The Hidden Profit Leak Costing Suppliers Millions (And Why Most Teams Never See It)

In a recent discussion, John Gunther, SVP of Sales at STAT Recovery, and Steven Terry, COO and former Walmart executive, broke down a problem most suppliers don’t realize they have: hidden revenue leakage. This post highlights the key insights from that conversation, and what they mean for suppliers selling into Amazon, Target and Walmart.

If you’re a supplier selling into Amazon, Target or Walmart, you already know the drill:

• Hit your KPIs: Sales, Margin, Distribution, Innovation
• Build Strategic Partnership
• Achieve High On Time & In Full Rates while minimizing retailer deductions and chargebacks
• Achieve High Inventory Turnover and avoid out of stocks

But here’s the uncomfortable truth: Even high-performing suppliers are quietly losing 1–3% of revenue, without realizing it.

And no, we’re not just talking about deductions. We’re talking about something bigger. We’re talking about leakage.

What Most Suppliers Get Wrong About Deductions

Most teams are incredibly disciplined. They invest heavily in:

• Retail Compliance and Technology
• Logistics and Warehousing Infrastructure
• Trade Marketing & Commercial Investment
• Data Analytics and Inventory Management

And that work matters.

But here’s the problem:

“So much focus is placed on what the retailer publishes… but the return on that time investment can be less than what it should be.” - John Gunther

Why? Because you're optimizing what is published, which is necessary, but not seeing the hidden nuances.

Retailers Aren’t the Problem (But Their Systems Aren’t Perfect)

Retailers like Walmart are built for scale and efficiency. They rely on standardized programs to manage thousands of suppliers.

“Every program has a great reason behind it… but it’s one-size-fits-all.” - Steven Terry

That creates friction:

• Your supply chain ≠ every other supplier’s
• Your packaging ≠ standardized assumptions
• Your systems ≠ retailer systems

And when those don’t align? You get deductions, short pays, pricing mismatches, and hidden loss.

The Bigger Issue: Leakage (Not Just Deductions)

Most suppliers think in terms of deductions. But that’s only part of the picture.

“Not everything you’re owed is going to be presented as a deduction.” - John Gunther

Leakage includes:

• Pricing mismatches
• Allowance errors
• Short payments not flagged as deductions
• Overages and underpayments
• Contract misalignments
• ERP configuration issues

These don’t always show up clearly. They don’t always trigger alerts. And they often become “just the cost of doing business.”

The Cost of Ignoring It

Here’s where it gets real:

• Small errors across millions of units = massive losses
• Minor mismatches = millions in missed revenue
• “Acceptable” leakage = profit erosion

“It might seem small… but when you add it all up, it can be 1–3% of your entire revenue stream.” - Steven Terry

For large suppliers? That’s millions to tens of millions of dollars.

In one real example: A supplier uncovered $80 million in missed revenue tied to ERP allowance issues.

Why Internal Teams Can’t Catch Everything

Even the best teams struggle here, and it’s not a talent issue. It’s complexity.

“It’s almost impossible to be an expert across all deduction types, systems, and processes.” - Steven Terry

Think about everything involved:

• ERP systems
• Item setup
• Logistics execution
• Warehouse processes
• Contracts
• Retailer-specific rules
• Constant program changes

Now multiply that across:

• Walmart
• Target
• Amazon
• Multiple other retailers

There is no true “one-size-fits-all” solution.

A Real Example of How Leakage Happens

One supplier thought they were shipping perfectly. They weren’t. Their warehouse made a well-intentioned change:

• More items per box → better sustainability

But retailer systems expected:

• 1 item per carton scan

The result? They were only getting paid for 25% of what they shipped. No alarms. No obvious deduction. Just silent revenue loss.

The Shift: From Fighting Deductions → Recovering Profit

Most suppliers spend their time:

• Disputing deductions through retailer portals
• Pulling BOL’s and proof of delivery
• Negotiating with merchant teams

But that’s reactive.

The smarter shift is:

1. Recover what you’re owed

2. Identify root causes

3. Prevent it going forward

“Fighting is one piece… but understanding why it’s happening and fixing it is the key.” - Steven Terry

Why Leading Suppliers Are Changing Their Approach

Retailers already do this. They use third-party audit firms to recover missed value. But many suppliers still try to do everything in-house.

“Walmart uses outside firms to catch things… suppliers miss that.” - Steven Terry

That mindset is shifting. More suppliers are now:

• Bringing in second-pass recovery partners
• Using external experts to audit their business
• Treating leakage like a profit center, not a cost

What Makes the Difference

Not all solutions are equal. There are three common approaches:

1. SaaS / Automation

• Focus: dispute workflows, reporting

• Limitation: follows standard processes
  

2. BPO / Outsourcing

• Focus: handling volume of disputes
• Limitation: process-driven, not value-driven

3. True Recovery (Where the real opportunity is)

• Focus: uncovering hidden leakage
• Approach: end-to-end analysis
• Outcome: higher recovery + prevention
  

“We’re not just solving deductions, we’re identifying and recovering leakage across the full lifecycle.” - John Gunther

The ROI Most Suppliers Are Missing

Recovered revenue isn’t just “nice to have.” It is:

• Pure profit
• Reinvestable capital
• Growth fuel

“You can reinvest it into pricing, promotions, innovation… and grow the business.” - Steven Terry

The Biggest Mistake Suppliers Make

It’s not a bad process. It’s this belief: “Our processes are already working.”

“Years ago that process worked… but with new programs and changes, it may not anymore.” - Steven Terry

Retailers change constantly. If your process hasn’t evolved with them, you’re leaking value.

So When Is the Right Time to Fix This?

There is no wrong time.

If you:

• Sell at scale
• Work with major retailers
• Have deductions (even small ones)
• Haven’t audited your full process recently

There is almost certainly value being missed.

Final Thought

Deductions aren’t the enemy. They’re a signal.

“They’re meant to be a feedback mechanism… to drive efficiency.” - Steven Terry

The real question is: Are you just reacting to them, or using them to uncover hidden profit?