[Supplier] How do you choose between two suppliers when one is cheaper and the other is more reliable?

Instruction: Calculate comparable expected monthly cost, recommend a supplier and state what could change the recommendation.

Context:

Fictional sourcing case: demand is 1,000 units per month. Supplier A charges $10/unit plus $300 monthly freight; supplier B charges $10.40/unit plus $100 freight. Both meet the approved quality specification. Forecast monthly disruption costs are $600 for A and $100 for B; these are uncertain expected costs, already inclusive of expediting and lost production, not charges to add twice. B has confirmed capacity for all units. You recommend; the category owner approves the award.

Updated

Worked recommendation

A's quoted purchase and freight cost is $10,300; including the stated expected disruption cost gives $10,900 per month. B's corresponding figures are $10,500 and $10,600. B is $200 more expensive on the invoice basis but $300 cheaper on the supplied expected-total-cost basis.

I would recommend B, subject to validating the disruption estimates and contract terms with operations and the category owner. Both meet specification and B has capacity, so the supplied reliability difference outweighs its unit-price premium. I would show the uncertainty rather than present an expected cost as a guaranteed saving.

Sensitivity and controls

Holding B's $100 disruption estimate fixed, A breaks even when its disruption cost is $300: $10,300 + $300 = $10,600. If evidence puts A below that level, the cost ranking changes. Check comparable periods, service evidence and whether disruption estimates already include freight or expedites. Agree delivery and quality monitoring after award and do not commit beyond approval authority.

Assessment signals

Credit a reconciled comparison, a conditional recommendation and the break-even sensitivity. “Always choose reliability” and “always take the lowest price” both ignore the supplied economics.

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