Sourcing
Identify needs and find the right suppliers
Phases 1–2Analysis
RFQ, TLC calculation, and supplier evaluation
Phases 3–5Contracting
Negotiate, formalise, and place the order
Phases 6–7Execution
Logistics, receipt, payment, and improvement
Phases 8–12Why Total Landed Cost is Central to This Roadmap
Traditional procurement focuses on unit price as the primary decision metric. However, in global sourcing, the unit price represents only a fraction of the true cost of acquiring goods. Customs duties, freight, insurance, brokerage fees, warehousing, last-mile delivery, and risk provisions can add 20–60% or more to the unit price depending on the product category and origin country. This roadmap integrates TLC thinking at every phase — from supplier selection through to performance review — so that every procurement decision is made on the basis of true economic value rather than headline price.
The 12-Phase Procurement Roadmap
Follow these phases in sequence for a structured, professional procurement process.
Needs Identification
Define what you need to buy
Every procurement journey begins with a clear, documented understanding of what the organisation needs. This phase establishes the specification, quantity, quality standards, and timeline that will guide all subsequent decisions.
Key Actions
- Define product specifications, quality standards, and required certifications
- Estimate quantity requirements and desired delivery schedule
- Identify any regulatory or compliance requirements for the destination market
- Obtain internal budget approval and establish target unit cost
Pro tip: The more precisely you define your requirements upfront, the more accurate your Total Landed Cost estimates will be at every subsequent stage.
Market Research & Supplier Identification
Find and shortlist potential suppliers
With requirements defined, the next step is identifying suppliers who can meet them. This involves researching both local and international markets, evaluating supplier capabilities, and building a shortlist of credible candidates.
Key Actions
- Research domestic and international supplier markets
- Evaluate supplier certifications, production capacity, and track record
- Assess geopolitical and supply chain risk by country of origin
- Build a shortlist of 3–5 qualified suppliers for further evaluation
TLC Connection
Geographic location directly drives freight cost, transit time, customs duty rates, and currency risk — all major components of Total Landed Cost. A supplier in a nearby country may carry a higher unit price but a significantly lower TLC.
Pro tip: Always evaluate suppliers from multiple geographies before shortlisting. The lowest unit price rarely equals the lowest landed cost.
Request for Quotation (RFQ)
Obtain comparable quotes from suppliers
An RFQ is a formal document sent to shortlisted suppliers requesting a detailed price quote based on your specifications. Standardising the RFQ format ensures you receive comparable responses that can be evaluated on equal terms.
Key Actions
- Issue a standardised RFQ document to all shortlisted suppliers
- Specify Incoterms (FOB, CIF, DDP, etc.) to define cost and risk transfer points
- Request itemised pricing: unit price, packaging, minimum order quantity (MOQ)
- Ask suppliers to declare country of origin and HS tariff codes
- Set a firm deadline for quote submission
TLC Connection
The Incoterm agreed in the RFQ determines which cost components fall on the buyer versus the supplier. For example, under FOB the buyer bears all freight and insurance costs, while under DDP the supplier covers all costs to the destination — dramatically changing the TLC calculation.
Pro tip: Always request quotes on the same Incoterm basis so comparisons are meaningful. FOB origin is a common standard for TLC analysis.
Total Landed Cost Analysis
Calculate and compare the true cost of each supplier
This is the most critical analytical step in the procurement process. Rather than comparing unit prices alone, TLC analysis adds all costs incurred from the supplier's facility to your warehouse — giving a true, like-for-like comparison across all suppliers regardless of geography.
Key Actions
- For each supplier, calculate: freight, insurance, customs duty, VAT/GST, brokerage, port handling, last-mile delivery
- Apply the correct customs duty rate using the product's HS code and destination country
- Account for currency exchange costs and payment terms (advance payment, LC, open account)
- Include a defect allowance based on supplier quality history
- Rank suppliers by Total Landed Cost Per Unit, not unit price
TLC Connection
This step IS the TLC calculation. Use the Terbit TLC Calculator to model each supplier's full cost profile side-by-side. The supplier comparison feature lets you evaluate up to three suppliers simultaneously with a visual cost breakdown.
Pro tip: A 5% difference in unit price can easily be reversed by a 3% duty rate difference or a higher freight cost. Always run the numbers before making a sourcing decision.
Supplier Evaluation & Due Diligence
Verify capability, quality, and compliance
Before committing to a supplier, conduct thorough due diligence to verify that their capabilities, quality systems, and ethical standards meet your requirements. This protects against supply disruptions, quality failures, and reputational risk.
Key Actions
- Request and review quality management certifications (ISO 9001, etc.)
- Conduct factory audits — in person or via third-party audit firms
- Verify financial stability and production capacity
- Check references from existing customers
- Assess ESG (Environmental, Social, Governance) compliance
- Confirm export licensing and regulatory compliance in the origin country
Pro tip: A supplier with a slightly higher TLC but a strong quality track record often delivers better total value than a cheaper supplier with high defect rates.
Negotiation
Secure the best terms across all cost dimensions
Negotiation in procurement extends well beyond unit price. Armed with a detailed TLC analysis, buyers can negotiate on multiple levers simultaneously — including payment terms, Incoterms, packaging, minimum order quantities, and quality guarantees.
