§1Pick one basis
Use delivered cost per accepted pallet, per spec, per delivery point. "Accepted" matters: a supplier with a lower price and a higher reject rate can cost more.
Levelled cost = (price + delivery charge per pallet + surcharges per pallet) ÷ (1 − expected reject rate)
If rejects are credited in full and picked up at the supplier's cost, the reject adjustment shrinks to the cost of your time and any line disruption. Put a number on that instead.
§2Adjustments to make
- Freight: per-load delivery charges divided by pallets per load at the volume you'll actually order.
- Fuel surcharge: at the current diesel level, using the supplier's own surcharge table.
- Minimum order: if your volume falls below it in slow months, add the penalty.
- Payment terms: a supplier offering longer terms is worth something; use your cost of capital.
- Index clause: if one bid is fixed and another is indexed, compare at today's index and at a stressed index.
§3Score what price doesn't show
Add a short scorecard: capacity headroom, distance, backup plant, on-time history from references, and how the supplier handled your questions. Weight it modestly; it's a tie-breaker, not a substitute for price.
§4Use the sheet
The bid-leveling sheet downloads as a CSV with these columns already set up. The Program Builder pre-fills it with your spec.
§5A worked example of the method
Take two bids for the same spec and delivery point. Bid A is $9.80 a pallet, with a $150 delivery charge per load of 500 pallets and an expected reject rate of 1%. Bid B is $9.60, with a $300 delivery charge per load of 500 and an expected reject rate of 3%.
A = (9.80 + 150 ÷ 500) ÷ (1 − 0.01) = 10.10 ÷ 0.99 = $10.20 B = (9.60 + 300 ÷ 500) ÷ (1 − 0.03) = 10.20 ÷ 0.97 = $10.52
The cheaper headline price loses by 32 cents per accepted pallet. These numbers are an illustration of the arithmetic, not market prices; use the figures in your own bids.
Where the expected reject rate comes from matters. Use the supplier's own figure only if they will commit to it in the reject-and-credit clause; otherwise use your own receiving history for similar suppliers.