Leak 18 · Suppliers & Procurement - Buying the same product at inconsistent costs
Branch 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.
Diagnostic note. Symptoms, required records, an initial check, and possible fixes. This shorter note does not include a full worked example.
What is it?
Cost inconsistency has two sources. Different buyers or branches negotiating separately, so the company pays several prices for one item. And supplier invoices that do not match the PO price, which are approved because AP matches quantity but not price. Both put cost into inventory that should not be there, and both feed into customer prices built on cost.
- Family
- Suppliers & Procurement
- Primary owner
- Purchasing Manager
- Secondary owners
- Branch Managers, Controller
- Primary impact
- Gross margin
- Typical data source
- PO lines by item and branch, supplier invoices
- Detection difficulty
- 30-day measurability
Ask yourself
For the same item in the same month, do your branches or buyers pay the same cost?
Yes, partially, no, or don’t know. “Don’t know” is the most useful answer, because it points at the test below.
What does it look like?
Warning signs. None of these proves the leak exists. They tell you where to look.
- The same item and supplier with multiple unit costs in the same period.
- Invoice-to-PO price variances that are approved without review.
- Branches with their own supplier accounts and terms.
What data do I need?
The minimum viable set. Most of it is already in your ERP.
| Field |
|---|
| PO lines: item, supplier, branch, buyer, unit cost, date |
| Supplier invoice lines with unit cost |
| Agreed or contract cost, if any |
The initial check
Start with a small sample. Gathering the exports, agreements, or observations is separate from running the check; agree that work with the person who owns the records.
- 1Export last quarter’s PO lines for your top supplier.
- 2For each item, find the lowest and highest unit cost paid and the quantity at each.
- 3Sum (cost paid − lowest cost) × quantity across items.
Overpayment = Σ (unit cost paid − lowest unit cost paid for the same item in the period) × quantity
Then ask one question: Did the invoice price match the PO price, and would anyone have noticed if it did not?
How much could it be costing us?
A conservative range, not a headline. The goal is a number management can trust enough to investigate.
Annual overpayment versus best achieved cost × share attributable to inconsistency rather than legitimate differences
Common root causes
Fixes fall into three layers. Not every problem needs software, and almost none needs AI first.
- Process
- Decentralized buying without shared negotiated costs, and no price check at invoice matching.
- Data
- Item-supplier cost records are not maintained, so there is no agreed cost to match against.
- Technology
- Three-way match is configured for quantity only, or not at all.
What should we do?
Start with the simplest intervention that could solve it. Move down the list only if the one above is not enough.
Level 1
Visibility
A monthly cost-variance report by item and supplier across branches and buyers.
Level 2
Controls
Maintain agreed costs in the item-supplier record and enforce price matching at invoice.
Level 3
Workflow
Route invoice price variances above a tolerance to purchasing with the PO and agreement attached.
Where AI helps
- Reading supplier invoices and matching lines to POs when formats and part numbers vary.
Where AI probably doesn’t
Turning on price matching in the ERP is the first fix.
Before you call it a leak
- Cost differences can be legitimate: quantity breaks, dated price changes, freight-inclusive pricing. Check before disputing.
Think this might be happening in your business?
Turn the finding into a next step.
If the numbers say there is something there, send us what you found and we will help you decide whether it is worth a full investigation. No transaction files needed for that conversation.
Related leaks
- Leak 02 · PricingCost 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.
- Leak 07 · PricingPoor 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.
- Leak 17 · SuppliersPoor supplier consolidationSix suppliers for one category, none reaching a volume tier, each shipping under the freight minimum. The spread was never decided. It accumulated.
- Leak 39 · DataDuplicate 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.
Let’s start with one thing.
What would better performance look like?
Bring a result you want to improve, a symptom, or a workflow you already understand. You do not need to know the bottleneck yet. We’ll help choose what to investigate first.
No transaction files needed for the first conversation.