The Profit Leak Library - Where industrial distributors leak profit.
Start with five detailed guides, then explore 41 diagnostic topics across pricing, purchasing, inventory, sales, and operations. Each shows what to look for, which records to bring, and how to check the issue with your team.
Distribution businesses rarely lose profitability to one mistake. Margin goes a few basis points at a time: a price not updated when cost rose, freight not passed through, a rebate not claimed, a quote nobody followed up on. Across thousands of SKUs and transactions, it adds up. This library is built to help you find where.
Start here
Five full guides, with the 30-day test and the math.
These guides include worked examples and an extended test. The rest of the library contains shorter diagnostic notes with symptoms, required records, and an initial check.
- Leak 01Uncontrolled quote discountingSalespeople discount quotes without the discount buying enough extra win probability to justify the margin given away. Thousands of individually reasonable decisions add up.Read the guide →
- Leak 02Cost increases not reaching customer pricesA supplier raises cost. The customer price stays where it was. Margin on that item quietly compresses until someone notices, often a year later.Read the guide →
- Leak 08Freight recovery leakageYou pay the carrier $100 and bill the customer $60, or nothing. Across every shipment in a year, the gap is often a six-figure line that never appears on any report.Read the guide →
- Leak 14Missed manufacturer rebatesRebate agreements live in a filing cabinet. Purchases live in the ERP. The money you earned but never claimed lives nowhere, and it is often the largest single leak on this list.Read the guide →
- Leak 27Quotes that are never followed upA quote goes out. Nothing happens. Nobody calls, because the quote is not in anyone’s queue. The customer bought from whoever called.Read the guide →
Explore by where the money disappears
What’s happening in your business?
All 41 profit leaks, by family
Pricing & Margin
Prices that drift below where they should be: discounts, unpassed cost increases, expired specials, and overrides.
- Leak 01Full guideUncontrolled quote discountingSalespeople discount quotes without the discount buying enough extra win probability to justify the margin given away. Thousands of individually reasonable decisions add up.Impact: Gross margin
- Leak 02Full guideCost increases not reaching customer pricesA supplier raises cost. The customer price stays where it was. Margin on that item quietly compresses until someone notices, often a year later.Impact: Gross margin
- Leak 03Diagnostic noteExpired customer-specific pricingA special price was agreed for a project, a period, or a volume commitment. The project ended and the price stayed. Nobody owns the expiry.Impact: Gross margin
- Leak 04Diagnostic noteInconsistent pricing across similar customersTwo customers of the same size, buying the same item in the same quantity, pay prices that differ by 20%. Not by design. By accumulation.Impact: Gross margin
- Leak 05Diagnostic notePrice overrides without adequate controlsAnyone with order-entry access can change a price, and nothing records why. The override rate is the leak, and it is usually unmeasured.Impact: Gross margin
- Leak 06Diagnostic noteSmall orders priced below their cost-to-serveA $40 order with $12 of gross profit costs $25 to pick, pack, invoice, and deliver. Multiply by thousands of orders a year.Impact: EBITDA
- Leak 07Diagnostic notePoor handling of manufacturer price increasesThe increase notice arrives sixty days ahead. Nobody buys ahead, the cost file updates late, and customers are told after the fact. Each step leaves money on the table.Impact: Gross margin
Freight & Cost-to-Serve
Money spent delivering and handling orders that the price never recovered.
