Objectively comparing supplier prices: Why market prices are crucial

If you work in purchasing, you are probably familiar with the following situation. You are sitting in a meeting, the supplier puts an offer on the table and claims with conviction: "This is our best possible price." A few minutes later, the familiar feeling of uncertainty arises in the room. Is this price really fair? Is it in line with the market? And how can this be assessed objectively?

Many companies compare offers using incomplete tables or purely historical values. But in a global and volatile market, that is no longer enough. Comparing supplier prices correctly means understanding the price structure and placing it in the context of market developments. This is precisely where the difference between a simple comparison and an objective evaluation process begins .

In this article, I will show you why supplier prices are often not comparable, why market prices play a decisive role, and how you can get a much clearer picture with better data. At the same time, I would like to convey to you how much strategic potential there is in modern price comparisonwhen it is no longer done intuitively, but professionally and based on facts.

This is why supplier prices are difficult to compare

When two suppliers appear to offer the same product, it is easy to assume that you should simply choose the cheaper option. However, this comparison is misleading at first glance. Upon closer inspection, it becomes clear that the same materials, personnel costs, and specifications can have completely different price structures.

One supplier calculates conservatively, another aggressively. One hedges against fluctuations, the other does not. Some base their calculations on the current spot market, others on long-term contract data. Some take advantage of discounts on raw material prices, others pass on price increases immediately.

If these factors remain invisible, a comparison is made that feels correct but is actually based on assumptions. Purchasing then works not with real prices, but with a feeling. An objective comparison only begins when both prices are viewed in relation to the market.

The difference between the asking price and the market price

This is the most important and, at the same time, most complex part of the entire price comparison process. Many purchasing departments evaluate offers without knowing how the price has developed in relation to the market. This is precisely what leads to incorrect assessments and weak negotiating positions.

The offer price reflects the individual situation of a supplier. It is composed of production costs, raw material costs, logistics costs, margins, risk premiums, and strategic decisions. These elements differ from company to company and lead to deviations that cannot be explained by the material alone.

The market price , on the other hand , is the objective price at which raw materials or materials are traded. It shows how the industry assesses the actual production costs. This price changes due to demand, energy prices, political decisions, shortages, or technical developments. It is dynamic and follows a clear logic.

If you only look at the asking price, you only see part of the picture. Only by comparing both prices can you obtain the crucial information and gain an understanding of the overall picture, the work involved, and not just the black figures.

Imagine that a supplier quotes a price for plastic granulate that is ten percent higher than your previous price. Your initial reaction would be to consider this price expensive. But if you know that the international polymer market has risen by twenty percent in recent weeks, you immediately realize that the offer is actually favorable. The supplier has not fully passed on the market development. In the reverse situation, the price remains stable on paper, even though the market has fallen. The offer appears solid, but in reality, the supplier has increased their margin without making this transparent.

If you use strategies such as market price tracking, raw material price analysis, or supplier benchmarking, a completely new picture emerges. You understand not only the price, but also the dynamics behind it. An offer price is never a market price. Anyone who confuses these two values loses the objective comparison and thus the basis for any informed decision.

How commodity price benchmarks increase transparency

Once you know market prices, the entire price comparison process changes. You can immediately see whether a deviation is based on real costs or individual calculations. You can tell whether a supplier is charging a fair price or whether their pricing strategy no longer fits your market position.

English technical terms such as price benchmarking, market-aligned pricing, and commodity-based costing show the direction in which modern purchasing departments are developing. They are moving away from subjective evaluation and working with real key figures.

Imagine you are comparing two suppliers for a metal component. Both deliver similar quality. One is noticeably more expensive. Without a reference, this supplier appears unattractive. With a raw material price benchmark analysis , however, you can immediately see that the lower price was only achieved through outdated material costs. The higher price is more accurate, realistic, and sustainable. With this knowledge, you can change your negotiations. You no longer talk about numbers, but about facts. You negotiate strategically, not blindly.

How an objective price comparison works

A modern price comparison follows a clear structure. First, the pure offer prices are collected. They are then compared with market prices based on commodity indices, energy prices, and global trends. The deviation is then analyzed. Finally, an assessment is made as to which pricing strategy best suits your own situation.

Many companies use professional tools for this purpose, but even without complex software, this approach forms the basis for an objective process. It is crucial that the market is not excluded. As soon as external price developments are taken into account, subjective impressions lose weight and real figures gain in importance.

Where full-service providers such as costdata® can help

Even though this article does not focus on advertising, it is worth mentioning at this point that companies such as the full-service provider costdata® can take care of these analyses for you. They combine raw material price databases, calculations, and benchmarks to produce a clear assessment.

With this support, you don't just get a simple table, but a professional assessment of market prices, offer prices, and deviations. This facilitates internal discussions and strengthens your position in negotiations.

Objective price comparisons provide clarity

When evaluating supplier prices, you should never rely solely on the quoted price. Only a comparison with the market shows how the price really ranks. An objective price comparison protects against wrong decisions and improves every negotiation.

The difference between the asking price and the market price is the decisive factor. Those who understand this make better decisions, recognize hidden risks, and leverage the power of modern market transparency. This results in a price comparison that is clear, well-founded, and strategic.