A specialty chemicals distributor with 220 employees had a rule that any purchase over $1,000 needed the owner’s approval. It made sense in 2009, when they had 30 employees and $4 million in revenue. Last year they had $52 million in revenue and 4,100 purchase orders waiting in one person’s inbox.
Average approval time was 3.6 days. The owner was the bottleneck and he knew it. He just didn’t know how to loosen the rule without losing control of spending.
The real cost of a slow signature
We pulled a year of purchase orders and sorted them by size. The picture was almost comical.
- 78% of POs were under $2,500 and totaled just 6% of spend.
- Roughly 1,900 of them were routine consumables — gloves, solvents, packaging film.
- Fourteen POs accounted for 41% of total spend.
He was spending his attention on the small stuff and had almost none left for the fourteen orders that actually moved the business. Approval rules that don’t scale stop being controls and start being delays.
There was a hidden cost too. Buyers, trying to dodge the wait, were splitting orders — two $900 orders instead of one $1,800 order. Double freight, double receiving, and a supplier who noticed and started pricing accordingly. The rules were built for a company one-tenth the size, which is the classic pattern an ERP Consulting review uncovers first.
How they rebuilt the approval ladder
- Under $500: automatic, no approval, if the item is on the standard list. About 40% of transactions left the queue overnight.
- $500 to $5,000: buyer’s manager approves, 24-hour clock, escalates on its own if missed.
- $5,000 to $50,000: department head plus finance, against a budget already agreed.
- Above $50,000 or any new supplier: owner signs. That’s about 40 decisions a year instead of 4,100.
They also stopped order splitting cold by flagging any two POs to the same supplier within seven days. Two buyers got a conversation. It stopped.
What the owner actually got back
Routine purchase approvals fell from 3.6 days to under six hours. Expedited freight charges dropped by $71,000 in the first year, mostly because buyers no longer had to pay rush shipping to cover internal delays.
The number he cared about was different, though. He went from reviewing 4,100 transactions to reviewing about 40, and those 40 carried the real money. He told me it was the first time in four years he felt like he was running the business instead of clearing an inbox.
This month, export your last 500 purchase orders and sort them by amount. Count how many were worth the executive attention they received. For most managers, the top 5% of orders drive the majority of spend — and the other 95% are just clogging the pipe.