Volume discount purchasing

Site arrangements vary. The site may be leased by the industrial gas supplier or it may be purchased outright. Utilities are most often supplied by the customer because volume discount based on a much larger usage for a refinery or petrochemical plant offers a significant savings. 

As shown in Table 1, there are many kinds of pricing decisions that a firm must make. There is the decision on the specific price to set for each product and service marketed. But this spedflc price depends on the type of customer to whom the product is sold. For example, if different customers purchase in varying quantities, should the seller offer volume discounts ... 

Diapers are a steady-selling item at the retail store. Yet, in the past, Procter and Gamble (P G) faced large demand swings that percolated through the supply chain. These demand swings, termed the bullwhip effect, caused increased order volatility to suppliers and plants. One reason for such volatility was the different price brackets that were offered to retailers every day. Every retailer adjusted orders to attain the lowest cost procurement price for products. In addition, they offered products with volume discounts, discounts for joint purchases, customer backhaul discounts, and so on. The net effect was that the orders, i.e., demand seen by P G, was unpredictable, even if retail demands were reasonably stable. The impact of these demand fluctuations was substantial. Additional plant... 

The horizontal cooperation that was initiated in the 1990s allowed small and medium supermarket stores to secure large purchases to achieve higher volumes, discounts, and improved purchasing... 

A key distinction between lot-size-based and volume discounts is that lot-size discounts are based on the quantity purchased per lot, not the rate of purchase. Volume discounts, in contrast, are based on the rate of purchase or volume purchased on average per specified time period (say, a month, quarter, or year). Lot-size-based discounts tend to raise the cycle inventory in the supply chain by encouraging retailers to increase the size of each lot. Volume-based discounts, in contrast, are compatible with small lots that reduce cycle inventory. Lot-size-based discounts make sense only when the manufacturer incurs high fixed cost per order. In all other instances, it is better to have volume-based discounts. 

Georgia will receive a transit fee corresponding to 5% of the actual amount of the transported gas (i.e. 0.5 bcm for 2010). Under the most optimistic conditions the revenues correspond to the value of 1 bcm of natural gas. This will be the case for 2020 when the throughput of the pipeline is assumed at 22 bcm (including 20 bcm transit volumes for Turkey and Europe). In addition, Georgia will have the right to purchase a maximum amount of 0.5 bcm of gas annually at a discounted price (US 55 per 1000 m3 reckoned from 2005. The price will be increased by 1.5% per year). 

Another option used by pharmacies is to purchase directly from a pharmaceutical manufacturer. However, many manufacturers have substantial minimum purchase requirements, making it less favorable to buy from the manufacturer. Pharmacies may be receiving discounts based on volume purchased from the wholesaler thereby giving an incentive to the pharmacy to buy most of its products from one wholesaler. Wholesalers also offer next-day delivery and other value-added services that help pharmacy managers minimize inventory costs. Thus most pharmacies do not purchase products from manufacturers very often. 

Publication in LNP is free of charge. There is no formal contract, no royalties are paid, and no bulk orders are required, although special discounts are offered in this case. The volume editors receive jointly 30 free copies for their personal use and are entitled, as are the contributing authors, to purchase Springer books at a reduced rate. The publisher secures the copyright for each volume. As a rule, no reprints of individual contributions can be supplied. 

Authors receive jointly 30 complimentary copies of their book. No royalty is paid on Lecture Notes in Physics volumes. But authors are entitled to purchase directly from Springer other books from Springer (excluding Hager and Landolt-Bornstein) at a 33 % discount off the list price. Resale of such copies or of free copies is not permitted. Commitment to publish is made by a letter of interest rather than by signing a formal contract. Springer secures the copyright for each volume. 

Pharmacies often choose one pharmaceutical wholesaler and esfablish a prime vendor relationship. The prime vendor relationship is an agreement that stipulates that the pharmacy will purchase a set amount of drugs from the wholesaler. In return for guaranteed purchases, wholesalers provide a discormf to fhe pharmacy. As parf of the agreement, wholesalers may provide further discounts based on purchase volume. Some pharmacies might also retain a secondary wholesaler to use as an alternative source of pharmaceuticals. However, purchases from fhe secondary wholesaler are usually kept to a minimum so as not to jeopardize quantity discounts from the primary wholesaler. 

This can be further enhanced by realizing the quantity discounts that will become available because of the company s increased volumes and its redesigned purchasing processes. This will apply to almost all mergers and acquisitions in which product overlaps exist... 

An individual item of PPE may pass through several vendors between its point of manufacture and the point of sale to the person responsible for the health and safety of a pesticide handler. Along the chain, there is an opportunity for mark-ups and discounts the magnitudes of which are highly dependent on the volume of the purchase and the market conditions. Vendors and distributors are constantly changing prices in order to reflect changing raw materials costs, labor costs, and competition. For all these reasons, item-by-item price information is not included in this discussion. 

Authors receive a total of 50 free copies of their volume, but no royalties. They are entitled to a discount of 33.3% on the price of Springer books purchased for their personal use, if ordering directly from Springer. 

Perhaps the most difficult aspect of the pricing decision is to develop the procedures and policies for administering prices. Up to this point, the issue has been on the setting of base or list prices. However, the fist price is rarely the actual price paid by the buyer. The decisions to discount from list price for volume purchases or early payment, to extend credit, or to charge for transportation effectively change the price actually paid. In this section, we consider the problems of administering prices. 

Estimates of working capital requirements fall Into four cireas inventories, accounts receivable, cash in hand, and current liabilities. To estimate these, it is necessary to consider the different production stages in which materials can be found, wdiich are (1) raw materials paid for but not received (a portion of current assets) (2) raw materials on hand but not paid for (a portion of current liabilities) (3) materials in process (4) finished products in store whether on-site orpff-site and (5) finished prod-ucts delivered to customers but not yet paid for (accounts receivable). The calculation of the amounts of each of these material inventories depends on such factors as distance from raw material suppliers, types of contracts for raw material purchases, raw material purchase fh nancing methods, quantity discounts and lot sizes available for raw materials, available modes of transportSition, cost of storage facilities, plant size and capacity, seasonality of sales volumes, marketing system, and customer credit policies. 

Quantity discounts refer to the practice of offering lower prices for large volume purchases. There are two types of quantity discoimts offered by vendors as follows ... 

Discounts earned This may be a credit or cash payment for volume purchases. Equipment rental Perhaps this is income from rental of some of the company s equipment to other contractors. 

---