Why First Time Right is so important
As your webshop handles more and more orders, it can be tempting to focus on speeding up processes first. However, we recommend focusing on getting things right the first time, and only then looking at how to speed things up. In e-commerce, mistakes are extremely costly. They must be fixed, which takes both time and money. Think of additional shipping costs, return processing, customer service workload and the impact of negative reviews.
How much does a mistake cost?
To give you an idea of how much a single incorrect shipment might cost, here’s an example:
- A white USB-C cable is shipped from the warehouse, but the customer actually ordered a white micro USB cable.
- The customer calls customer service. It takes around 15 minutes to handle the complaint over the phone, plus 5 minutes to process it and arrange a replacement in the system. That’s 20 minutes x €35/hour = €11.67 excluding VAT.
- The incorrect product must be returned. This costs around €5.
- The returned product must be processed by a warehouse employee. This takes about 6 minutes = €3.50.
- The correct product is shipped. This adds another €5 in shipping, €2 in handling, and €1.50 in packaging.
Altogether, it costs around €28.67 to correct one incorrect shipment. And this doesn’t even include potential reputational damage from poor reviews or word-of-mouth.
Measuring mistakes with the First Time Right percentage
To track the quality of your warehouse operations, you can monitor your First Time Right (FTR) percentage. This can be done daily or weekly. The FTR is the percentage of all orders that are delivered correctly the first time. An FTR of 100% means no mistakes were made.
You can track errors in a simple spreadsheet. The key is for all departments to report mistakes when they spot them. For instance, if customer service receives a call about the wrong product, or if someone notices inventory discrepancies, those errors should be logged.
The formula
The FTR percentage is calculated as follows:
100 - (100 * number of faulty orders / total number of orders)
So if you process 150 orders per day and make 2 mistakes:
100 - (100 * 2 / 150) = 98.67%
This gives you a clear view of your FTR over time.
Address the root cause
If your FTR is too low and you're spending too much time and money on fixing mistakes, it’s time to identify the root cause.
Whether your FTR is too low depends on how complex your tasks are, how many orders you process, and how many people work in your warehouse. But in general, we consider 99% already too low.
When too many mistakes occur, some businesses respond by adding more checks and steps to their process. This only adds unnecessary work. It's better to identify and fix the actual issue.
By analyzing subprocesses, you can pinpoint the problem. For example, track how often the wrong item ends up on the packing table. You can calculate an FTR for each subprocess and identify where errors most often occur.
First right, then fast
In short, start by eliminating mistakes. Measure your FTR, investigate errors and prevent unnecessary costs and time. Doing it right doesn’t mean being perfect. A 100% FTR is not always realistic—mistakes happen. But focus on accuracy first, then improve speed.
