Two quotations for the same product are rarely the same product, and almost never the same deal. The unit price on the page is the least reliable number in a sourcing decision, because it excludes everything that varies between suppliers: specification, packaging, freight basis, payment terms, and what happens when something goes wrong. This guide sets out how to compare on landed cost without needing a spreadsheet model nobody will maintain.
Why unit price misleads
A lower unit price usually reflects a difference somewhere in the specification, whether or not the supplier mentions it. Common sources of a deceptively low price:
- Thinner core, lower SAP content, or a lighter ADL.
- Lighter or fewer packaging materials, or a smaller sheet count than you assumed.
- Fewer inspection steps, or a narrower sampling plan.
- A different Incoterm, moving freight and risk to you without saying so.
- A quantity breakpoint that does not match your actual order pattern.
The countermeasure is simple and unglamorous: normalise every quote against an identical written specification before comparing any number.
Build the landed cost line by line
| Component | What to include | Where it hides |
|---|---|---|
| Product | Unit price at your real order quantity, per SKU | Quotes priced at a breakpoint you will not reach |
| Packaging | Film, carton, labels, plates or cylinders for custom print | Quoted separately or "to be confirmed" |
| Tooling | One-off plate, cylinder or mould cost, amortised over your expected volume | Omitted from the comparison entirely |
| Inland and export handling | Trucking, export clearance, port charges | Included in one quote and excluded from another under the same Incoterm label |
| Main freight | Ocean or air, per container or per kilogram chargeable | Estimates presented as facts; verify against a forwarder |
| Insurance | Cover level and cost | Assumed rather than priced |
| Duty and taxes | Based on the classification your broker confirms | Ignored in CIF quotes because it is not the seller's cost |
| Destination charges | Port, clearance, delivery, and any demurrage risk | Almost always excluded from the quote |
| Quality cost | Inspection, testing, and expected defect rate | Invisible until the first claim |
| Working capital | Effect of payment terms on cash tied up | Never in the quote, always in the cost |
You do not need precision on every line. You need every line to appear, so that the comparison is between comparable things.
Payment terms are part of the price
A 30% deposit with 70% before shipment and a 100% letter of credit are different financial products, and the difference is a real cost. If one supplier requires full payment at production and another accepts payment against documents, the second is cheaper than the headline numbers suggest even at a higher unit price. Quantify it roughly: the cost of the credit, the length of time cash is committed, and the risk carried in each structure. For a first order with a new supplier, the risk dimension usually outweighs the financing dimension.
Quantity breakpoints and the honesty of your forecast
Quotes are usually stepped by quantity. The cheapest column is often a volume you will not reach in the first year, and committing to it to capture a lower price can leave you with inventory you cannot sell. Compare at three quantities: your first order, your expected annual volume, and your optimistic case. Where a supplier's price curve is steep, ask what drives it — material purchasing, line changeover, or packaging plates — because the answer tells you which volume threshold actually matters.
Total cost of a bad batch
The cost that never appears in a quotation is the failure cost. Estimate it before you need it:
- Value of the rejected goods.
- Freight already spent on goods that cannot be sold.
- Cost of replacement production and the delay it causes to your launch or replenishment.
- Retail chargebacks, returns and the internal labour of handling complaints.
- Reputational cost, which is largest exactly when the product is new and the brand has no equity to absorb it.
A supplier who is 8% cheaper with no inspection plan and no documented method is not cheaper. The specification and inspection basis covered in Common Defects and Prevention is what converts that risk into a measurable line.
A short comparison procedure
- Issue one specification document and one question set to every supplier, with the same Incoterm and named place.
- Require the quote to follow your cost structure, not the supplier's template.
- Ask for the loading plan and the packaging cost separately.
- Normalise to cost per unit and cost per kilogram of finished product.
- Score quality evidence separately from price, and keep the two scores apart until the shortlist.
- Re-quote the shortlist against a final, frozen specification.
For the shipping components of landed cost, see Incoterms and Shipping. For the specification side, start from Sourcing Checklist and Absorbent Core Basics.