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At TeaSquares, I used to treat COGS tracking like a once-a-year exercise. We’d sit down, update our numbers, adjust a few assumptions, and move on. Then I finally took a closer look mid-year.

Ingredient costs had crept up. Packaging had quietly gotten more expensive. Freight and production costs had shifted in ways that didn’t feel dramatic in isolation, but added together, they had meaningfully eroded our margins. What surprised me most was how long I had gone without noticing.

That’s the trap. COGS moves gradually, quarter by quarter, in ways that are easy to miss if you’re not actively tracking it. The founders who maintain strong margins are running a simple, repeatable process every quarter to stay ahead of it.

The 5-Step Quarterly COGS Review Process

As you scale, your cost structure gets more complex — more SKUs, more suppliers, larger production runs, and tighter margins. What worked when you were small (gut checks and occasional updates) stops working quickly.

The solution is a simple, repeatable quarterly process that forces you to look at the right data and make decisions consistently.

Here’s the framework:

1. Pull accurate COGS data
2. Analyze inventory and production efficiency
3. Review supplier pricing
4. Update your forecast
5. Make strategic decisions

Step 1: Pull Accurate COGS Data from Your Inventory Management System

Everything starts with having the right data — and for growth-stage brands, that means moving beyond spreadsheets.

Your inventory management system should be your source of truth for:

• Ingredient costs over time
• Packaging costs
• Bill of materials (BOMs)
• Production run costs
• Waste or shrink
• Freight costs

The goal is to compare trends over time:

• How have ingredient costs changed vs. last quarter?
• Which SKUs have seen the biggest cost increases?
• Are your margins consistent across channels and products?
• How are freight costs changing, and should you look into other options?

This is where many brands run into issues. BOMs don’t get updated when suppliers increase pricing. Packaging changes are made informally. Small adjustments never make it back into the system.

If your data is off, every decision downstream will be too. This step is about rebuilding a clean, accurate baseline every quarter.

Step 2: Analyze Inventory & Production Efficiency

Once you trust your numbers, the next step is understanding how operational decisions are impacting your costs.

Start with inventory:

• Are you holding excess raw materials or packaging?
• Do you have dead stock tying up cash?
• Are you over-ordering to hit MOQs?
• Are there underperforming SKUs worth re-examining? Company-wide COGS can look fine while one or two SKUs are quietly costing you an arm and a leg.

Then look at production:

• Are your run sizes aligned with demand? Misaligned run sizes can lead to waste from spoiled product, or create unnecessary urgency that results in costly mistakes — expedited shipping, last-minute purchasing decisions, and more.
• Are you creating inefficiencies by producing too frequently — or not frequently enough?
• Is waste increasing your true cost per unit? Make it a habit to reconcile after every production run, comparing beginning and ending raw materials, packaging materials, and more.

Many founders discover that their biggest margin leaks come from operational inefficiencies that have gone unnoticed.

Step 3: Review Supplier Pricing (Ingredients & Packaging)

Most founders only revisit supplier pricing when there’s a problem. A quarterly review gives you a structured moment to:

• Check in on current pricing
• Ask about upcoming changes
• Explore volume discounts
• Identify alternative suppliers
• Factor in the impact of freight and tariffs — today’s market is unpredictable, and staying on top of these levers leads to better all-in pricing

This doesn’t always mean pushing for lower prices. Sometimes it’s about:

• Locking in pricing before increases hit
• Consolidating SKUs or materials
• Adjusting order sizes to improve cost efficiency
• Keeping suppliers updated on your forecasts — if your projections have seen an uptick, don’t surprise key partners at the last second. That can lead to costly, last-minute sourcing scrambles.
• Tracking one-off events like irregular fuel surcharges or single-use ingredient and packaging switches, which can easily become invisible by the end of the quarter

Suppliers are dealing with the same volatility you are. The brands that stay ahead are the ones that communicate regularly and treat suppliers like strategic partners.

Step 4: Update Your Forecast and Model Future COGS

Your updated costs are only useful if you apply them forward. This is where forecasting becomes critical.

Using your latest data, update your projections based on:

• Growth in retail or distribution
• Seasonality
• Promotions or velocity changes
• New product launches
• New channel launches, such as food service

Then layer in your updated COGS to answer:

• What will our margins look like next quarter?
• Where are we at risk of margin compression?
• How does scale impact our costs?

This step shifts you from reacting to problems to seeing them in advance. Instead of being surprised by shrinking margins, you can plan around them.

Step 5: Make Strategic Decisions (Not Just Observations)

Now that you have all this data — what do you do with it? This is the fun part. Based on your analysis, decide:

• Do we need to adjust pricing?
• Are there SKUs we should discontinue or reformulate?
• Can we simplify packaging?
• Should we change production run sizes or partners?

Even small adjustments — saving a few cents on packaging, improving yield, optimizing order quantities — can compound quickly at scale.

The key is to leave each quarterly review with clear actions and measurable goals for the next quarter.

Putting This Process on Autopilot

The power of this system comes from consistency. To make it stick:

• Assign ownership (founder, ops, or finance lead)
• Schedule it as a recurring quarterly meeting
• Use a standardized checklist or template
• Track historical performance over time

Refine the process every quarter, and over time it becomes less of a heavy lift and more of a routine health check for your business.

Small Improvements Compound

Running a simple quarterly COGS review forces you to catch changes early and respond before they become real problems. And when you consistently make small improvements, the impact on your margins is significant.

If you need help running this process or supporting your operations, reach out to Run The Numbers. They help CPG brands:

• Track COGS in real time
• Keep BOMs and inventory data accurate
• Support demand planning in Excel or one of the many programs out there
• Model future scenarios with updated costs
• Run quarterly reviews faster and with more confidence

If you’re serious about protecting your margins as you scale, this isn’t something to revisit once a year. Put the process in place, run it every quarter, and give yourself the visibility you need to make better decisions.

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