Manufacturing · Packaging
A surcharge lag was never passed into customer contracts.
This marketing & margin audit surfaced $79k in recurring annual margin in a Manufacturing business, evidenced, senior reviewed, and delivered in 7 days.
The business
A corrugated packaging manufacturer supplied customers on contracts that set pricing, while its own input costs, particularly resin, board and energy, moved with volatile commodity and utility markets. Surcharge mechanisms existed to pass rising costs through, but they were applied slowly and inconsistently, so how far contract pricing lagged real input costs was never systematically tracked.
What triggered the audit
Contract margin was eroding despite stable volumes, the classic signature of input costs outrunning the pricing that’s meant to cover them. The audit compared the movement in resin, board and energy costs against the surcharges actually passed into contracts, testing how far pricing had fallen behind.
What the audit found
Contract pricing had fallen well behind rising input costs because the surcharge mechanism lagged. Resin, board and energy costs had climbed through volatile markets, but the pass through surcharges were applied late, negotiated inconsistently, and often absorbed rather than enforced, so contracts were running on pricing that no longer reflected what production actually cost. Every month the lag persisted, margin eroded on volume that looked perfectly healthy, and because the erosion was spread thinly across many contracts and buried in commodity noise, no one had quantified it. The gap between input cost movement and the surcharges genuinely passed through amounted to roughly $79k a year of contract margin quietly given up.
What we changed
Rebuilt the link between input cost movement and contract surcharges, so resin, board and energy rises pass through promptly and consistently.
Enforced the surcharge mechanisms that had been absorbed or negotiated away, recovering the margin the lag had steadily cost.
Introduced an indexed pass through tied to published commodity and energy benchmarks, removing the lag at its source rather than negotiating it each time.
Made contract margin against live input costs a monitored metric, so pricing can’t silently fall behind volatile costs again.
The result
The published chart shows contract margin against live input costs rising from 9% to 16%, a 7 percentage point increase. The published material does not state the effective date of each price change or the period over which recovered margin was measured. $79k a year of contract margin recovered by closing the lag between input costs and pricing, an annual figure equal to 13× the $5,950 Audit + Sprint fee. For any manufacturer on cost plus or contract pricing, the surcharge lag is the leak: when pass throughs are slow or absorbed, margin erodes on perfectly healthy volume, buried in commodity noise. If your pricing trails resin and energy moves, you’re giving up margin every month. A fixed fee audit quantifies the gap in days and installs an indexed pass through that keeps pricing current.
From kickoff to signed off findings: 7 days.
What the client said
$79k a year found in 7 days
Contract margin vs live input costs: 9% → 16%
“Volume was stable and contract margin kept eroding. Cristian compared resin, board and energy cost movements against the surcharges we actually passed through, and the lag was costing us every month. An indexed pass through fixed it.”
Cristian BragauSenior Auditor · signed this audit off