Midwest Office Products (MOP) is a regional distributor of office supplies to institutions and commercial businesses. MOP orders supplies from several manufactures, processes the orders/cartons, and delivers them to their customer. Known for their excellent customer services and responsiveness, MOP was a healthy company. In 2003, MOP suffered a loss despite an increase in sales from the prior year. John Malone, general manager of MOP, was concerned since it was MOP’s first loss in its history. Malone turned to his controller, Melissa Dunhill and director of operations, Tim Cunningham for help. Malone wanted a clear picture of what it cost to process the orders and how can they improve their profitability? Dunhill and Cunningham met with Wilber Smith, the distribution center manager, to get a better understanding of the key issues and drivers. There are two ways MOP would process an order, manually or electronically. For manual orders, an order entry operator would enter the customer ID and validate the customer’s information. Depending on the size of the order, the operator would have to key in the order line by line. This was a very tedious task and forced MOP to have 16 order entry operators on staff. In 1999, MOP introduced an electronic data interchange (EDI) system and implemented a new internet site in 2000. This allowed customer orders to arrive automatically so the clerks would not have to manually enter the data. With the EDI system, order entry operators only had to quickly verify the customer’s order for accuracy. This saves a tremendous amount of time, regardless of the order size. Next, there are two ways MOP shipped the product(s) to its customer, commercially or desktop delivery. For commercial shipments, MOP would use a third party freight forwarder and incur the applicable cost. This cost was incorporated in the mark up of the