This eBook explores hidden areas of supply chain operations that can eat into a mid-market company’s net margins. Today’s combination of increasingly complex supply chain operations and the availability of more accessible/affordable technology means mid-market companies can and should take a deeper look into these areas as a means to maximize margins.

1. eBook
Avoiding Hidden Margin Erosion in Mid-Market
Supply Chain Operations

2. 2
Avoiding Hidden Margin Erosion in Mid-Market Supply Chain Operations
Content
Introduction 3
Planning and Forecasting Areas 4
Inbound and Receiving Areas 5
Evaluation and Inspection Areas 7
Accounts Payable Areas 8
Conclusion 9

3. 3
Avoiding Hidden Margin Erosion in Mid-Market Supply Chain Operations
According to the Middle Market Indicator (MMI), 85 % of
middle market executives cite the ability to maintain
margins as a somewhat to highly challenging issue. The
MMI quarterly business performance update and economic
outlook survey indicates that quarter after quarter, margin
management is ranked as a top concern among middle
market companies.1
This should be no surprise, considering mid-market
companies are squeezed between large and small cap
businesses: they must streamline product manufacturing
and delivery operations as much as larger companies, yet
be as nimble as smaller companies. As a result, they have a
unique set of challenges and makes margin management
even more critical.
This eBook explores hidden areas of supply chain
operations that can eat into a mid-market company’s net
margins. Identifying and addressing these supply chain
issues has historically been a challenge as it required
diverting resources and capital away from other critical
areas.Today’s combination of increasingly complex supply
chain operations and the availability of more accessible/
affordable technology, means mid-market companies can
and should take a deeper look into these areas as a means
to maximize margins.
Introduction

4. 4
Avoiding Hidden Margin Erosion in Mid-Market Supply Chain Operations
Mid-market companies often must focus so tightly on delivering quality products and services to their customers that investing resources
into analyzing and fixing what appear to be minor supply chain issues might not seem practical or even feasible. It’s true that each of these
less obvious areas does not cause significant margin erosion on its own; however, many mid-market companies can suffer from a number
of combinations of these issues.When evaluated in that context, the impact on profitability can be noteworthy.
Planning and Forecasting Areas
Landed cost vs. Itemcost Evaluating materials based on landed cost instead of the item’s unit cost is a growing trend in
planning and procurement. Materials planning based on landed cost allows companies to factor transportation and logistics
costs into the contract item cost for more visibility into actual materials expense.
Forecasting Forecasting in general is also an area that can impact margins. Without reliable forecasting processes and tools,
a company can easily order the wrong quantity of materials.“Projecting heavy”unnecessarily consumes warehouse space,
increases the risk of waste or loss, raises taxes, and impacts inventory turns.“Projecting light”drives up procurement and
transportation costs, as well as increases the risk of materials run-out. Fortunately, there are a number of low-investment
ways to increase accuracy, such as:
• Increasing collaboration with customers to gauge future demand
• Integrating marketing plans and projections to prepare for order spikes or lulls
• Increasing forecast sharing and communication with suppliers via a collaboration
portal or other automated workflow system
Hidden areas that can eat into mid-market net margins
2016
1
http://www.scdigest.com/assets/on_target/13-10-31-1.php?cid=7534

5. 5
Avoiding Hidden Margin Erosion in Mid-Market Supply Chain Operations
Inbound and Receiving Areas
Ordering and receiving inefficiencies Ordering and
receiving inefficiencies, such as a lack of automation
and collaboration in critical areas, play a quiet, yet
potentially large contribution to reduced profits.
Automating workflow tasks between buyers and
suppliers—such as sending, receiving, acknowledging,
and approving purchase orders—can enhance
processing speeds by more than 80% while reducing
costs by approximately 83%.2
But the benefits go beyond the initial savings.
Automation also increases purchase order throughput
and allows resources to focus efforts on quickly
resolving issues that require human attention.
Automated collaboration software helps ensure
required order quantities are current with real-time
buyer and supplier notifications. Configurable
workflow helps to ensure compliance so what is
shipped always matches what is ordered.
Besides fees and penalties, there are alternative and
perhaps more subtle ways that missing carrier and delivery
windows can affect margins. Shipments that arrive at one
part of the supply chain late often require expediting to
make it on time to the next stage—which not only adds
cost, but can adversely affect the entire build-to-deliver
cycle. Expediting also increases the chances of selecting a
higher carrier rate or sending the product to the wrong
location, both of which quickly eat into margins.
Automation is not only beneficial for increasing margin
in current operations, it reduces the cost of scaling as
the business grows. While studies continue to show
that mid-market companies are behind the adoption
curve in procurement automation, lower investment
solutions are now available that can deliver ROI in just
a few months.
Today’s supply chain automation solutions give
mid-market businesses the automation and visibility they
need to nimbly collaborate with suppliers.With simpler
implementation and more user-friendly interfaces,
these solutions can consolidate product and order
communications to help minimize disputes as well
as empower planners to better forecast demand.
Automated Workflow Tasks
80%
83%
Enhanced
Processing Speeds
Reduced
Costs
2
TAKE Supply Chain, 5 Key Criteria for Setting the Right Level of Supply Chain Automation

