Lesson 2.2 showed that two quotations for the same RFQ often differ in quantity, inclusions, exclusions and validity period, and that these differences must be read before price is compared. Normalising goes one step further: it means recalculating each quotation onto one shared basis, so that a price stated ex-factory, at a different quantity, or with a different payment term, is converted into a figure that means the same thing as the other quote it is being placed against. Omar, the owner of Cedar & Co., does this every time he compares his regular supplier's price against a new factory's offer. This lesson mainly teaches the money flow: converting two prices onto one basis before subtracting one from the other means anything.
You need: the four quotation-reading checks from lesson 2.2, and the delivery-basis vocabulary from Track 11 course 6 and Track 12 course 1.
By the end of this lesson you can:
Not covered here: weighing a normalised price against lead time and quality history (lesson 2.4), and building a full comparison sheet (lesson 2.5).
| Term | Meaning |
|---|---|
| Normalising | Adjusting two or more quotations so they are stated on the same delivery terms, quantity, and payment terms before their prices are compared. |
| Ex-works (EXW) | The supplier makes the goods available at its own premises; the buyer arranges and pays for all transport from there. |
| Delivered price | A price that already includes moving the goods to the buyer's own premises, unlike an ex-works price. |
| Open account | A payment term where the buyer pays the supplier a set number of days after delivery or invoice, rather than in advance. |
| Cost of credit | The value to the buyer of being allowed to pay later, or the cost to the supplier of waiting to be paid, often estimated from a standard interest rate. |
| Common basis | The single set of delivery terms, quantity and payment terms that every quotation is converted to before being compared. |
Two quotations stated on different terms cannot be subtracted from each other and produce a meaningful gap, because a lower price on weaker terms is not automatically a lower real cost. Normalising means picking one common basis, usually the basis closest to what the buyer actually needs, and converting every other quotation to match it: adding transport cost to an ex-works price to make it a delivered price, scaling a quoted rate to the buyer's actual quantity, and adjusting for payment terms when one supplier asks for payment in advance and another offers 60-day open account. Only once every quotation sits on the same basis does the difference between them mean what it appears to mean.
| What can differ | The shapes you will meet | Why it matters to you |
|---|---|---|
| Delivery basis | An export FOB quote already includes moving goods to the port; a domestic ex-works quote does not include moving goods anywhere. Cedar & Co. regularly compares an ex-works quote against a delivered quote from a different supplier. | Comparing an ex-works price directly against a delivered price without adding transport cost understates the ex-works supplier's real price. |
| Quantity quoted versus quantity needed | A supplier may quote a per-piece rate valid at 10,000 pieces, while Cedar & Co. only needs 6,000 for one replenishment. Some suppliers hold the same rate at any quantity above a floor; others step the rate up for smaller runs. | Applying a large-quantity rate to a smaller actual order can understate the real price the buyer would pay at the quantity it actually needs. |
| Payment terms | A supplier offering 60-day open account is effectively lending the buyer money for those 60 days; a supplier demanding payment in advance is not. Both may quote the identical unit price. | Two identical prices on different payment terms are not equally costly to the buyer once the value of that credit period is counted. |
| Domestic MTS replenishment versus export MTO orders | Cedar & Co. buys in smaller, more frequent replenishment quantities to match its own sales forecast, an MTS pattern. Northline Apparel buys the full order quantity once, an MTO pattern. | The normalising method is identical either way, but the quantity a rate is being scaled to differs by business model, so the same supplier's quote can normalise differently for two different buyers. |
Cedar & Co. buys T-shirts from Delta Garments on 60-day open account, ex-factory pricing, as its regular arrangement. A new supplier has offered a lower price, but on different terms, so Omar converts both to the same basis before comparing.
| Basis point | Delta Garments (regular) | New supplier | Normalised to Cedar & Co.'s basis |
|---|---|---|---|
| Stated price | 2.80 ex-factory | 2.60 ex-works | Both already ex-works/ex-factory; same basis |
| Quantity stated for | 6,000 pieces (as needed) | 10,000 pieces | New supplier's rate at 6,000: confirmed unchanged by new supplier, 2.60 stands |
| Payment terms | 60-day open account | Payment in advance | New supplier's advance payment carries a real cost to Cedar & Co. (worked below) |
A buyer working quickly often takes the two printed unit prices and picks the lower one, treating "ex-works" versus "delivered" or "advance payment" versus "60-day open account" as fine print rather than facts that change the real number. A price that looks 0.20 cheaper on the label can normalise to only 0.15 cheaper, or even more expensive, once transport, quantity scaling and payment terms are added back. Skipping normalisation risks choosing the supplier whose paperwork looks cheapest rather than the one whose real delivered cost, on the terms the buyer actually needs, is cheapest.
