Ferrule Electrical Supply · Business case
Barcode scanning in the distribution center
We send the wrong item on 36 order lines a day, and putting that right costs us $414,000 a year. I am asking for $140,000 once and $36,000 a year to add barcode scanning to the warehouse system we already run. It should cut wrong picks by three quarters, pay for itself in 13 months and leave us $528,250 better off over three years.
$414,000what wrong picks cost us a year today
$140,000one-time cost, plus $36,000 a year to run
$528,250net benefit over three years
13 monthsto pay back, in January 2028
1The problem, and what it costs today
Pickers work from a printed list and match part numbers by eye. A 15-amp and a 20-amp breaker sit in neighboring bins and look the same in the box. In a four-week audit of credit notes, 5 to 30 October 2026, we found 720 wrong picks in 20 working days. That is 36 a day on about 3,000 order lines, or 1.2%.
| What one wrong pick costs | Average |
|---|---|
| A second delivery to put it right (6 in 10 need one, at $40 a run) | $24 |
| Returned stock we can no longer sell as new | $12 |
| Staff time on the call, the credit note and restocking (20 minutes at $30 an hour) | $10 |
| Each wrong pick | $46 |
Over a year of 250 working days, 36 a day is 9,000 wrong picks. At $46 each, that is $414,000 a year.
Not counted: three contractor accounts worth $310,000 a year in sales left us in 2026 and named wrong orders as a reason. I can't prove how much of that was down to picking, so it is left out.
2Options considered
| Option | One-time | A year | Wrong picks | Three-year net |
|---|---|---|---|---|
| A. Do nothingNothing to approve. Wrong picks go on costing $414,000 a year, $1,242,000 by the end of 2029. | $0 | $0 | 1.2% | $0 |
| B. A checker on each shiftTwo people at $52,000 each catch about half the errors at the dock. It works from week one, but adds a step to every order. | $0 | $104,000 | 0.6% | $309,000 |
| RecommendedC. Scanning on our current systemPickers scan the bin and the item, and the handheld refuses a mismatch. Live by the end of April 2027. | $140,000 | $36,000 | 0.3% | $528,250 |
| D. Replace the warehouse systemThe best accuracy, but a year to go live. It doesn't pay back inside three years. | $610,000 | $96,000 | 0.2% | −$208,000 |
Three-year net is savings minus costs for 2027 to 2029, measured against doing nothing. B saves $207,000 a year from the start. D saves $345,000 a year, but only from 2028.
3Recommendation
Option C. It removes three quarters of the wrong picks at 28% of option D's three-year cost, and it keeps the system the team already knows. The vendor put us in touch with two customers of our size. One went from 1.4% wrong picks to 0.2% within six months, the other from 1.1% to 0.3%. I have assumed 0.3%.
| 24 handheld scanners at $1,450 | $34,800 |
| Scanning module set-up by the vendor, fixed price | $58,000 |
| Wi-Fi coverage in the racking | $21,200 |
| Bin labels and two label printers | $9,000 |
| Training and overtime during changeover | $17,000 |
| Total | $140,000 |
| Module subscription, $2,400 a month | $28,800 |
| Scanner support and spares | $7,200 |
| Total | $36,000 |
4Costs and benefits over three years
Running total −$20,750
Running total +$253,750. Paid back in January.
Running total +$528,250
| Option C | 2027 | 2028 | 2029 | Three years |
|---|---|---|---|---|
| One-time cost | $140,000 | $0 | $0 | $140,000 |
| Cost to run | $36,000 | $36,000 | $36,000 | $108,000 |
| Total cost | $176,000 | $36,000 | $36,000 | $248,000 |
| Saving from fewer wrong picks | $155,250 | $310,500 | $310,500 | $776,250 |
| Net for the year | −$20,750 | $274,500 | $274,500 | $528,250 |
| Running total | −$20,750 | $253,750 | $528,250 |
- A full year saves 6,750 wrong picks (9,000 today less 2,250 at 0.3%) at $46 each: $310,500.
- 2027 counts six months of that. Scanning goes live at the end of April, and I have allowed two slow months.
- Order volume and prices are held flat. Every dollar spent returns $3.13 over the three years.
- Nothing is counted for faster picking, quicker training of new pickers, or accounts we keep.
5Risks
Scanning cuts wrong picks by less than planned
If the rate only halves, to 0.6%, the three-year net falls to $269,500 and payback moves to month 18. Option B would then have been $39,500 better. Both reference sites did far better than that.
Picking slows down during the changeover
We go live one zone at a time, starting with breakers and panels, where 4 in 10 wrong picks happen. The $17,000 for overtime covers the first six weeks.
Wi-Fi gaps in the high racking
A survey on 3 November found five dead spots. Fixing them is the $21,200 line.
Items with no barcode
Cable cut to length and loose fittings are about 8% of lines. We will label them at the cutting bench, which is what the two label printers are for.
The vendor finishes late
The set-up is fixed price and paid in stages. Each month of delay costs us about $25,875 in savings we don't make.
6The decision
Approve $140,000 of capital spending in 2027, and $36,000 a year to run it.
- By Friday 11 December 2026. The vendor is holding a start date of Monday 11 January until then.
- If we miss it, the next start is in March and go-live moves from the end of April to the end of June. Two months later means about $51,750 less saved in 2027.
- What you will get from me: wrong picks per 1,000 lines, reported every month from go-live, against 12 today and a target of 3.
Sources: the October credit-note audit, payroll rates for 2026, and the vendor's fixed-price quote of 6 November 2026.
Sample page. The names and numbers are made up.