6. 6
Avoiding Hidden Margin Erosion in Mid-Market Supply Chain Operations
Inbound and Receiving Areas (cont)
Carrier and delivery windows According to
Refrigerated Transport,“Supply chain compliance is
now a vital component of logistics transactions
and supplier relationships. In 2014, access to visibility
and execution data will advance both supply chain
conformity and transparency to help minimize
and mitigate environmental, performance, process,
and intellectual property risks.”3
Requiring fixed materials delivery windows from
suppliers is a growing trend in supply chain management
that impacts margin on both the buyer and supplier side.
Over the past few years, improvements have been made
in receiving dock scheduling systems in an effort to help
warehouse managers and supply chain professionals
streamline operations and reduce unnecessary cost. As
a result, more companies now require dock reservations
for inbound orders, including financial penalties for
suppliers who deliver off-schedule.
For example, in 2010, Walmart joined other retailers in
imposing a penalty on suppliers that failed to deliver
products within the company’s prescribed four-day
window. Under the policy, suppliers whose products
arrive at Walmart before or after that period face a
three-percent penalty based on the cost of the goods.
Before the policy went into effect, Walmart requested
delivery within the four-day period, but suppliers had no
incentive to actually adhere to that schedule.4
Although it
was not the first to adopt this policy,Walmart’s status as
the world’s largest retailer prompted a domino effect that
continues to affect supply chains to this day…as late/early
delivery fees are now the norm for many industries.
The margin benefits of more tightly managing materials
delivery are numerous, especially as supply chains become
far more complex and synchronized. As alluded to earlier,
early and late deliveries can quickly drive up warehousing,
manufacturing, and inventory holding costs. Below the
surface, other costly occurrences, such as inventory
misplacement and theft, can also increase with
unexpected shipments.
Installing a functionally strong shipment collaboration
solution can help to reduce and/or eliminate these less
obvious/hidden logistics areas that eat into margin.These
types of solutions allow order fulfillment thresholds such
as delivery windows, order quantity, and carrier selection/
mode to be configured and validated prior to shipment
release. Advanced Shipment Notices (ASNs) and package/
container traceability are also typically included, along
with pre-formatted, compliant labeling to further reduce
receiving dock errors. As a result, all stakeholders across
the buy side and the supply side have real time visibility
for more accurate resource and materials planning
through the rest of the supply chain.
2014
! !
3
http://refrigeratedtransporter.com/carriers/five-trends-logistics-supply-chain-industry-forecast-2014
4
http://asq.org/qualitynews/qnt/execute/displaySetup?newsID=8082

7. 7
Avoiding Hidden Margin Erosion in Mid-Market Supply Chain Operations
Evaluation and Inspection Areas
Inefficient RMA and quality processes Often times,
RMA and quality are considered on the fringes of supply
chain and don’t receive the same level of scrutiny as,
for example, procurement or accounts payable. Yet
inefficiencies in these areas, usually in the form of
manual inventory updates and ineffective notification
and collaboration with stakeholders, can have a
significant impact on net margin in the form of errors
and delays. Inventory carrying costs, labor, and
customer satisfaction are just a few of the areas
impacted on the buy side of the supply chain.
Yet another threat to the mid-market company’s bottom
line are recalls.5
Even when inadequate supplier quality
control causes a recall, the host company is ultimately
the party that suffers. When a recall occurs, unplanned
reverse logistics costs for tracking the recalled items and
transporting all the recalled items from every end location
back to the manufacturer warehouse could cost more
than shipping those same items out the first time around.
In fact, warehousing and return shipping costs for
rejected materials alone can quickly eat into otherwise
healthy profits. Automating and aligning QA and RMA
processes can reduce unnecessary costs associated
with planning and procurement discrepancies, as
well as potential overpayment of invoices that reflect
rejected materials.

8. 8
Avoiding Hidden Margin Erosion in Mid-Market Supply Chain Operations
Accounts Payable Areas
LatepaymentfeesJust as late deliveries can incur small
but not incidental costs on each delivery, late payments
can also affect margins. Without proper automation
systems in place, companies have limited visibility into
invoices tied to various billing cycles, invoices that may
incur fees for late payment (and how much those fees
are), or how far each individual invoice has traveled
through the payment system.
Today’s solutions enable mid-market managers to group
invoices based on payment terms so those batches that are
approaching their due date can be flagged automatically,
without clerks sorting through them individually. Invoices
that meet three- or four-way match criteria are processed
for payment. Invoices not meeting pre-established rules
and criteria are sent to an exception queue for manual
handling.This increases the timeliness of payments as well
as expedites problem resolution.
Earlypaymentdiscountsasawaytoincreasemargin
One final hidden area of margin erosion is in the form of
forgone early payment discounts.This is also a product of
manual processes and poor collaboration. Often times,
however, AP automation solutions are equipped with a
dynamic discounting feature that allows companies to
place invoices with applicable discounts into a separate,
accelerated queue for faster processing and/or resolution.
2014
5
TAKE Supply Chain eBook, Hidden Transportation and Logistics Costs of Supplier Non-Compliance

9. 9
Avoiding Hidden Margin Erosion in Mid-Market Supply Chain Operations
In today’s increasingly competitive business environment,
mid-market companies must keep margin management
and supply chain efficiency at the top of the priority list.
There are a number of points in the supply chain lifecycle
where margins can be streamlined and improved, from
forecasting and planning to returns and billing. Each
of these points can be evaluated to determine where
improvements can occur.
In the not-so-distant past, mid-market companies might
have required an entire department to monitor, analyze,
and improve supply chain efficiency. Fortunately, that’s no
longer the case.The current array of available supply chain
management systems provide powerful, cost-effective
technology solutions that not only fit into any budget,
but can also help minimize or even eliminate many of the
most common margin killers.
A mid-market business uncovering the hidden
problems highlighted in this eBook might discover a
number of ways to improve margins—and the new
technology available today means that systematically
taking advantage of these opportunities is no longer
a Herculean undertaking.
Conclusion

10. 10
Avoiding Hidden Margin Erosion in Mid-Market Supply Chain Operations
6805 Capital of Texas Hwy | Austin, TX 78731 | T - 512 231 8191 | F - 512 231 0292 | W - takesupplychain.com
A division of TAKE Solutions, Inc. ©2014 TAKE Solutions, Inc.