Sounds like investing in some dodgy off-shore bank, financing a narcotics deal or, perhaps, a dead cert at Ascot. But it’s the type of return that suppliers of “Voice Technology” claim for their systems.
Deals that seem too be too good to be true usually are, so we thought we’d investigate why companies such as Wal-Mart have invested heavily in these systems and why software houses like BCP claim clients are queuing up for their new voice modules. Firstly some basics:
What exactly is “Voice Technology”? It’s the use of wearable computers passing their information to a user by voice through a headset (rather than displaying the information on screen), and receiving feedback via voice through a microphone.
Where is it used? Most applications are in the warehouse – goods receiving, stock checking, and particularly order picking. In practice most investments are justified on the benefits it brings to picking alone.
Why is it claimed to be so good? There’s a long list of benefits claimed by suppliers and supported by users. Its hands free nature and quick communications can increase picks per hour by 10% to 20%. Compared to paper based systems it decimates pick errors. Also, as accuracy is improved, savings can be made in order checking.
What are the savings? This obviously depends on each company, its market and how it operates. The table shows a typical breakdown of total savings:
Picking efficiency 27%
Reduction in errors 39%
Order checking 25%
Will I get these savings? As always it depends on how you currently operate and how you view the savings.
The table shows the factors that are important to consider and the range of potential savings:
Productivity Gain – 10% to 20%
Reduction in Error Rate – 50% to 95%
Cost/Error – £1 to £20
Order Checks (cost/order)- £1 to £5
Perhaps the area of greatest uncertainty is ‘cost per error’. You need to cost out the effort to correct errors – lost revenue, loss of good will, etc. Although sometimes difficult to measure this can offer the biggest savings
And the costs of putting in a Voice system? Suppliers can be coy about this. However, if you estimate around £6,500 per set to include set-up and software you’d be in the right ballpark. Remember, sets can be shared between shifts.
So where do you get your 100% return? This can be done by feeding the figures into a spreadsheet. Taking a simple example – with 25 pickers on a single shift – a typical P&L would look something like this:
25 units pus software – 162,000
Savings on Picker Efficiency – £50,000
Savings from Errors – £65,000
Savings from Order Checking – £45,000
Stationery – £18,000
TOTAL SAVINGS pa – £178,000
On an expenditure of £162,000 this shows a return of £178,000 pa – around 110%. In other words, a payback in 11 months. If hardware can be shared across more than one shift then pay back can be even faster. In some cases suppliers and users have claimed paybacks in as little as 6 months.
If your head starts hurting trying to work out the costs and savings there is a handy spreadsheet calculator available at www.bcpsoftware.com. This allows you to insert your own numbers and find the benefits for you.
Alternatively, I heard from a very good source that Fancy Dandy in the 2:30