Two prices from two suppliers cannot just be subtracted from each other if they are not really priced the same way. One might not include delivery to the buyer's own warehouse. One might be priced for a bigger quantity than the buyer actually needs. One might ask to be paid earlier than the other. Normalising means adjusting both prices so they stand for the same real thing, adding back whatever one price leaves out, before deciding which one is genuinely cheaper for the buyer to actually pay.
Cedar & Co.'s buying assistant recommends switching the T-shirt replenishment to the new supplier, pointing out that 2.60 is 0.20 cheaper than Delta Garments' 2.80.
Here is the comparison the assistant is looking at:
Should Omar switch suppliers on this comparison alone? Decide before opening the answer.
No, not on this comparison alone. Two facts decide this.
First, the new supplier's price assumes payment in advance, not the 60-day open account Delta Garments already offers. Estimating the cost of paying 15,600 USD 60 days earlier, at a 12% annual rate, adds about 307.73 USD to the order, or about 0.05 per piece.
Second, once that cost is added back, the new supplier's normalised price is about 2.65, not 2.60. The real gap against Delta Garments' 2.80 narrows to about 0.15 per piece, not the 0.20 the printed prices suggested.
Omar can still choose the new supplier if 0.15 per piece is worth it to him, but the decision should be made on the normalised gap of about 0.15, not the printed gap of 0.20.
Framed with the figures already worked out, switching suppliers on the printed 0.20 gap alone would overstate the saving by about 0.05 per piece, the estimated cost of the payment-terms difference. Repeated across several replenishment orders a year, this gap compounds into a real, avoidable cash-flow cost that a five-minute normalisation would have caught before the decision was made.
Open the Quotation comparison sheet workbook linked below. Its "Normalise" tab lists the four normalising steps this lesson teaches, with Cedar & Co.'s own replenishment example filled in. Fill in the yellow "Your quotes" columns with your own two quotations' delivery terms, quantity and payment terms before comparing any prices.
[Download the Quotation comparison sheet](../../templates/T13-C02-quotation-comparison-sheet.xlsx)
1. What does normalising two quotations mean?
2. A supplier quotes 2.60 per piece payable in advance, instead of the buyer's usual 60-day open account. What should be added to make this comparable to a 60-day-terms quote?
3. A supplier's ex-works price is quoted for 10,000 pieces, but the buyer only needs 4,000. What must be checked before using that quoted rate in a comparison?
| EN | AR | FR | TR | Meaning |
|---|---|---|---|---|
| Normalising | تسوية عروض الأسعار | Normalisation des devis | Tekliflerin normalleştirilmesi | Adjusting two or more quotations so they are stated on the same delivery terms, quantity, and payment terms before their prices are compared. |
| Ex-works (EXW) | تسليم من المصنع (EXW) | Départ usine (EXW) | Fabrika teslim (EXW) | The supplier makes the goods available at its own premises; the buyer arranges and pays for all transport from there. |
| Delivered price | السعر شاملاً التسليم | Prix livré | Teslim fiyatı | A price that already includes moving the goods to the buyer's own premises, unlike an ex-works price. |
| Open account | حساب مفتوح | Compte ouvert | Açık hesap | A payment term where the buyer pays the supplier a set number of days after delivery or invoice, rather than in advance. |
| Cost of credit | تكلفة الائتمان | Coût du crédit | Kredi maliyeti | The value to the buyer of being allowed to pay later, or the cost to the supplier of waiting to be paid, often estimated from a standard interest rate. |
| Common basis | الأساس الموحد للمقارنة | Base commune de comparaison | Ortak karşılaştırma esası | The single set of delivery terms, quantity and payment terms that every quotation is converted to before being compared. |
You now know how to bring two quotations onto the same price basis. The next lesson shows what to do once the cheapest normalised price and the most reliable lead time and quality history point to two different suppliers. Back to the course map