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Order Accuracy: How To Improve Ecommerce Order Accuracy

order-accuracy:-how-to-improve-ecommerce-order-accuracy
Order Accuracy: How To Improve Ecommerce Order Accuracy

Order accuracy is essential to ecommerce efficiency and customer satisfaction. Learn how to improve your order accuracy rate.

When an online shopper makes a purchase, they expect their order to contain the right products. An incorrect order can ruin a shopper’s experience, so ecommerce merchants must prioritize order accuracy. Learn how to calculate and improve your order accuracy—and why you must get it right.

What is order accuracy?

Order accuracy is a critical metric merchants use to determine the number of orders fulfilled and delivered to customers without errors. Common errors with customer orders include shipping the wrong quantity, size, or color of a product and incorrect or damaged items.

Several factors can impact order accuracy, including human errors, inventory management problems, flaws with manual or automated systems, supply chain delays, fluctuations in order amounts, shipping errors, and communication issues.

Why is order accuracy important?

Shipping the correct items to your customers is important for various reasons, including:

Increased customer satisfaction

Order accuracy impacts the customer experience. Incorrect orders can create negative customer perceptions about your ecommerce business. Earning more sales from existing customers is essential to growing your business, but this requires good order accuracy.

Building customer loyalty is difficult if you aren’t picking, packing, and delivering precisely what your customers ordered. Creating a streamlined and quality-controlled order fulfillment process can increase customer retention, which, in turn, impacts your company’s bottom line.

Improved efficiency

By optimizing your picking and packing process and your delivery process, you and your team can save time and energy. Communicating with a customer about a wrong order, reshipping the correct order, and reconciling inventory records take valuable time away from your company. If order processing errors occur regularly, you could spend more time fixing problems than improving your company with new marketing campaigns or product lines.

More cost savings

Poor order accuracy can impact profits because you’ll have to cover unnecessary shipping costs and will end up with returned products that you can’t resell. Additionally, incorrect orders can result in merchants needing to use customer retention strategies like discounts or store credits—these strategies can help keep customers happy after receiving the wrong order, but they can also lower your profit margins.

Better inventory forecasting

Companies that fulfill orders accurately have more precise information about their inventory, which helps with inventory forecasting—the process of anticipating future inventory needs based on historical sales data. Fulfillment errors can skew your inventory data, making it harder to predict inventory needs.

How to calculate order accuracy rate

To calculate order accuracy rate, identify the number of total orders fulfilled accurately and divide it by the total order amount. Once you have that number, multiply it by 100 to find a percentage. That percent represents your order accuracy rate.

Here is the order accuracy formula:

Order accuracy rate = (total orders fulfilled accurately / total orders fulfilled) x 100

For example, if you fulfilled 1,000 orders total and noticed 30 fulfillment mistakes (and therefore 970 accurate orders), you would calculate your order accuracy rate like this:

970 orders fulfilled accurately / 1,000 orders fulfilled = 0.97

0.97 x 100 = 97

Therefore, in this example, your order accuracy rate would be 97%.

What is a good order accuracy rate?

Although every merchant should strive for an order accuracy rate as close to 100% as possible, some order fulfillment mistakes are inevitable. However, as a general rule of thumb, a good order accuracy rate falls between 96% and 98%. If your order accuracy rate drops below 95%, you may find yourself at a competitive disadvantage with customers choosing more reliable merchants.

How to improve order accuracy

  1. Identify your current order accuracy rate
  2. Set clear goals for order accuracy
  3. Improve inventory management
  4. Optimize your warehouse
  5. Use automation tools
  6. Track key performance indicators

Here are some basic steps to follow to improve your order accuracy:

1. Identify your current order accuracy rate

Use the order accuracy formula to calculate your current rate. Identify the number of accurately fulfilled orders by analyzing customer feedback and noting incorrect inventory levels. Although customers who received a higher quantity of what they ordered may not report this to your customer service department, you can catch those mistakes by monitoring inventory levels regularly.

2. Set clear goals for order accuracy

Once you’ve identified your current order accuracy rate, set new goals for how you’d like that rate to improve. For example, if your rate is at 93%, you could set a goal to increase that number to 96% within 12 months. Setting clear goals will help get your order fulfillment team on the same page.

3. Improve inventory management

Inventory management is the process of monitoring and organizing your company’s inventory. Use an inventory management system (IMS) to monitor inventory across various sales channels. By using software to manage inventory, you can optimize the inventory management process across the board to ensure better order accuracy.

Integrated ecommerce platforms like Shopify offer built-in inventory management tools that give entrepreneurs the power to easily manage their company’s inventory levels. If you’re using a dropshipping model with products supplied and shipped by a third-party vendor, choose a fulfillment provider that boasts a high order accuracy rate.

4. Optimize your warehouse

Organize your warehouse to make the picking and packing process logical and efficient. For example, use a warehouse slotting strategy to organize your inventory based on product categories or variations in pricing. Use a bar code system with individual SKU numbers—stock keeping units that correlate to specific products in your warehouse.

A good warehouse management system (WMS) can help you track SKU levels and monitor your picking and packing processes. For example, entrepreneur Kheris Rogers—the creator of fashion brand Flexin’ In My Complexion—discovered huge benefits for her company once she moved her inventory into a warehouse.

On an episode of Shopify Masters, Kheris Rogers describes running the fulfillment operations for her clothing line out of her house when she started the company at 10 years old. After selling out of her clothing products, she moved the company’s new inventory to a warehouse that handles the picking, packing, and shipping process.

5. Use automation tools

Use software automation tools to optimize your entire order fulfillment process. For example, some warehouse management systems include features like automatic alerts for when particular products need their inventory levels replenished.

These automation tools can reduce human error that occurs from manual processes and help you avoid fulfillment mistakes or inventory stockouts. Perform regular quality checks on your order fulfillment process to identify any system errors creating order inaccuracies.

6. Track key performance indicators

key performance indicator (KPI) is a metric that ecommerce merchants use to track the success of their operations. Here are some of the most important KPIs to monitor as you make adjustments to your order fulfillment process:

  • Order picking accuracy. Order picking accuracy (OPA) monitors one specific aspect of the order fulfillment process—the number of orders picked correctly in the warehouse prior to shipping.
  • Average shipping time. This KPI helps you monitor the efficiency of your supply chain and shipping process by determining the average time it takes between a customer ordering a product from your store and that product being shipped out.
  • Return rate. Your return rate is the percentage of customers who return incorrect or damaged products—a low return rate generally indicates a higher order accuracy.
  • Inventory turnover. Inventory turnover is a metric used to identify the rate at which a certain product is selling out. Low inventory turnover rates indicate less demand, while high inventory turnover rates represent high demand for a particular product.

Order accuracy FAQ

How do you ensure order accuracy?

To ensure high order accuracy, set clear goals for your order accuracy rate, improve your inventory management system, automate your warehouse, and monitor key performance indicators like order picking accuracy and return rate.

What are the benefits of order accuracy?

The benefits of good order accuracy include increased customer satisfaction, improved efficiency, and better data for inventory forecasting.

What factors impact order accuracy?

Some of the main factors that impact order accuracy include flaws with inventory management systems, humor errors, miscommunications, and supply chain delays.

This article originally appeared on Shopify and is available here for further discovery.
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