Find the real cost to serve
Compare supplier options using total cost to serve instead of unit price alone.
Supplier A is $1.20 cheaper per insulation sheet on 10,000 sheets. But it adds $8,500 in split-load freight, $2,900 in branch handling, and $4,200 in damage credits. Supplier B has none of those extra costs. Which supplier is cheaper in total for the quarter? Total cost = invoice cost plus the operating costs required to make the material usable for the customer Counting the unit-price discount but ignoring freight, handling, damage, and customer credits turns other departments into the place where procurement savings disappear. Calculate invoice saving $1.20 per sheet multiplied by 10,000 sheets = $12,000 apparent saving. This is…
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