Put each offer on the same quantity and quality basis, include relevant delivery costs, then assess timing and payment terms. The lowest quoted unit price may not be the lowest cost per usable unit.
Make the offers comparable
Check that both suppliers are quoting the same specification, unit and quantity. A carton price cannot be compared with a piece price until the pack contents are clear. Fabric of a different width or finish may serve a different purpose even when its per-metre price is lower.
Record what is included: transport, packing, inspection, insurance where relevant, and any additional service. Keep tax treatment separate for the person responsible for accounts; do not assume every tax component is either fully recoverable or a final cost.
A fictional comparison before tax
Suppose two suppliers offer 1,000 units that meet the same specification. The buyer has evidence for the usable quantities assumed below. These are scenario inputs, not expected industry rejection rates.
| Item | Supplier A | Supplier B |
|---|---|---|
| Quoted goods cost | ₹50,000 | ₹52,000 |
| Freight | ₹3,000 | ₹0 included |
| Total before tax | ₹53,000 | ₹52,000 |
| Usable units in this scenario | 980 | 1,000 |
| Cost per usable unit | ₹54.08 | ₹52.00 |
A's calculation is ₹53,000 ÷ 980 = about ₹54.08. B's is ₹52,000 ÷ 1,000 = ₹52.00. Under these assumptions, B costs less per usable unit despite the higher quoted goods price. If A replaces rejected units at no extra cost, change the comparison to reflect that agreement rather than keeping an assumed loss.
Price does not settle the whole choice
Now add the confirmed delivery date, minimum quantity, payment date and return terms. A lower-cost offer arriving after your customer's required date may not meet the job. A larger minimum order may tie up cash in stock you do not yet need.
Keep these factors visible rather than hiding them behind a combined supplier score. For an urgent order, delivery certainty may be the deciding factor. For a repeat purchase, quality consistency or a smaller batch may matter more. Record why you chose the offer.
Use received quantities to improve the next comparison
After delivery, compare the accepted quantity, actual freight and promised date with the offer. Resolve shortages and rejected units with the supplier. An attractive quotation should not erase a history of unresolved exceptions, but one bad receipt also needs its circumstances recorded.
For stock cost principles, IAS 2's overview describes purchase, conversion and other costs of bringing inventory to its location and condition. The commercial worksheet here is not a determination of the accounting treatment applicable to your business.
Give the buyer a checkable recommendation
“B is cheaper” is incomplete. Say: “At the quoted quantity, freight and usable-unit assumptions, B is ₹2.08 lower per usable unit. Please confirm the delivery date and payment terms before approval.” That makes the recommendation reviewable when an assumption changes.
Questions you might ask
How do I compare suppliers with different freight charges?
Add the relevant freight to each comparable goods quote, then compare on the same quantity and specification basis. Keep other terms visible.
Should I always choose the lowest unit price?
No. Check usable quantity, delivery timing, minimum order, payment and return terms. State the assumptions behind the choice.