What retyping really costs a manufacturer
Typing purchase orders into the ERP looks like a small cost: a few minutes per order. Measured properly, it is lost hours, wrong shipments, slow confirmations and a single point of failure. Here is how to count it in a week.
Ask a manufacturer what order entry costs and the usual answer is a shrug: it is part of Linda's job, it takes a few minutes an order. That answer is honest and almost always wrong, because the visible minutes are the smallest part of the cost.
This is how we measure it with a client in the first week, using nothing but their own records and a notebook. You can do the same before you talk to anyone.
Cost one: the minutes
Start with the obvious one, but measure it rather than estimate it. For five working days, the person entering orders notes the start and end time of each order, and the number of lines. That is all.
The result is usually surprising in two ways. The average is higher than anyone guessed, because a handful of messy orders take twenty or thirty minutes each. And the spread is wide: a clean five-line order from a regular customer takes three minutes, a forty-line order from a customer whose part numbers differ from yours takes most of an hour.
Cost two: the mistakes
Every hand-typed line is a chance to type the wrong digit, pick the wrong unit or miss a revised date. Most are caught. Some become a wrong shipment, a credit note and an awkward call.
To count them, pull the last three months of credit notes, returns and order amendments, and ask one question of each: did this start at order entry? You do not need precision. Even a rough count, multiplied by what a wrong shipment really costs you (freight both ways, the remake, the time on the phone), is usually larger than the minutes.
The visible minutes are the smallest part of the cost.
Cost three: the wait
An order that sits in the inbox until after lunch is an order that does not reach planning until tomorrow. A confirmation that goes out a day late is a customer who wonders whether you received it, and calls to check.
Measure the gap between the email arriving and the order existing in the ERP, for the same five days. Then ask sales how often customers chase for confirmation. The wait rarely shows up in any report, but customers feel it, and so does the schedule.
Cost four: the single point of failure
In most of the manufacturers we meet, one or two people know how to enter orders properly: which customer's part numbers need translating, which price agreement applies, which orders need a second look. When they are on holiday, orders either wait or get entered by someone who does not know the rules.
This cost is hard to put a number on, but easy to see. Look at the week someone was away last year. What happened to the backlog, and to the error rate?
Putting it together
- Time Minutes per order, multiplied by orders per year. Use your measured average, not a guess.
- Errors Order-entry mistakes per quarter, multiplied by the full cost of one wrong shipment.
- Delay Average hours from email to ERP, and how often customers chase. Harder to price, worth writing down.
- Risk How many people can do this properly, and what happened the last time one of them was away.
What it could be worth
What to do with the number
The point is not a dramatic figure for a slide. It is a baseline. If you automate order entry, these are the four things you should see move, and you now know where they started.
It also tells you where to begin. If most of the time goes on a few messy customers, start with them. If errors cluster on part-number translation, the fix might be a cross-reference table before anything else. Measuring first stops you building the wrong thing.
Questions people ask
- How do I measure order entry time?
For five working days, note the start and end time of each order and its number of lines. The average and the spread are both useful.
- What is the full cost of a wrong shipment?
Freight both ways, the re-make or re-pick, staff time, any credit given, and the customer's patience. Write down a real one.
Try it this week. Five days, a notebook, start and end times. If you send us the numbers, we will tell you what we think the first phase should be, and whether it is worth doing at all.
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