Sourcing analytics: compare supplier options with evidence

Sourcing analytics compares supplier options at the same quantities, specifications, and terms before an award. Calculate evaluated costs from demand and bid exports, then compare them with a documented current-cost basis. The lowest unit price can produce a higher total after other charges.

1. Freeze the requirements and comparison period

Agree on specifications, delivery locations, forecast quantities, service, and the decision period. Each supplier must quote that requirement. Record currency, quote validity, payment terms, minimum quantities, and exceptions alongside costs.

The federal FAR price-analysis guidance recognizes comparisons with competing and historical prices and calls for adjustments when quantities or material terms differ. Those are useful comparison principles for a commercial sourcing review; this example does not establish federal procurement compliance.

Have the responsible buyer approve item equivalence and units. Use the method for supplier price and pack-size comparisons when bids quote different packaging. An unresolved conversion is an exception, not a zero-cost row.

2. Build one row per supplier and item

An illustrative US manufacturer requests annual bids for seals and valves. Both suppliers meet reviewed specifications, quote USD, share payment and delivery terms, and confirm quantities fall within quoted volume bands. Freight covers the same delivery schedule.

The example evaluates purchase price, freight, and one-time qualification charges. Current delivered unit cost includes freight; it is a reference for the same requirement, not last year's total spend.

Place this table in columns A through G of Excel, with headers in row 1 and bid rows in rows 2 through 5:

Allocate each supplier-level fee once, with the rule documented. Disclose any unmatched quote period before ranking.

3. Calculate extended prices and evaluated costs

Create columns H through K for extended price, evaluated cost, current-basis cost, and projected saving. In H2, I2, J2, and K2 respectively enter:

=C2*D2
=H2+E2+F2
=C2*G2
=J2-I2

Fill down through row 5. A negative saving means an increase against the current basis.

For A's seal row, 1,000 × 8.20 = $8,200; adding $300 freight gives $8,500. The current basis is 1,000 × 8.80 = $8,800, leaving 8,800 − 8,500 = $300 of projected saving. The valve increase offsets that benefit.

4. Compare complete supplier options

Put supplier labels A and B in M2 and M3. In N2 calculate evaluated cost, in O2 calculate the current basis, and in P2 calculate projected saving:

=SUMIF($A$2:$A$5,M2,$I$2:$I$5)
=SUMIF($A$2:$A$5,M2,$J$2:$J$5)
=O2-N2

Fill down to row 3. Microsoft documents SUMIF as adding values that meet specified criteria. Covirage is not affiliated with Microsoft.

A totals 8,500 + 6,900 = $15,400. B totals 8,700 + 6,800 = $15,500. A is $100 cheaper than B, but both exceed the $15,300 current basis. Describe the recommendation accurately: A is the lower evaluated bid for the complete requirement, with a $100 projected cost increase against the baseline.

Do not add both options' current-basis costs together. They represent alternative purchases of the same demand. Keep projected outcomes separate from realized cost savings and cost avoidance.

5. Test the assumption that could change the ranking

Suppose seal demand doubles while valve demand is unchanged. Both suppliers confirm the same unit prices and fixed charges still apply. Change seal quantity to 2,000 on both supplier rows and recalculate:

B becomes $100 cheaper. The demand assumption matters more than the original ranking suggests. Dollar totals are exact for the stated inputs; unit prices are displayed to two decimals. Review any broader supplier-switch business case before treating the bid difference as the whole decision.

6. Reconcile the file and record the recommendation

Check that every eligible supplier covers the complete requirement, every item uses the approved quantity, and the extended-price totals match the bid documents. Tie current unit costs to dated purchasing evidence and document differences from historical spend. Record missing prices, unqualified items, and unconfirmed charges as unresolved exceptions.

The buyer owns the comparison; the demand owner approves quantities; technical and operating owners approve equivalence and service requirements. Finance reviews the baseline. After award, contracted share against actual spend answers a different question about purchasing behavior.

Where it goes wrong

• Unequal quantities. Comparing each supplier's preferred volume confuses demand with pricing.
• Charges counted twice. Freight included in a delivered price must not be added again.
• Missing prices treated as zero. An incomplete bid should not become the cheapest option.
• Savings without a common baseline. Historical spend and future evaluated cost need the same scope before subtraction is meaningful.
• Unpriced commercial exceptions. Capacity, quality, and delivery differences require review even when they do not appear in the cost total.

Compare your own sourcing files in Covirage

Bring your bid comparison, approved demand, and current-cost file to Covirage; it maps the columns, and its tools compute and check the cost differences. The external AI model explains the comparison with every figure traced to its rows. Create a free Covirage account, which takes about a minute, then set up your business and bring a sample of your own data.

See Covirage for procurement teams for the wider spending review.