The Hidden Costs of Manual Order Processing for Distributors

As distributors, you are always on the move to meet the growing needs of your clientele while keeping in place in the competitive race of the market. Processing orders efficiently is a lifeline in any operation, and it has direct implications for customer satisfaction, revenues, and profit. Surprisingly, many distributors still use manual order processing using these techniques. 

Costly hidden charges always cut into your profit margins. DCKAP Integrator is a powerful ERP integration platform to automate your order processing, inventory management, and customer data management.

You are on the brink of saving time, eliminating errors, and improving customer satisfaction which would ultimately lead the way to your growth and profit as far as your business is concerned. 

This blog will uncover the facts behind the hidden costs of manual order processing when viewed by the distributors and how automated order processing will save time, eliminate errors, and enhance customer satisfaction.

Operational Inefficiencies: How Manual Order Processing Drags Efficiency Down

To manual disruptions in operational efficiency, manual order processing can slow down the efficiency and drag it into your business’s bottom line.

Time-Consuming Processes

A typical manual order processing involves very tedious processes, which include:

• Manually receiving and processing orders by voice call, email, or fax
• Manually entering order details into your ERP or accounting system
• Availability and price checks for the ordered items
• Creators and distributors of order confirmations and invoices
• Updating order status and tracking information

All of these will cost so much time and resources and lead to processing delays or inefficiencies.

Risk of Human Error

Manual processing of an order is also prone to human errors such as: 

• Types of Errors: Data entry error, inventory discrepancy, pricing error, and shipping error.
• Consequence of errors: Delayed or lost orders, wrong or broken shipments, customer grievances, lost business, economic losses, even a hit to repute.

Example: A manual entry by a sales representative is made in the orders. The wrong amount is then entered when filing the order. The order then gets processed and shipped, and the customer ends up with an incorrect quantity and suffers delay and extra costs as a result.

Impact on Resource Allocation

Relying on manual order processing means that talent is not maximized and the workforce is strained. Some of these are as follows:

• Underutilization of Talent: Employees take too much time doing manual tasks instead of higher-value tasks such as sales and customer service.

• Strain on Workforce: Manual order processing automation can also cause employees burnout and frustration because it is a very repetitive, time-consuming activity.

Example: Instead of spending time resolving customer complaints and enhancing customer satisfaction, a customer service representative spends most of their day manually processing orders. The consequence of this is burnout and turnover combined with customer dissatisfaction.

Financial Costs: The Hidden Drain on Profits

Manual order processing can incur hidden costs that might lead to draining profits. Here are some examples of such costs:

Increased Labor Costs

• Staffing Needs for Manual Processing: A manual process requires a lot of staff to carry orders; as such, it greatly increases labor costs.
• Overtime and Long Hours: Labor is hence costly due to the long hours and overtime usually combined with manual processing.

Example: Let’s say we have one company with an average of 500 orders per day, taking 10 minutes per order for processing. Hence it would take a team of 10 employees, who would work 24 hours a day, about 8 total hours a day, at the employee cost of $25 per hour for this company. The total cost per day will come to $2000.

Inventory Discrepancies

• Inventory management challenges: The inventory discrepancies are stockouts and overstocking resulting from manual orders.

• Cost of Stockouts: These will lead to loss of sales and revenue.

• Cost of Overstocking: This will lead to wastage in stock and storage.

Example: A company faces a stockout of an in-demand product with lost sales of around 100 units a day. Based on an average sale price of 100, it loses $10,000 a day.

Late Payments and Cash Flow Issues

• Invoice Errors and Delays: These derive from manual order processing, which leads to late payment and cash flow issues. 

• Impact on Cash Flow: Such cash flow problems occur when a company has late customers without payments, and it becomes more difficult to pay suppliers and employees. 

Example: A company receives late payments, which results in a cash flow shortage of about $50,000 a month due to delays in sending invoices to customers.

Customer Experience: How Manual Processes Erode Customer Satisfaction

1. Delayed Order Fulfillment

Every customer hates waiting for an order, and they become frustrated when they get excessive delays in processing an order entirely through automation. 

Example: Orders are made by customers through online sources, but these orders are not processed till the next day and should have been processed earlier that day. But this might be after 3-4 days longer than he was supposed to receive that order. Now, the customer would call customer service to complain about the delay.

2. Lack of Real-Time Updates

The caveat of such manual processing activity is that it renders updates to customers almost impossible in real-time. 

Example: They might closely follow up on their order online, but a customer has failed to notice that the status is not live and has not been updated. Again, this customer might contact customer service regarding his order; he would get a message saying that it has not yet shipped. 

3. Inefficient communication

From the opposite angle, manual processing might result in ineffective messages to customers. 

Example: A customer typically gets a notification via email regarding an order shipment; however, the email has confusing and totally wrong information regarding the carrier and tracking number. This would lead the customer to call customer service for correction of the error, thus adding to frustration and all the more wasted time.

Scalability Challenges: The Struggles of Growing with Manual Systems

Manual processing makes it difficult for businesses to be scalable or to grow. Here are some challenges with scalability:

Difficulty in Scaling Operations

As the number of orders increases, manual processing gets more and more cumbersome.

• Example: The company gets a 20% increase in orders during the holiday season, but the manual processing system cannot keep up with it. Orders get delayed, which leads to customer dissatisfaction.

Inability to Leverage Data for Growth

Manual processing often makes it difficult for the organization to capture and analyze data, making it hard to inform growth decisions.

• Example: A company would love to penetrate new markets but lacks data because the manual processing does not provide it in time to take informed decisions. Tracking sales trends, customer behavior, and other key metrics becomes impossible.

Cost of Expansion

Manual processing makes expansion costly as it requires hiring new personnel and infrastructure to support growth.

• Example: A company wants to expand its operations to meet growing demand, but its manual processing system requires it to hire additional staff to process orders, thus increasing its labor costs and making it difficult to scale efficiently.

Technology Adoption: The Road to Automation and Efficiency

Adopting an automation technology will aid businesses in streamlining the entire order processing automation and will make them more productive and less costly. Here are some of their advantages: 

The Benefits of Automating Order Processing 

• Improved Accuracy: Automation can be very accurate and efficient in processing orders without any chances of human errors, as well as in achieving the task.
• High Speed: The enabled automation of managing orders will help businesses bring speed to the fulfillment process.
• Enhanced Customer Experience: Such automation will provide a better customer experience by ensuring personalized updates and tracking of information.

Cost Savings Through Automation

• Reduced Labor Costs: The biggest contributor to minimizing labor would be moving toward automation.
• Decreased Error Rates: Automation has lowered the risk of human errors; therefore, error rates and costs incurred in correcting these errors are also low.

Example: A company automates its order processing and reduces labor costs by 30%. Their error rates also decrease by 25%, and they save significant costs.

Better Scalability with Automation

• Automation can give more flexibility to adopt rapidly at different stages of demand increase in the operations.
• Better Responsiveness: The automation of businesses can also improve the service time for responding to customers’ inquiries and orders. 

Example: An example is when a company automates its order processing and reacts immediately to 50% increases in demand during the holiday season; orders go on effortlessly and effectively in the hands of satisfied customers.

The Real Cost of Manual Order Processing and the Path Forward

Processing orders by hand can impact the business on many fronts.

A few examples are operational inefficiencies, added costs, unsatisfactory customer experience, challenges in scalability, etc. These hidden costs can add up fast and gnaw into profits while stalling growth. The essence of adopting automation solutions is to ensure smooth order processing, cut down on errors, and promote customer satisfaction.