What’s your first instinct?
For many leaders, it’s to assume that something’s wrong: Someone is paying too much. Procurement isn’t doing its job properly. Suppliers are taking advantage.
In my experience, that’s not the right place to start.
When I see price differences across a business, I’m more interested in understanding why they exist. I’ve seen price differences that reveal opportunities to reduce costs. And I’ve also seen situations where the differences were entirely justified, driven by factors like volume, service requirements, and operational priorities.
The issue isn’t that different prices exist. The more important question is whether the business understands why those differences exist and whether they’re justified.
The Lowest Price Is Often the Wrong Starting Point
One of the biggest misconceptions I encounter is the assumption that the lowest price is automatically the best outcome.
On the surface, pricing comparisons can look straightforward. One business unit appears to be paying less than another, so the natural conclusion is that someone negotiated a better deal.
In reality, those comparisons are rarely that simple.
A supplier may be providing different service levels, delivery commitments, payment terms, or contractual arrangements. One team may be prioritizing cost, while another is prioritizing responsiveness, availability, or continuity of supply.
Before drawing conclusions, I’d want to establish whether we’re genuinely comparing like for like. Which isn’t always easy. The product may be the same, but the commercial arrangement around it often isn’t. What looks like a pricing difference may actually reflect different operational requirements, contractual commitments, or business priorities.
That’s why I don’t see lowest price and best outcome as the same thing.
The strongest commercial outcome is the one that delivers the right balance of cost, quality, service, and risk for the organization.
Some Pricing Differences Are Exactly What You Should Expect
I would actually be surprised to find a large organization with no pricing variation at all. In most businesses, there are perfectly legitimate reasons why different sites, regions, or business units achieve different commercial outcomes.
Volume is one of the most obvious. Larger operations often secure stronger rates because they purchase greater quantities and represent more significant opportunities for suppliers.
Contract timing can also influence outcomes, with different agreements negotiated under different market conditions.
I’ve also seen operational priorities drive pricing differences. A function that values speed and responsiveness may make very different buying decisions from one focused primarily on cost reduction. Both approaches can be commercially sensible if they support the needs of the business.
Regional factors matter too. In categories such as facilities maintenance, labor costs and local market conditions can vary significantly between locations. Expecting every site to achieve identical pricing is not always realistic.
I wouldn’t automatically view pricing variation as a problem.
In many cases, it’s simply a reflection of how different parts of the organization operate, and the requirements they’re trying to meet.
The important question is whether those differences are understood and justified.
What Pricing Variation Tells Me About Procurement Maturity
When nobody can explain pricing variation, that’s usually when I stop looking at pricing and start looking at procurement controls.
One of procurement’s fundamental responsibilities is maintaining visibility of organizational spend. When business units source independently, negotiate separately, or operate with limited coordination, that visibility can quickly become fragmented. Over time, that can lead to inconsistent commercial outcomes, duplicated effort, and missed opportunities to leverage the organization’s total buying power.
Mature procurement functions don’t necessarily eliminate every pricing difference. They understand them. They know where pricing varies, why it varies, and whether those differences are justified.
When that understanding doesn’t exist, pricing variation can often point to broader challenges, including:
- Weak category management
- Limited spend visibility
- Off-contract spend
- Inconsistent sourcing practices
- Governance gaps
- Poor coordination across the organization
In those situations, the pricing difference itself isn’t usually the biggest issue.
It’s a symptom.
The bigger question is why the organization can’t explain it.
Sometimes the Most Valuable Insight Is the Site Paying Less
When organizations discover pricing differences, the conversation often focuses on the sites paying more.
That’s understandable.
But I’ve found that some of the most valuable insights come from understanding why another part of the business achieved a better outcome.
A business unit may have negotiated more effectively, secured stronger commercial terms, or adopted buying practices that could be applied more widely across the organization. Those examples can provide valuable internal benchmarks. Understanding what’s driving stronger outcomes can often create more value than focusing solely on the areas paying more.
When a Pricing Review Becomes a Governance Review
One example stands out because it illustrates how pricing investigations often uncover something much bigger than pricing.
A client had an ERP system configured to flag invoices that did not match agreed pricing. When we investigated a number of discrepancies, we found that a supplier had continued charging outdated rates following a contract price change. The result was a prolonged period of overcharging that required backdated corrections and credits.
Initially, it looked like a supplier pricing issue.
The ERP system had actually worked exactly as intended. The discrepancies had been identified. The alerts had been raised.
The real issue is what happened afterwards.
The corrective actions were not being followed through to resolution. What appeared to be a pricing problem ultimately exposed a governance and process gap.
This is one of the reasons I find pricing reviews so valuable. They rarely just tell you what you’re paying. They often reveal how effectively an organization manages exceptions, enforces controls, and turns insight into action.
Start With Understanding, Not Standardization
If I were advising an executive team that had just discovered different prices across the organization, I’d start by understanding why those differences exist. I’d want to know whether the comparison was genuinely like-for-like. I’d want to understand whether differences were being driven by volumes, service levels, contract timing, regional factors or operational priorities. I’d also want to identify whether there were any underlying governance or control gaps.
Only once those questions had been answered could we decide whether action was needed.
In my experience, the presence of different prices is rarely the most important finding. The most important finding is whether the organization can explain them. If it can, the variation may be entirely justified. It may even highlight examples of good commercial practice that deserve wider adoption.
If it can’t, the pricing difference is often the first sign of a much larger opportunity to improve visibility, governance and commercial performance.
Different prices are common.
The important thing is whether organizations can explain them.