Lesson 2.3 showed how to normalise two quotations onto the same price basis. Once that is done, price is rarely the only fact that matters: a factory's own record for holding to its stated lead time, and its history of quality faults on past orders, both carry a real cost or saving that a price comparison alone does not show. Meridian Sourcing, an agent placing orders for more than one buyer, makes this trade-off often, since it does not always control which factory a buyer ultimately prefers on relationship grounds alone. This lesson mainly teaches the decision flow: choosing between two supported options once they do not agree.
You need: the normalising method from lesson 2.3, and the lead-time vocabulary from T01-C01.
By the end of this lesson you can:
Not covered here: building a complete comparison sheet from a blank page for a new order (lesson 2.5).
| Term | Meaning |
|---|---|
| On-time delivery rate | The share of a supplier's past orders that arrived by their agreed date, used as a record of lead-time reliability. |
| Quality fault rate | The share of a supplier's past shipments that failed inspection or were returned for a quality reason. |
| Cost of a delay | The estimated financial impact of goods arriving later than agreed, such as air-freighting part of an order or missing a retail date. |
| Cost of a quality fault | The estimated financial impact of reworking, discounting or rejecting goods that fail inspection. |
| Weighted comparison | A comparison that combines normalised price with the estimated cost of lead-time and quality risk, not price alone. |
| Trade-off | A decision in which choosing the advantage of one option means accepting the disadvantage that comes with it. |
A supplier's quoted price is only one part of what an order actually costs. A factory with a lower normalised price but a poor on-time delivery record can still cost the buyer more once the likely cost of a delay, air freight to recover the timeline, or a missed retail date, is estimated and added to its price. Likewise a factory with a history of quality faults can cost more once the likely cost of rework, discounting or rejected pieces is estimated. Weighing price against these two records means putting a number, even an estimated one, on each risk, rather than deciding on price alone or on reputation alone.
| What can differ | The shapes you will meet | Why it matters to you |
|---|---|---|
| Whether a track record exists at all | A regular supplier like Delta Garments has several past orders to check for on-time delivery and quality fault rate. A newly qualified factory, just through T13-C01's process, has no track record yet with this buyer. | With no track record, the risk cannot be estimated from history; a buyer either accepts more uncertainty or asks for a smaller trial order first. |
| How lead-time risk is estimated | Some buyers use a simple on-time delivery percentage from past orders. Others weight recent orders more heavily than older ones, since a factory's performance can change over time. | A single old late delivery should not be weighted the same as a recent pattern of lateness; how the record is read affects how much risk is estimated. |
| How quality risk is estimated | A quality fault rate may come from the buyer's own final inspection reports, or from a third-party inspection agency's records if one was used. | A fault rate based on the buyer's own inspections may differ from an independent agency's; knowing the source matters when comparing two suppliers' records. |
| Who is making the recommendation | A buyer's own merchandiser weighs this trade-off for one buyer's own priorities. An agent like Meridian Sourcing, working for more than one buyer, must weigh the same trade-off while representing the buyer's interest, not its own commission. | An agent's recommendation should still be driven by the buyer's own risk tolerance and cost exposure, not by which factory is easier for the agent to place orders with. |
Meridian Sourcing represents a buyer considering both Delta Garments, its regular supplier, and Factory Y, the newly qualified factory from lesson 2.2, for a repeat of Order A.
| Factor | Delta Garments | Factory Y |
|---|---|---|
| Normalised price | 3.20 | 3.13 |
| On-time delivery rate, last 6 orders | 100% (6 of 6 on time) | 67% (4 of 6 on time, from its record with another buyer) |
| Quality fault rate, last 6 orders | 1 fault in 6 (minor, reworked) | 2 faults in 6 (one required a partial discount) |
An agent or merchandiser under pressure to show a saving often leads with the normalised price advantage and mentions lead-time or quality history only as a caveat, without turning that history into an estimated cost that can be weighed against the saving directly. A 0.07 saving that carries a 0.15 estimated risk is not a smaller version of a good decision; once estimated, it is the worse decision. Treating risk history as a footnote rather than a number understates exactly the fact that should have changed the recommendation, and the buyer only discovers the real cost once a delay or a fault has already happened on a live order.
