The real costs of manual data entry for logistics organizations
Whether or not you work in shipping, you know that manual data entry comes at a cost. But is that just down to the time spent by your people in putting data into your system? We think there's more to take into account.
In this article, we look at how much manual data entry costs freight forwarders and other logistics organizations.
What is manual data capture?
Think of manual data capture as the human-powered transfer of data from unstructured systems to structured systems. It is all the work involved in manually reading, understanding, typing and checking data from one place to another. This involves time, thought and effort – and it's inevitably prone to error.
Globally, as much as 90% of data extraction and data entry still occurs manually.
In 2019, only 55 billion of the world's 550 billion invoices were exchanged on a paperless basis. The remaining 90% would require at least some level of manual processing.
What does the typical manual data entry process look like?
The typical process for manual data entry for freight forwarders is shown below:
Here's the process in a little more detail:
- Receive the documents: the source material arrives in email or paper form for manual processing.
- Understand the meaning: the content of the documents needs to be read, categorized and understood.
- Prepare for data entry: the important data needs to be stored in CargoWise or some other CRM. Depending on what the data and history is, this may need to go into a new record or be added to an existing one.
- Enter the data: the relevant document data needs to be accurately entered into the system.
- Check for accuracy: the data needs to be checked to ensure that nothing has been missed, added accidentally or otherwise misrepresented.
All of these steps involve at least some manual effort. When those tasks are repeated for businesses that deal with a lot of documents (the freight forwarding industry alone processed 1.26 billion invoices in 2017,) the manual work represents a significant time cost.
Moreover, any failure in the above steps, such as inadequate accuracy checks, means that the entire process fails. Bad data leads to bad decisions, and that could mean a cost far higher than the time investment in manual processing.
Why is manual data entry so expensive?
Unless your staff have been hired for the express purpose of manual data entry, there are higher-value tasks they could be completing for you. There are several costs associated with doing this work, as discussed below.
Direct costs of manual data entry
The most obvious cost of manual data entry is the time your staff spend on inputting data into your systems. Every minute of that time contributes to your wage bill. It is time spent on administrative work that could be automated, hence freeing up your staff to work in other areas of the business on high-value customer-facing tasks.
Alternatively, removing the manual data entry burden from your jobs list could mean achieving the same levels of productive output with a lower headcount. Either way, the direct impact of manual data entry is financial because your staff will need to invest more time to get this task done.
Quantifying the direct cost depends on the number of documents to process, the complexity of those documents, and the keystrokes per minute (KPM) that your staff can achieve. The more documents you process manually, the higher the direct cost to your business.
Our research, based on real tests conducted with professional data entry teams, finds that, when processed manually, each document – usually received as an email attachment – takes at least 10 - 15 minutes (up to 60 minutes for larger documents) to deal with by the time the data entry clerk has opened the attachment, found the relevant record in the TMS or ERP and manually keyed in the update.
By our calculations, this tells us that if you’re paying $20 per person per hour and it takes each person on average 10 minutes to process each document, each document you receive is costing you $3.33. Multiply this by the number of documents you manually process each month, and you'll quickly discover the direct cost in dollars of manual data processing.
Indirect costs of manual data entry
Even though the data entry process itself might not involve many typed characters per document, it's important to note that this doesn't mean that each document will be completed quickly. Instead, your staff members' KPM will be much lower than it would be for normal typing tasks.
A staff member entering the data will at least pause between each field as they read and transfer the information. Their rate of progress may slow down significantly if they encounter confusing or contradictory data, and some problem-solving may be needed before normal service is resumed.
In some cases, the manual entry process may be stopped altogether because the document's contents need to be checked by another department. If the document needs to be referred outside your organization (for example to a bank or other vendor), the processing time could potentially leap from minutes to days or even longer.
Human data entry is not a consistently productive endeavour. Your staff need to take breaks and are more likely to make mistakes as their concentration wanes.
Human error must also be considered an indirect cost. A report from global analyst firm IDC estimated the cost of human error is costing businesses in the US and the UK £315 per employee per year or 18 billion dollars for each economy.
If you add the costs of errors to data entry speed and direct costs, the costs of manual document processing continue to rise. So too will, the implications of those errors.
Human error means that 12.5% of invoices processed manually require some sort of rework.
Indirect costs are harder to quantify than direct costs, though the rework percentage alone shows that significant numbers of hours are needed each month to correct avoidable errors.
Hidden costs of manual data entry
All of the emphasis so far has been on the time and effort needed to perform manual data entry. Though the costs of this are significant, they are not the only ones your business might incur from relying on manual processes to handle and process your documents.
Slow or incorrect manual data entry can lead to negative knock-on effects such as:
- Fees for late payments
- Unclaimed rewards for missing early payments
- Cash flow issues
- Inefficiencies in employee changeovers
- Poor vendor relationships
- Lower potential for business growth
Such costs are the hardest of all to quantify, and the impact is often felt through the long-term effect on your reputation. This affects both the staff who work for you and the clients and vendors who deal with you.
The estimated TRUE cost of manual data entry
For every business, the true cost of manual data entry is going to be different. When analyzing just how much manual data entry is costing your business, we strongly suggest that you consider the bigger picture. The direct cost in dollars, the impact of human error, the cost of delay and bad data and arguably, most importantly, the hidden costs and impact it can have on your customer relationships.
Let's sum up
We think manual data entry has some major drawbacks. It burdens you with direct, indirect and hidden costs, leading to a negative financial impact, as well as to a dent in customer and staff satisfaction. But just because 90% of data entry still happens manually, it doesn't need to be that way for your business.
What's the solution?
The quickest and most effective way to reduce the high costs of manual data entry in your organization is to automate.
The key is to map key processes, find inefficiencies and use technology to automate these time consuming manual processes. Automation requires business choices to be made, and the key to this change, of course, is connecting your business systems
Shipamax gives you an automated way to extract, store and sync data from your invoices and documents so that you can cut out the inefficiencies associated with human data processing.
As a specialist automation solution built for logistics teams, we understand the complexities associated with shipping workflows and craft simple-to-use tools that help manage these. Our Exception Manager is a simple and intuitive ticketing system that tells users if a document could not be sent into their TMS / ERP system and why.
With Shipamax there’s no need for staff to deal with costly labour-intensive manual tasks which can often lead to data input errors and more often than not, prove to be the main source of pain for many back-office logistics teams.
We help the supply chain organizations like yours with a plug-and-play AI data extraction platform that saves you time and money. Get in touch for a free demo today.