“We can save ₹8 per piece if we switch suppliers.”
The Purchase Manager expected everyone to agree.
Instead, the Plant Head asked one question:
“How much will we really save?”
The supplier’s price was lower.
But there was a catch.
The new supplier delivered in larger batches.
That meant more inventory.
Their lead time was also longer.
So production kept extra safety stock.
Then Quality found that the rejection rate was slightly higher.
Nothing looked serious on its own.
₹8 cheaper.
A little more inventory.
A few more rejected parts.
Some extra inspection.
But when Finance added everything together, the “cheaper” supplier was actually costing more.
The Purchase Manager cancelled the switch.
This is Total Cost of Ownership.
The buying price is only one part of the real cost.
Transportation, inventory, quality problems, inspection, delays and handling can all change the final number.
The cheapest price is not always the cheapest purchase.
A good buyer doesn’t ask, “What is the price?”
They ask, “What will this really cost us?
Now or Never
We’ve got your back on your manufacturing journey — Stay in touch
Follow us for step-by-step guidance, templates, and insights that save time and reduce mistakes.
Know Industrial Engineering Platform – Helping manufacturing industry professionals worldwide since 2019
Discover more from Know Industrial Engineering
Subscribe to get the latest posts sent to your email.
