Wholesale Supplier Comparison Calculator

Understanding the wholesale supplier comparison calculator — concept and principle

When two suppliers quote different unit prices and different shipping terms, the cheaper sticker price is not always the cheaper product. This calculator compares the landed cost of each offer, unit price plus shipping per unit, and shows the gross margin you would earn at your selling price with each one. Retailers, online sellers and purchasing teams use it before placing an order. It works with any currency.

How it is calculated

• Landed cost A = unit price A + shipping per unit A (and the same for B)
• Margin with A = (selling price − landed cost A) ÷ selling price × 100
• Better supplier = the one with the lower landed cost. If both landed costs are exactly equal, the calculator shows "Equal landed cost".

Shipping per unit is the total freight of an order divided by the number of units in it. Enter all prices in the same currency and per the same unit.

The principle

What you actually pay to get one unit onto your shelf is the landed cost, so that is what has to be compared. Since the selling price is the same whichever supplier you use, the supplier with the lower landed cost always gives the higher margin; the margin figures simply show how much room each option leaves for operating costs and profit.

Worked example

1. Landed cost A = 11 + 1.5 = 12.50.
2. Landed cost B = 12.5 + 0 = 12.50.
3. Margin with A = (25 − 12.5) ÷ 25 × 100 = 50%.
4. Margin with B = (25 − 12.5) ÷ 25 × 100 = 50%.
5. The landed costs are equal, so the result shows Equal landed cost.

In this default case the two offers are financially identical per unit: A's lower price is exactly cancelled by its shipping charge. The choice should then rest on other factors.

How to read the result

A margin difference of even one or two percentage points matters at volume: multiply the per-unit difference in landed cost by your annual quantity. When the margins are equal or close, compare minimum order quantities, lead times, defect and return rates, payment terms and reliability. A supplier with free shipping only above a certain order size may change the picture for small orders.

Common mistakes

• Comparing unit prices without shipping, duties or packaging costs.
• Spreading freight over a different order size than you will actually buy.
• Reading the "better supplier" label without checking how large the gap in landed cost is.
• Confusing margin on price with markup on cost.

Frequently asked questions

What is landed cost?

The total cost of a product delivered to your location: purchase price plus freight, insurance, duties, fees and handling.

How do I include a fixed shipping fee per order?

Divide the fee by the number of units in a typical order and enter the result as shipping per unit.

Is a 50% margin good?

It depends on the sector and on your operating costs. Compare it with what you need to cover rent, staff, marketing and returns.

Sources: Datar & Rajan, Horngren's Cost Accounting (Pearson) · Monczka et al., Purchasing and Supply Chain Management (Cengage)