Too often, the easy “analysis” of a profit problem is to say we just need to charge more. It’s a convenient narrative, especially in markets where customers are fighting for every penny.
If you’ve ever sat in an Operations or Finance meeting, you’ve probably heard one (or all) of these lines:
- “We don’t charge enough.”
- “We’re leaving money on the table.”
- “We can’t hit GM% goals because the price is too low.”
- “The customers don’t understand our value proposition.”
- “We discount too easily.”
And sometimes that’s true, but more often, price is the symptom, not the cause.
In large businesses, the real drivers of margin erosion usually live deep inside the cost structure: inefficiencies, unnecessary levels of bureaucracy, poor communications and workflow systems, systems gaps, supplier creep, or hidden operating costs that quietly pile up. These issues rarely show up in PowerPoints, Monthly Reports, or Board of Directors Presentations, but they absolutely show up in the P&L.
Based on years of experience in business acumen, we have identified five overlooked factors that might be eating away at your operating margin (EBITDA) long before a customer ever sees your price tag.
1. Operational Inefficiency
Even global leaders can lose money at scale through inefficiency. A single plant running 3% below capacity, a logistics network that’s not optimized, or a redundant approval process can cost millions.
Example: One large manufacturer uncovered that downtime during production changeovers was costing more than $8 million annually. A cross-functional “process sprint” reduced changeover time by 22%, instantly improving GM% without any price change.
2. Inventory Management
Inventory is often where profitability quietly hides. Carry too much, and you’re sitting on frozen capital and excess warehousing costs. Carry too little, and you’re burning sales and customer trust.
Example: A global consumer goods company reduced its safety stock by one week across three regions by improving demand forecasting accuracy. The result? Over $40 million in freed working capital and a noticeable uptick in operating margin, achieved entirely through better balance, not higher prices.
3. Vendor and Supplier Management
Vendor creep is a profit drain. Over time, supplier costs inflate, service levels erode, and “miscellaneous fees” become accepted as normal.
Example: A large healthcare organization consolidated 200+ suppliers down to 90 strategic partners with new SLAs tied to quality and delivery metrics. Procurement savings exceeded 6% year-over-year, and indirect COGS dropped by nearly $20 million.
4. Processes and Systems
Legacy systems and disconnected workflows quietly kill productivity. Large companies often have data, that is just trapped in silos that don’t talk to each other.
Example: A Fortune 100 technology company integrated finance, procurement, and supply chain data into a single analytics platform. The project took nine months but led to a 15% reduction in process time and a $30 million annual improvement in operating efficiency.
5. Breakage, Returns, and Service Delays
At scale, even a 0.5% increase in returns or service delays can have a material financial impact.
Example: A global logistics provider mapped its “hidden rework” costs, things like incomplete order data or failed first-time deliveries, and discovered $12 million in recoverable losses. Addressing root causes in customer onboarding and data quality reduced these costs by half within a year.
Summary
There are many other factors beyond these five that most organizations know are there but don’t know how to act on, such as unnecessary meetings, lack of accountability to goals, that are killing the margins.
When margin targets are missed, it’s tempting to point to price. But before you add another 2% to the list price, look inward. Operational waste, inefficiency, and outdated systems are often the real culprits.
Improving what’s inside the walls of your organization can unlock just as much, if not more, value than a price increase ever could.
Sometimes, it’s not that we don’t charge enough. It’s that we spend too much to deliver.
