries.
In conclusion, it is important that shippers identity and analyze failed deliveries in order to control and reduce the costs of these. They need to analyze the reasons for failed deliveries and take the necessary measures to reduce these causes, as just 1.000 failed deliveries a year easily can cost 300.000 Euros plus the soft variables concerning reputation and lost customers.
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