Improving Margins at Summit Industrial Supply

Summit Industrial Supply is a specialty industrial distributor headquartered in San Antonio, serving manufacturing and construction companies across South and Central Texas. Founded by Tom Brennan in 2004, the company had grown to $48M in annual revenue, three warehouse locations, and 85 employees — but profitability had been declining for three consecutive years.

Revenue was up 12% year-over-year, yet operating margin had fallen from 11% to just over 8%. The founder and his leadership team could not explain why. They had limited visibility into profitability by customer, product line, or warehouse. Pricing decisions were decentralized and often reactive — driven by competitive pressure rather than cost and value analysis.

Inventory was another pain point. Stock levels were based on rules of thumb rather than data, leading to excess inventory on slow-moving items and stockouts on high-demand products. Freight costs were rising, and the warehouse team was struggling to keep up with order volume during peak construction seasons.

The CFO had recently joined from a larger distributor and recognized that Summit lacked the management reporting infrastructure to run a business of this complexity. The leadership team needed financial visibility, pricing discipline, and operational improvements — not another sales push.

Solvane began with a financial and operational diagnostic spanning four weeks. We analyzed three years of P&L data by product category, customer segment, warehouse, and sales territory. We conducted ride-alongs with sales reps, shadowed warehouse operations, and interviewed customers who had recently churned to understand where value was being lost.

The diagnostic revealed that Summit's pricing was largely cost-plus with inconsistent discounting authority. Sales reps had wide latitude to negotiate, and there was no systematic analysis of which customers and products were actually profitable after accounting for freight, handling, and service costs. Inventory management relied on legacy reorder points that had not been updated as product mix shifted toward higher-value, lower-volume specialty items.

We worked with the CFO and VP of Sales to build a customer and product profitability model — the first time Summit had visibility into true margin by account. The analysis identified that 22% of revenue came from customers generating below-breakeven margins, primarily due to excessive small-order freight costs and outdated contract pricing.

Over eight weeks, we redesigned Summit's pricing strategy. We implemented tiered pricing by customer segment, established discount approval thresholds tied to margin floors, and created a quarterly pricing review process for top accounts. We also renegotiated freight contracts and redesigned the warehouse pick-and-pack workflow to reduce cost per order on small shipments.

In parallel, we built a leadership dashboard with twelve KPIs updated weekly: gross margin by category, inventory turns, days sales outstanding, order fill rate, cost per shipment, revenue per sales rep, customer retention rate, and others. We established a weekly 45-minute leadership meeting with a fixed agenda reviewing these metrics and assigning corrective actions.

The final phase focused on embedding the new discipline into the organization. We trained sales managers on margin-based selling, updated compensation discussions to include profitability metrics alongside revenue targets, and documented the forecasting process so the leadership team could project performance with confidence.

• Operating margin — Improved from 8.2% to 14.1% over 18 months, adding approximately $2.1M in annual operating profit
• Gross margin — Increased from 31% to 37% through pricing optimization and freight cost reduction
• Inventory turns — Improved from 4.2x to 5.8x annually, freeing $1.4M in working capital
• Days sales outstanding — Reduced from 52 to 41 days through tightened collections process
• Low-margin accounts — Repriced or restructured 34 of 47 below-breakeven customer relationships
• Forecast accuracy — Monthly revenue forecast variance reduced from +/- 18% to +/- 6%
• Sales team behavior — 89% of sales reps reported the new pricing tools helped them negotiate more confidently

The founder credited the engagement with changing how the leadership team thought about growth. "We stopped chasing revenue for its own sake," he said, "and started growing profitably. That shift is worth more than any single number on this list."