Author | Jerry Fujita
For manufacturers and distributors, the supply chain is the lifeline of business operations. However, hidden costs often erode profitability without clear visibility into where inefficiencies lie.
At CDH, we help manufacturing and distribution leaders uncover these hidden costs and implement financial strategies to drive greater profitability. Here are key areas to consider:
- Inventory Carrying Costs
Excess inventory ties up cash flow and increases costs for storage, insurance, and obsolescence. Conducting regular inventory analyses using an ERPA system and implementing just-in-time (JIT) strategies can reduce carrying costs while maintaining production continuity.
- Freight and Logistics Inefficiencies
Freight costs often fluctuate due to fuel prices and carrier surcharges. Reviewing shipping patterns, consolidating loads, and negotiating contracts with multiple carriers can lead to significant savings. Additionally, maintaining appropriate inventory levels helps reduce expedited shipping costs, such as those incurred through air freight.
- Vendor Payment Terms
Many companies miss opportunities to optimize working capital through strategic payment terms. Early payment discounts and negotiated extended terms both impact cash flow positively when managed proactively.
- Tax Implications of Supply Chain Decisions
Decisions such as where to warehouse inventory or which states goods transit through can trigger additional sales tax or income tax nexus. Strategic supply chain tax planning ensures compliance while minimizing tax liabilities.
- Poor Data Visibility
Without integrated financial and operational data, companies often lack clarity on true landed costs. Implementing ERP systems like Sage Intacct provides real-time insights for decision-making, cost control, and margin improvement.
Strategies to Drive Profitability
To mitigate hidden costs and maximize profitability:
✅ Perform a full supply chain cost analysis – beyond purchase price to include freight, taxes, duties, and overhead.
✅ Leverage technology for real-time visibility and automated cost allocation.
✅ Integrate tax strategy into supply chain planning to avoid unintended exposures.
✅ Engage cross-functional teams – finance, operations, and procurement – to align decisions with financial goals.
At CDH, our manufacturing and distribution specialists work with clients to uncover hidden costs and implement tailored financial strategies. Optimizing your supply chain is not just an operational task – it’s a strategic financial imperative to remain competitive in today’s market.
Ready to unlock hidden profitability in your supply chain?
Contact our Manufacturing and Distribution Advisory team to start your cost optimization journey today.