Bramvia — Business Central Experts

Your costs are up, your revenue held — and your margin fell. Here's where it actually went

Diesel hit a record $5.90/gallon in September 2026 and fuel surcharges are up ~300%. But cost inflation only explains part of a falling margin. The four leaks we find in almost every mid-market manufacturer's data — and how to quantify yours in dollars.

Short answer: if revenue held and margin fell, the input-cost surge explains part of it — and only part. Diesel set an all-time US record of $5.90 a gallon on 8 September 2026, crude averaged $91 a barrel in August, fuel surcharges are up roughly 300% and truckload rates about 15% year on year. Those are real and they hit every company. But the companies that lose the most margin in a cost surge are not the ones with the worst suppliers — they are the ones who cannot see which products, customers and orders are absorbing the increase. The four leaks we find in almost every mid-market manufacturer's data are: products that are now unprofitable and nobody repriced, cash frozen in material that hasn't moved in a year, the true cost of expediting, and rework that never gets costed. All four are measurable from data you already have. This article shows how to find them.

What's actually happening to your costs

The EIA's September outlook says this persists through 2026. So "wait for it to pass" is not a plan for this quarter.

Why the surge exposes problems it didn't create

A cost increase is a stress test. When margins were comfortable, a product priced three years ago on old freight assumptions still made money. At $5.90 diesel it doesn't — and nothing in your system tells you which ones flipped.

That is the pattern: the surge doesn't create the leak, it makes an existing blind spot expensive. Companies with per-product, per-customer cost visibility repriced in weeks. Companies without it discover the problem at year-end, in aggregate, when the margin is already gone.

The four leaks, and how to quantify each

1. Products and customers that now lose money. Gross margin on the invoice looks fine. Then subtract inbound freight on components, outbound freight to that customer's region, the rebate agreed in January, returns, and the discount the sales rep applies "because they always ask." We routinely find 5-15% of SKUs and 3-8% of customers contributing negative margin once everything is loaded.

How to measure it: pull 12-24 months of order lines with the actual landed cost and every deduction, and rank by contribution margin. If your system can't produce that, that itself is the finding.

2. Cash frozen in material. Inventory that hasn't moved in 12 months is cash you already spent, plus the space, the insurance and the handling. In a high-rate environment that carrying cost is no longer theoretical. 10-25% of inventory value is typical for the dead portion in companies that have never run the analysis.

How to measure it: value on hand versus consumption in the last 12 months, by item. Simple, and almost nobody does it monthly.

3. What expediting actually costs. Every rush order has a real price: premium freight, overtime, a machine changeover that broke the schedule, and the other order that shipped late because of it. Most companies book the premium freight and none of the rest. The number surprises people — and at current fuel prices, the premium-freight line alone is up sharply.

How to measure it: count expedited shipments per month, multiply by the freight delta, then add the schedule disruption. Even the crude version is a wake-up call.

4. Rework and scrap that never lands in the cost. Material consumed twice, labour spent twice, and a yield that the standard cost still assumes is what it was in 2022. If your standard costs haven't been reviewed since input prices moved, every quote you issue is built on fiction.

How to measure it: actual versus standard consumption per production order, over a year.

The management leak nobody puts in a spreadsheet

Two we see constantly, and neither is a technology problem:

Money spent on the wrong project. We worked with a US distributor that had spent roughly $2 million on an SAP integration it did not need — a system sized for a company several times larger, sold on a scope nobody challenged. That money is not recoverable. What is recoverable is the decision-making process that approved it: who signs off on a seven-figure system without an independent assessment of whether the requirement is real?

Staff turnover as a hidden cost. In the same company, high turnover meant the knowledge of how things actually worked left with people. Processes existed in heads, not in the system. Every departure cost re-learning, errors, and decisions made without context. It is a real cost line, and it never appears as one.

If you are reading this because your margin fell, put both on the list. They are usually bigger than the fuel surcharge.

What to do in the next 90 days

1. Rank by contribution margin, not gross margin. Products and customers, everything loaded. Reprice or exit the bottom.
2. Age your inventory and convert the dead portion to cash. It funds the rest of the work.
3. Put a dollar figure on expediting for one month. Share it with operations and sales in the same room.
4. Refresh standard costs against actual input prices. Every quote after that is at least honest.
5. Review freight terms and lanes. At these rates, consolidation and lane changes pay back faster than they did a year ago.
6. Ask what your system can't tell you. The questions it cannot answer are the map of where you're losing money.

How we help — without changing your ERP

We built a fixed-scope service for exactly this: you send an extract from your current system, whatever it is, and we use AI to analyze 12-24 months of your real data. In 10 working days you get the leaks quantified in dollars, ranked, with what it would take to close each one. It works on SAP, Epicor, Infor, NetSuite, Dynamics, QuickBooks plus spreadsheets — we do not need to know your system in advance, and we are not proposing you replace it. How the Profit Leak Audit works.

FAQ

Isn't this just what our accountant does? Your accountant reports what happened, accurately and in aggregate. This finds where it happened, at the level of SKU, customer, order and production run — which is where decisions get made.

Our data is messy. Everyone's is. Dirty data is part of the finding: duplicate items, three addresses per customer and abandoned part numbers tell you how the company actually operates.

Do we have to change ERP afterwards? No. Most of the fixes are pricing, purchasing and process decisions. If the analysis shows your system genuinely cannot give you the visibility you need, we'll say that — and it will be your call, with numbers.

How long until we see something? The first surprising figures appear in the free assessment, before any paid work.

Costs up and no clear answer on where the margin went? Free assessment, no commitment — first reply within one working day.

Bramvia · bramvia.net