Supplier-switch savings: use a known volume and delivery frequency

The purchasing question

A supplier change can reduce delivered cost but also introduce qualification, tooling or setup costs. Start with an equivalent order comparison. Do not describe twelve deliveries as annual savings unless the business actually plans one comparable delivery each month.

Calculation method

Recurring saving per order = old delivered order cost − new delivered order cost. Saving across a stated number of equivalent orders = order saving × order count. Deduct one-time switching costs once to calculate a net scenario. If volumes or tiers vary, total the individual order scenarios instead.

Worked example

An old delivered order costs €2,040 and the replacement costs €1,920, a €120 saving. Across twelve equivalent deliveries, gross saving is €1,440. With €600 of one-time transition cost, net saving is €840. At €120 per order, recovering €600 takes five equivalent orders before additional timing effects.

This arithmetic does not establish that the new material is technically qualified or that future order prices remain fixed. A business with four such deliveries per year would have €480 of gross annual savings, not €1,440. Label volume and frequency assumptions directly beside the result.

Checks before using the result

• Match specifications, quantities and delivered-cost boundaries.
• Subtract transition costs once.
• Use the actual planning period or number of deliveries.

Common questions