From 20% to 70% gross margin

The problem

The company processed supplier invoices for independent restaurants and pulled out the line items, so restaurants could track costs by product and supplier. In March 2016, processing cost $1.67 per invoice. Line-item extraction cost another $1.67 and took 24 hours, so it wasn't offered to every customer yet. An invoice with line items cost $3.34 to process, all of what it brought in. Gross margin sat near 20%.

The root cause

Every line item was typed by hand, twice. Two processors each extracted the same invoice, a senior processor checked every line, and the batch was imported by hand. Product names and units were re-keyed for vendors the system already knew. Slow internet at the offshore team meant invoices moved in batches of 25 to 200, and only one person on the day shift was trained to verify them. Queues built up and a 24-hour lag became normal.

What we did

A one-page improvement plan put a cost on every step and set targets for extraction: $0.80 per invoice and a 4-hour turnaround. We built extraction into the app. The database already knew each vendor's products and units, so the app filled those fields and checked the extraction itself. A processor typed 3 fields instead of a whole invoice, and the manual check went away.

With no transit time, there was no reason to hold invoices, so they moved one at a time, first in, first out. We trained the night shift to verify, so two shifts worked the queue. Labor per invoice fell by two-thirds, and a second outsourced team and 3 of 5 US contractors were wound down. Extraction went live in July 2016, and cost per invoice was tracked for 90 days after.