- Leak 08Full guideFreight recovery leakageYou pay the carrier $100 and bill the customer $60, or nothing. Across every shipment in a year, the gap is often a six-figure line that never appears on any report.Impact: Gross margin
- Leak 09Diagnostic noteUnprofitable emergency deliveriesA driver spends two hours delivering a $90 part because the customer’s line is down. It was the right call once. It is now a habit nobody prices.Impact: EBITDA
- Leak 10Diagnostic noteExcessive split shipmentsOne order, three boxes, three carrier charges, one freight charge to the customer. Backorders and branch stocking decide it, not anyone in particular.Impact: EBITDA
- Leak 11Diagnostic noteExpediting costs not passed throughThe customer needs it Friday. Purchasing pays a supplier expedite fee and overnight freight. The sales order still shows the standard price and ground freight.Impact: Gross margin
- Leak 12Diagnostic noteExcessive customer-specific handlingCustom labels, kitting, special packaging, portal data entry, certs with every shipment. Real service, real labor, and usually free.Impact: EBITDA
- Leak 13Diagnostic noteLow-value orders below economic minimumA minimum exists on paper. A third of orders are below it. Each one is handled, delivered, and invoiced at a loss.Impact: EBITDA
Suppliers & Procurement
Rebates, breaks, returns, and terms you negotiated and never fully collected.
- Leak 14Full guideMissed manufacturer rebatesRebate agreements live in a filing cabinet. Purchases live in the ERP. The money you earned but never claimed lives nowhere, and it is often the largest single leak on this list.Impact: Gross profit
- Leak 15Diagnostic noteMissed volume discount thresholdsBuying 480 units at the 100-unit price when 500 would have earned the next break. Or buying 500 units of something that does not move to get the break. Both cost money.Impact: Gross profit
- Leak 16Diagnostic noteUnclaimed vendor returnsMany suppliers allow an annual return of slow stock, often a percentage of purchases. The window passes. The stock stays on the shelf.Impact: Working capital
- Leak 17Diagnostic notePoor supplier consolidationSix suppliers for one category, none reaching a volume tier, each shipping under the freight minimum. The spread was never decided. It accumulated.Impact: Purchasing economics
- Leak 18Diagnostic noteBuying the same product at inconsistent costsBranch A pays $14.20. Branch B pays $15.60 for the same item from the same supplier. Or the invoice says $15.60 and the PO said $14.20, and nobody checked.Impact: Gross margin
- Leak 19Diagnostic noteSupplier terms not being capturedA 2% discount for paying in 10 days is a 36% annualized return. Paying on day 30 anyway, or paying on day 12 and missing it, throws that away.Impact: Cash / EBITDA
Inventory & Working Capital
Cash sitting on shelves in the wrong items, in the wrong branches, or in returns nobody resolved.
- Leak 20Diagnostic noteSlow-moving inventoryStock that turns once every three years ties up cash, takes space, and eventually becomes dead. The ERP already knows which items. Nobody has asked it.Impact: Working capital
- Leak 21Diagnostic noteDead and obsolete inventoryInventory with no demand and no prospect of demand. It is on the balance sheet at cost, and it will never be worth that again.Impact: Working capital
- Leak 22Diagnostic noteExcess safety stockSafety stock set once, by feel, for every item. It protects against a stockout that stopped being likely years ago and ties up cash doing it.Impact: Working capital
- Leak 23Diagnostic noteStockouts on high-value SKUsThe fast, high-margin item is out again. The customer buys elsewhere, and the sale is never recorded because it never happened.Impact: Revenue / margin
- Leak 24Diagnostic noteInventory duplicated across branchesFive branches each hold three months of a slow item. The company holds fifteen months. Each branch manager is being sensible.Impact: Working capital
- Leak 25Diagnostic notePoor inventory transfer decisionsStock shipped between branches to cover a shortage, then shipped back when the shortage is over. Freight both ways, and no one is counting.Impact: Freight / inventory
- Leak 26Diagnostic noteReturns sitting unresolvedA pallet of returns in the corner of the warehouse. Some restockable, some for the supplier, some scrap. All of it counted as nothing, or as full value, depending on the day.Impact: Working capital
Sales & Quoting
Quotes that stall, customers that fade, and effort spent where it does not convert.
