Three suppliers have responded to the same purchase. The quotations don’t appear to be the same. The first quotation shows the lowest unit price, but freight is separately. The second offer includes free delivery, yet the lead time is longer. And the third quotation uses a different unit of measure, and the proposed specification is different. The purchasing professional must make the three responses comparable.
To do that effectively, the purchasing professional must start from the purchasing requirement and ignore the suppliers’ own formats. Create columns for requested specification, quantity, unit of measure, delivery point, and required date. Add other relevant columns for commercial conditions such as unit price, total price, freight, taxes, payment terms, lead time, quotation validity, minimum order quantity, warranty and service. Using the same fields for comparison ensures the comparison doesn’t favour a specific supplier just because the quotation contained more data.
Look for technical compliance of quotations. Don’t compare the price directly when it covers a different material, size, capacity, service frequency or scope of supply. Mark all mandatory requirements as compliant, non-compliant or unclear and record optional preferences separately. When a quotation is unclear, add an issue to the supplier questions rather than assume the quotation meets the requirement.
Convert different quantities and units to a comparable basis. If one supplier quotes per box, the buyer needs to know how many items per box before comparing to another supplier who quotes per item. If a service supplier has provided prices per hour, per day, per month or a fixed-price for the complete project, the purchasing professional needs to be able to convert each quotation to the unit that’s needed for the purchasing decision. However, make it easy to see the original data to facilitate review and avoid the risk that someone might change a supplier’s data without explanation. Document that conversion in the record.
Record commercial conditions beside the price, rather than in the notes. Calculate a simple total evaluated cost by including any known freight, installation or set-up costs and recurring charges that should be included, as appropriate. Record payment terms and delivery terms as well; they might not make an immediate difference to the cost, but a supplier asking for upfront payment and providing an eight-week lead time is clearly offering more different commercial terms than a supplier who allows payment after delivery and a three-week lead time.
Once the purchasing professional’s table of comparison is done, check it briefly. Cover the suppliers’ names, and look only at the comparison criteria. Are there blanks? Assumptions that might not be correct? Quantities that might not match with other suppliers? Are certain exclusions affecting the scope of supply? For all the data that is missing, write out the question, the same way, for each supplier that might need to answer it. Only update the comparison after receiving a response in writing ensures the process is as equal as possible, and it creates an audit trail.
The purchasing professional’s final decision to recommend a supplier or suppliers for the purchasing action should summarize the outcome of the comparison, not restate the prices. Which offers meet the mandatory requirement? How is total cost calculated? What terms make the difference? Where might there be risks or areas of uncertainty? Finally, can a purchasing professional review the summary table of comparison and explain to a colleague exactly why a supplier was recommended, without needing to search through separate emails?