1. Find what you use
Units you need in one order, and how many orders a year. A shop uses 500 units an order, 12 times a year: 6,000 units.
2. Write down each supplier's real charges
Price per unit; shipping on one order at your order size; other fees (handling, heavy or oversize, liftgate, residential delivery); the smallest order they will take; any yearly membership. Use the shipping you would really pay, not the shipping at a threshold you will not reach.
3. Find the order size
The larger of what you need and the supplier's minimum. Supplier A has no minimum: 500. Supplier B has a minimum of 1,000: 1,000.
4. Add the extras to each unit
Landed cost per unit = price + (shipping + fees) ÷ order size + membership ÷ units used in a year. Supplier A: $0.42 + ($18 ÷ 500) = $0.456. Supplier B: $0.39 + ($45 ÷ 1,000) = $0.435. Supplier C at $0.45 with free shipping: $0.450.
5. Check the cash
Cash out per order = order size × price + shipping + fees. A: $228. B: $435, and you order every other month. B is cheapest over a year at $2,610, but it ties up cash in about 500 extra units. Whether that is worth about $90 a year is your decision.
In a spreadsheet
B1: Units needed per order (500) B2: Orders a year (12)
B3: Price per unit (0.42) B4: Shipping per order (18) B5: Fees per order (0)
B6: Smallest order (0) B7: Membership a year (0)
B8: Order size: =MAX(B1,B6)
B9: Landed cost per unit: =B3+(B4+B5)/B8+B7/(B1*B2)
B10: Cash per order: =B8*B3+B4+B5
B11: Cost for the year: =B9*B1*B2
What to do with the answer
Pick on landed cost first, then check the minimum and the lead time. If the cheaper supplier needs more cash than you can spare, or takes weeks to deliver, the reorder point tells you how much stock to hold while you wait.
Planning estimate from the numbers on your quotes. Not legal, tax or financial advice.
Published by Groundwork Business Advisory. Updated October 24, 2026.