Key Actions
- Use TLC data to demonstrate the full cost impact of each negotiation lever
- Negotiate Incoterms to shift freight and insurance responsibility where advantageous
- Discuss volume discounts and long-term pricing agreements
- Negotiate payment terms to reduce financing costs (net 60/90 vs. advance payment)
- Agree on quality acceptance criteria, inspection rights, and defect remedies
- Document all agreed terms in a formal term sheet before contract drafting
TLC Connection
Every negotiation outcome directly changes the TLC. A shift from 30% advance payment to open account terms, for example, reduces your payment terms cost. Re-run the TLC Calculator after each negotiation round to quantify the impact.
Pro tip: Never negotiate on unit price alone. A supplier who reduces unit price by 2% but removes free-on-board freight may actually increase your TLC.
Purchase Order & Contract
Formalise the agreement
Once terms are agreed, they must be formalised in a legally binding contract and purchase order. This documentation protects both parties and establishes the exact obligations, delivery schedule, and remedies for non-performance.
Key Actions
- Issue a formal Purchase Order referencing agreed unit price, quantity, and Incoterms
- Ensure the contract covers: delivery schedule, quality specifications, inspection rights
- Include force majeure, dispute resolution, and governing law clauses
- Specify packaging, labelling, and documentation requirements
- Confirm import/export documentation requirements (commercial invoice, packing list, COO, etc.)
Pro tip: Ensure the contract explicitly states the Incoterm and point of delivery. Ambiguity here is a common source of unexpected landed cost increases.
Logistics & Shipment Management
Manage the physical movement of goods
With the order placed, the focus shifts to managing the physical supply chain — from production monitoring through to customs clearance and final delivery. Proactive logistics management prevents delays and unexpected cost overruns.
Key Actions
- Confirm production schedule and pre-shipment inspection date with supplier
- Book freight with your freight forwarder and confirm booking details
- Arrange cargo insurance for the shipment
- Prepare and verify all export and import documentation
- Track shipment in transit and manage any delays proactively
- Coordinate customs clearance with your broker at the destination port
TLC Connection
Actual freight costs, port handling charges, and storage fees incurred during this phase should be recorded and compared against your TLC estimate. Variance tracking improves the accuracy of future TLC calculations.
Goods Receipt & Quality Inspection
Verify delivery against purchase order
Upon arrival, goods must be inspected against the purchase order specifications before acceptance. This is the final quality gate before the goods enter your inventory and the supplier is paid in full.
Key Actions
- Conduct a quantity count against the purchase order
- Perform quality inspection per agreed acceptance criteria
- Document any shortages, damages, or quality non-conformances
- Issue a Goods Receipt Note (GRN) and update inventory records
- Initiate claims or supplier corrective action requests for any issues found
Pro tip: Actual defect rates observed here should feed back into your defect allowance assumptions in future TLC calculations for this supplier.
Invoice Verification & Payment
Reconcile costs and release payment
Before releasing payment, all supplier invoices and third-party cost invoices (freight, brokerage, duties) should be verified against the purchase order and TLC estimate. This is also the point at which actual landed cost is finalised.
Key Actions
- Match supplier invoice against purchase order price and quantity
- Verify freight, brokerage, duty, and VAT invoices against estimates
- Calculate actual Total Landed Cost and compare to the original TLC estimate
- Approve and release payment per agreed terms
- Record actual costs in your procurement system for future reference
TLC Connection
Comparing actual TLC to estimated TLC reveals where your cost model was accurate and where it needs refinement. Over time, this feedback loop makes your TLC estimates increasingly precise.
Supplier Performance Review
Evaluate and improve the supplier relationship
Ongoing supplier performance management ensures that the value promised during negotiation is consistently delivered. Regular reviews build stronger supplier relationships and identify opportunities for continuous improvement.
Key Actions
- Score supplier on: on-time delivery, quality conformance, documentation accuracy, responsiveness
- Review actual TLC versus estimated TLC for each order
- Identify root causes of any cost overruns or quality issues
- Share performance feedback with the supplier and agree improvement actions
- Update your supplier scorecard and adjust future sourcing decisions accordingly
Pro tip: Track TLC variance over multiple orders. A supplier whose actual TLC consistently exceeds estimates is a hidden cost risk that may justify switching sources.
Continuous Improvement & Optimisation
Refine your procurement strategy over time
World-class procurement is a continuous improvement discipline. Each procurement cycle generates data that can be used to refine cost models, strengthen supplier relationships, reduce risk, and improve the accuracy of future TLC calculations.
Key Actions
- Update TLC cost assumptions based on actual data from completed orders
- Review freight rate benchmarks and renegotiate logistics contracts annually
- Monitor changes in customs duty rates, trade agreements, and tariff classifications
- Explore opportunities for supply chain consolidation, nearshoring, or dual-sourcing
- Invest in procurement technology to automate TLC calculations and supplier data
TLC Connection
As trade agreements evolve (e.g., preferential duty rates under FTAs), the TLC for existing suppliers can change significantly. Regular TLC reviews ensure your sourcing decisions remain optimal.