The cheapest price after normalising is not always the best choice. If a supplier is often late, or often produces faulty goods, that history has a real cost too, even if no invoice ever says so directly. Estimating that cost, from the supplier's own past record of actual orders, and comparing it fairly against how much cheaper that supplier's price actually is, tells you whether the saving is genuinely worth taking or is really, once counted properly, a hidden loss.
The buyer Meridian Sourcing represents asks for a quick recommendation based on the normalised prices alone, since Factory Y's 3.13 is lower than Delta Garments' 3.20.
Here is the comparison the buyer is looking at:
Should Meridian Sourcing recommend Factory Y on the normalised price alone? Decide before opening the answer.
No, not on price alone. Two facts decide this.
First, Factory Y's own record shows a 33% chance of a late delivery, based on 2 late orders out of its last 6. Estimating the cost of recovering a delay with air freight on a quarter of the order, and spreading that estimated cost across the whole order, gives an estimated delay-risk cost of about 0.15 per piece.
Second, 0.15 is larger than Factory Y's 0.07 price advantage. Once the estimated risk is weighed against the saving, Factory Y's real position is a net disadvantage of about 0.08 per piece, not a saving.
Meridian Sourcing should recommend Delta Garments for this repeat order, and explain the estimated delay-risk cost, not just the printed price, as the reason.
Framed with the figures already worked out, choosing Factory Y on its 0.07 price advantage alone risks the estimated 0.15 per piece cost of a delay actually occurring on about a third of future orders placed with it, based on its own history. Across the full 15,000-piece order, this is not a marginal difference.
Open the Quotation comparison sheet workbook linked below. Its "Weigh risk" tab lists the four steps this lesson teaches, with Delta Garments' and Factory Y's own records filled in as the worked example. Fill in the yellow "Your suppliers" columns with your own two suppliers' on-time delivery and quality fault records before recommending either one.
[Download the Quotation comparison sheet](../../templates/T13-C02-quotation-comparison-sheet.xlsx)
1. Factory Y's normalised price is 0.07 lower than Delta Garments', but its estimated delay-risk cost is 0.15 per piece. What is the net result of choosing Factory Y?
2. A newly qualified factory has no track record yet with this buyer. How should its lead-time and quality risk be weighed against a regular supplier's proven record?
| EN | AR | FR | TR | Meaning |
|---|---|---|---|---|
| On-time delivery rate | معدل التسليم في الموعد | Taux de livraison à temps | Zamanında teslimat oranı | The share of a supplier's past orders that arrived by their agreed date, used as a record of lead-time reliability. |
| Quality fault rate | معدل عيوب الجودة | Taux de défauts qualité | Kalite hata oranı | The share of a supplier's past shipments that failed inspection or were returned for a quality reason. |
| Cost of a delay | تكلفة التأخير | Coût d'un retard | Gecikme maliyeti | The estimated financial impact of goods arriving later than agreed, such as air-freighting part of an order or missing a retail date. |
| Cost of a quality fault | تكلفة عيب الجودة | Coût d'un défaut de qualité | Kalite hatasının maliyeti | The estimated financial impact of reworking, discounting or rejecting goods that fail inspection. |
| Weighted comparison | مقارنة موزونة | Comparaison pondérée | Ağırlıklı karşılaştırma | A comparison that combines normalised price with the estimated cost of lead-time and quality risk, not price alone. |
| Trade-off | مقايضة | Compromis | Ödünleşim | A decision in which choosing the advantage of one option means accepting the disadvantage that comes with it. |
You now know how to weigh a normalised price against lead time and quality history. The final lesson of this course puts every step from lessons 2.1 to 2.4 into one working comparison sheet for a new order from a blank page. Back to the course map