Make sure you include all the costs when comparing suppliers. If you don’t measure anything but the product price you may be awarding business to the wrong supplier. Suppliers will frequently bid with a stated price for the product but be vague about other costs that you will incur. For example, the F.O.B. term for domestic shipments determines who is responsible for the transportation cost, but the actual charges are not mentioned. There are several valid reasons for this omission. First, the actual quantity in any given shipment may not be ascertained. Second, the supplier may not know how quickly you want any particular shipment and the cost will depend on the carrier used.

But without the actual transportation charges or a very good estimate, how can you judge which supplier is more competitive? Naturally, a more distant supplier will need to charge more for transportation, but if everything else between suppliers is equal why should you choose the one that will cost you more for delivery?

Other charges that may not be mentioned are for containers, pallets, or supplies. Ink usage for printers is a good example of an item that may end up costing more than the purchase of a printer.

Pay particular attention to packaging. A supplier can save a bundle by placing items loosely in a large container rather than packing them neatly in separate shelf boxes. The bulk packaging may be satisfactory for your purposes, but it may not be good enough if the products are for resale, and the items will certainly not be protected as well.

Make a list of all the things you can think of that may be necessary to receive the product and ask the supplier if those items are covered in the product price. If not, ask for the cost or a cost formula that you can use to estimate the cost. It may be necessary for you to verify the prices or cost of any products or services that the supplier does not provide. You can check transportation cost by contacting carriers. This is a good idea anyway, because suppliers may markup the charges from the carriers. You can avoid this by requiring copies of the freight bills.