- Leak 27Full guideQuotes that are never followed upA quote goes out. Nothing happens. Nobody calls, because the quote is not in anyone’s queue. The customer bought from whoever called.Impact: Revenue
- Leak 28Diagnostic noteSlow quote responseThe RFQ arrives at 9 a.m. The quote goes out two days later, after a supplier price check and a cross-reference hunt. The customer decided yesterday.Impact: Win rate
- Leak 29Diagnostic noteHigh-value quotes receiving inadequate attentionA $40,000 project quote gets the same fifteen minutes as a $400 stock quote, because it arrived in the same inbox on the same busy morning.Impact: Revenue
- Leak 30Diagnostic noteLow-probability quotes consuming excessive laborA customer sends thirty RFQs a quarter and buys twice. Each RFQ takes an hour. Your quote desk is their free pricing service.Impact: EBITDA
- Leak 31Diagnostic noteCustomers buying only one product categoryA good customer buys bearings from you and everything else from someone else. They are one supplier consolidation away from leaving, and one conversation away from doubling.Impact: Revenue / retention
- Leak 32Diagnostic noteDormant customers going unnoticedA customer who bought every month for six years stopped in March. It is now September. Nobody called, because no report said so.Impact: Revenue
- Leak 33Diagnostic noteCustomer and product churn hidden inside aggregate revenueRevenue is up 3%. Underneath, twenty accounts are shrinking, five are gone, and two big wins covered it all. The 3% hides a problem that will show up next year.Impact: Revenue
Order-to-Cash & Operations
Re-keying, relaying, and reworking orders that should have flowed through once.
- Leak 34Diagnostic noteManual order-entry reworkA customer PO arrives as a PDF. Someone types it into the ERP, checks it against the quote, fixes the part numbers, and emails an acknowledgement. Fifteen minutes, forty times a day.Impact: Labor / errors
- Leak 35Diagnostic noteBackorder communication overheadEvery backordered line generates calls: customer to CSR, CSR to purchasing, purchasing to supplier, and back. The information exists. It just is not where anyone can see it.Impact: Labor
- Leak 36Diagnostic notePreventable order errors and creditsWrong item, wrong quantity, wrong price, wrong address. Each error costs a credit, a return, a reship, and a customer’s patience. The reason codes, if they exist, tell you exactly where.Impact: EBITDA
- Leak 37Diagnostic noteInvoice disputes caused by pricing and order errorsThe invoice price does not match the quote. The customer short-pays. AR chases, CSR investigates, pricing corrects, a credit is issued. Sixty days later the cash arrives.Impact: Cash / labor
- Leak 38Diagnostic noteExcessive manual exception handlingHalf the day goes to exceptions: the address that does not validate, the item that needs a substitute, the credit hold that needs a call. Most of them are the same exception, repeated.Impact: Labor
Data & Product Information
Duplicate and incomplete records that make every other leak harder to see.
- Leak 39Diagnostic noteDuplicate customer and product recordsAcme Mfg, ACME Manufacturing, and Acme Manufacturing Inc. Three records, three price files, three credit limits, and a sales report that shows none of them as your biggest customer.Impact: System-wide
- Leak 40Diagnostic notePoor substitute and cross-reference dataThe customer asks for a competitor’s part number. The rep asks the product manager, who checks a catalog, who calls the supplier. Two days later the customer has bought it elsewhere.Impact: Revenue / labor
- Leak 41Diagnostic noteIncomplete product and customer master dataItems with no weight, no product class, no supplier part number. Customers with no segment, no terms, no default ship-to. Every automated decision downstream falls back to a guess or a person.Impact: System-wide
How every page is built
Each leak answers the same four questions in the same order: does this happen in our business, how much could it be costing us, how can we prove it with our own data, and what should we do about it. Use the worked calculations to size the issue, then choose a practical fix: a pricing rule, an owner, a process change, or a tool that keeps the check running.
Bring the guide to the person closest to the work. Their knowledge of the customers, products, and exceptions makes the first check useful.
Found something worth chasing?
A pricing discrepancy may suit the 10-Day Pricing & Cost Check. A quote backlog, an order-entry bottleneck, or another operational issue can be scoped directly. Start with what you found, who owns it, and the result you want.
Looking for the earlier manufacturing-software articles?
The legacy archive covers our earlier research on how industrial teams evaluate and buy manufacturing software.
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