Order processing rarely grabs headlines, but it often determines whether a distributor protects margin or watches it slip away.
Inefficiencies leading up to fulfillment—waiting on pricing approvals, fixing picking errors, rekeying orders—consume time and resources. These friction points add up quickly, turning routine transactions into silent drains on profit.
Closing these gaps is key to preserving profitability. Here’s why:
Lost Time = Lost Margin
Slow, manual workflows drag profit down. According to frequently cited APQC’s Open Standards Benchmarking in Procurement, the median cost to process a purchase order in the U.S. ranges from $50 to $100. Multiply that by thousands of orders, and the impact becomes substantial. APQC also found that companies in the bottom quartile could take up to two days to process a single PO, often due to delays and errors. Each mistake adds labor costs and slows fulfillment, reducing productivity and inflating operational expenses.
Order Errors: Returns, Credits, and Rework
When the wrong SKU or quantity leaves the DC, margins fade. Even a 1% picking error rate can cost millions annually for a mid-size operation. Distributors also absorb freight on returns and spend administrative time logging credits, while customers quietly move their expenditure to a competitor that ships the correct product the first time.
Expedited Shipping and Workarounds
Missed cut-off times often force distributors to use premium freight—next-day air, same-day courier, or hotshot trucking—to get orders out the door. While these workarounds keep customers happy, they erode margin. Extra costs beyond the freight include overtime pay for warehouse staff, disruptions to picking schedules, and idle time while waiting for expedited carriers. Rush orders also can displace scheduled shipments, creating a domino effect. One-off saves drain profitability.
Inventory Imbalances
Stockouts and overstocks share a root cause: outdated, incomplete, or siloed data. Slow-moving stock and lost sales of items that aren’t available when customers need them cost distributors millions a year. Long lead times, fluctuating reliability, and demand variability amplify the problem. The fallout goes beyond carrying costs and missed revenue, however. It can result in emergency purchasing at unfavorable prices, strained relationships, and diminished customer trust.
Margin Leakage
Small pricing discrepancies can quietly erode profit over time. In fragmented systems, negotiated terms may not be applied correctly, and discount rules aren’t always consistent. These breakdowns add up. On the sales side, missed opportunities to recommend higher-value or better-fit products may further limit potential. The result is a slow but steady erosion of revenue that’s hard to detect without unified data and clear processes. Modern order management tools can close these gaps, ensuring accuracy, protecting margins, and capturing more value from every transaction.
Where AI Helps
McKinsey research shows that distributors who embed AI in operations can cut inventory 20% to 30% and trim logistics costs up to 20%. We’re seeing similar impacts in order management, where AI turns manual, error-prone processes into speed and accuracy advantages.
The following four priorities can help distributors shift from reactive firefighting to proactive, scalable order management. Each move addresses a pressure point, unlocking immediate and long-term improvements.
- Accelerate Order Capture and Approval
Before: Customer POs arrive in multiple formats, requiring hours of manual entry and increasing the risk of pricing or product errors.
After: AI-enabled order-capture processes clean orders instantly, apply customer-specific rules, and flag only true exceptions for review.
- Unify Systems for End-to-End Visibility
Before: Siloed ERP, CRM, and WMS systems delay critical information, forcing teams to chase updates and rework orders.
After: Integrated platforms give teams a real-time, shared view of orders, inventory, and customer activity, which enables faster, more accurate decision-making.
- Train for First-Time Accuracy
Before: Incomplete, complex, or unconventional orders trigger repeated back-and-forth with customers, slowing fulfillment and frustrating buyers.
After: Teams trained in the first time-right principles resolve irregularities immediately, supported by real-time data, system prompts and guided workflows to keep orders on track.
- Pinpoint and Eliminate Bottlenecks
Before: Order delays hide in manual touchpoints, with no clear data showing where processes stall.
After: AI-driven dashboards spotlight slowdowns by step, allowing leaders to target and resolve the exact points draining productivity.
Order management no longer must be business as usual, operating quietly in the background while profitability erodes through wasted effort and costly errors. With AI in place, every transaction presents an opportunity to deliver better service and protect your bottom line.
Keith Fatula, vice president of solutions engineering at DataXstream, has been in the software industry for over 30 years, with deep experience across wholesale distribution, retail, manufacturing, and consumer products. He spent a decade at SAP.