Financial Risk of Long-Term Inventory Holding

What began as a routine pricing audit uncovered systemic margin loss and customer overcharges due to outdated and inconsistent price break logic. I designed a transparent pricing system that empowered all sides of the supply chain to make smarter purchasing decisions and enabling real-time collaboration between procurement and finance.

Situation

A major industrial supplier was facing growing frustration from its largest customer due to recurring pricing discrepancies and inconsistent application of quantity-based discounts. The supplier had historically used vendor-provided price breaks to establish customer pricing tiers. However, these assumptions were not grounded in actual purchasing behavior, nor were they regularly reviewed against evolving minimum order quantities (MOQs), consumption trends, or discount eligibility. As a result, some SKUs were being sold at inflated prices causing over-charges and eroding customer trust, while others were priced too aggressively, leading to margin erosion for the supplier.

Internally, the third-party supplier had no centralized mechanism to validate vendor discounts against real-time ordering behavior, nor a standard process for offering bulk pricing incentives that could also protect margins. Inventory commitments varied widely across business units, and there was no clear consensus on how to weigh financial risk between 6-month vs. 12-month stockholding strategies—especially for items moving between Vendor-Managed Inventory (VMI) and Vendor-On-Invoice (VOI) programs.

To make matters more complicated, senior customer stakeholders demanded proof that price breaks were being applied fairly and competitively. The supplier needed to not only correct the discrepancies but also defend its pricing logic with benchmark data, dynamic modeling, and cross-functional buy-in. What began as a simple price list audit quickly evolved into a broader initiative to overhaul pricing strategy, reduce conflict, and strengthen forecasting.

Task

I was tasked with developing a transparent and scalable pricing model that could address widespread inconsistencies between vendor agreements and customer billing. The model needed to validate vendor pricing tiers, enforce minimum order quantities, and align customer-facing prices with actual usage patterns and forecasted demand. It also had to protect gross margin while providing flexibility for varying procurement strategies, especially between vendor-managed (VMI) and usage-based (VOI) inventory models.

Beyond spreadsheet analysis, I was responsible for creating tools that would simulate financial trade-offs, including the impact of holding 6 versus 12 months of inventory. The solution also needed to minimize billing disputes, enable scenario testing across plants, and provide data transparency through Power BI dashboards. I was further tasked with conducting a benchmarking analysis across the top 60% of annual customer spend to validate vendor selection, confirm the most competitive long-term pricing tiers, and build cross-functional confidence in the proposed pricing strategy.

Action

I launched the project with a detailed audit of over 200 part numbers across multiple suppliers. To validate pricing logic and regain stakeholder confidence, I performed a benchmarking analysis on the top 60% of annual spend. This allowed me to focus on the most financially impactful SKUs and provided data-backed insights to address customer management’s concerns about pricing transparency.

In addition, I also:

Reconciled vendor price lists and quantity breaks with actual order volumes
Identified discrepancies where vendor discounts were applied incorrectly
Developed a dynamic Excel-based pricing matrix that:
- Forecasted spend by SKU and supplier based on historical consumption patterns.
- Recommended optimal price break tiers aligned with forecasted demand.
- Modeled 6-month vs. 12-month holding cost strategies for margin recovery and cash flow visibility.
Simulated procurement risk scenarios, enabling toggling between VMI (supplier-owned) and VOI (customer-invoiced) paths to identify the most financially advantageous option.
Presented tailored cost strategies to site-level decision-makers, including manufacturing managers and finance controllers, with supporting ROI analysis to guide procurement.
Partnered with engineering and IT to integrate forecast-based pricing calculators into the customer-facing Power BI dashboard, enabling real-time scenario previews for the team.
Drove strategic vendor alignment by validating which suppliers offered the best long-term ROI at committed volume levels—enabling smarter, more sustainable purchasing strategies.

Result

This pricing reengineering initiative delivered measurable financial gains and long-term operational improvements. Over $100K in pricing discrepancies were identified and corrected, directly recovering lost margin—particularly from low-volume and high-risk SKUs. Chronic overcharges were resolved and communicated, which restored trust and significantly reduced invoice disputes with the customer.

The initiative also fostered stronger collaboration between finance, operations, and procurement teams by providing clear visibility into the pricing logic and its impact. Updated forecasting models improved both budgeting accuracy and strategic planning. Procurement leaders were empowered with a dynamic tool that allowed them to toggle between quantity break scenarios, driving smarter negotiations and purchasing flexibility. The company successfully standardized its pricing strategy across multiple business units, reducing variability and protecting not only margins, but their integrity.

Additionally, by embedding interactive forecasting logic into customer dashboards, stakeholders could now simulate real-time price outcomes based on stocking strategies. Ultimately, the project validated preferred vendors that offered the highest ROI for long-term commitments, maximizing value while minimizing financial risk.

Key Skills

Benchmarking & Spend Analysis (Top 60% by financial impact)
Vendor Pricing Strategy & MOQ Validation
Financial Modeling (Inventory vs. Margin Trade-offs)
Risk-Based Procurement & Cost Avoidance
Excel Automation & Dynamic Matrix Design
Power BI Dashboard Integration & User Interactivity
Customer Relationship Management & Trust Recovery
Cross-Functional Stakeholder Engagement (Finance, Ops, IT)

Disclaimer: The company name and proprietary business information have been intentionally omitted from this case study. All details are presented strictly for academic, professional, and educational purposes only. The solutions, data representations, and outcomes described are shared to illustrate process improvement methodologies, technical skills, and strategic problem-solving, not to disclose or represent any confidential or proprietary information.