A company's board dismissed a supplier's three-cent-per-bag discount until the math was shown: 100 semi-trucks daily, 22 pallets each, 100 bags per pallet. That tiny saving generated $5 million annually and helped drive a $25 million exit. Small operational efficiencies compound at scale.
They were sitting in a board meeting one day and they wanted to change the bags. They didn't like the bagging company he was buying the bags from. They didn't like the label, the way they were being printed. They wanted to change it. And they asked him, said, why did you choose this company? Before we make this transformation over here, it's going to cost us a little more money, but why did you go with this company? He said, because they guaranteed me a discount on volume, and that discount equated to 3 cents a bag. I said, are you kidding me? You get all that for 3 cents a bag? And he said, you do the math. You're running 100 semis a day. There's 22 pallets per semi. There's 100 bags per pallet. I can't do the math, but that's a shitload of bags going out every day, every week, every month, every year. And at 3 cents a bag It was a bunch. You know what his margins were? His margin, his goal, 10 cents a bag profit. And if he could earn 3 cents just on the bagging itself, then he didn't have to worry about the other 7 cents it took her. All he did was make 10 cents per bag, across the board, profit, which equated to $5 million a year profit, which equated to a $25 million sale. Simplicity, systems, ensures success. Don't overthink it.
