How a Small Change in the Purchase Price Saved Company 1.2 Million

Background: This client was in the business of manufacturing automotive parts. Majority of the parts were made up of Steel where the price fluctuated quite a lot. Therefore, the purchasing department had to issue a purchase order to suppliers for a future period too. However, if the price decreased, Purchase order was amended retrospectively, and supplier had to issue a credit note

What We Did: As the volume of transactions was high, we listed down all the transactions for which there was an amendment to the price retrospectively.

Then we compared this amendment with the bills/credit note given by the supplier.

Results: When we completed this entire exercise, we found nine transactions where the benefit of the reduced pricing was not passed on to our client. We quantified the impact, and this came to around 1.2 Million rupees.