Volume Discounts opinions?

[Outdoor84]

Just a question.

Is there a chart for general discounts for volume orders from China/Taiwan

MOQ is 1000 units.....

What if I get 10,000 units?

Say my per unit cost MOQ has worked out to $5 as an example.

Is there a general consensus about these things.

I was doing small posters in Toronto and was quoted.. 1= $30 1000=$1 and 10000= $.25


Thanks for any assistance.

 

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[Walter Hay]

You won't find any such chart unless the supplier publishes a price list. In any case you will most likely be disappointed to discover that the reality of discounts for volume is that they are small.

Negotiating the best price to start with is the best way to go. People very often think they have found the best supplier because to their eyes the price looks very low. If you follow the right methods to get quotes, as outlined in my book, you can be reasonably confident that you are in fact getting the best price.

As a guide to the real situation, here's a brief extract from a price list published by one of my former suppliers from whom I and my former franchisees ordered several million dollars worth of goods over a long period:

Unit price in US$
100 200 300 500 1,000 2,000
0.76 0.74 0.72 0.67 0.64 0.62

5,000 10,000 20,000 50,000
0.60 0.56 0.53 0.505

You will observe a few things:

• The first decent price break starts at 1,000 pcs. This is because that is the practical cost effective production run size that amortizes set up costs.
• The next good price break starts at 10,000 pcs. This is the point at which production efficiency really kicks in.
• Finally, by the time they get to a price for 50,000 pcs, there is no real improvement in economy of scale. At this stage they are cutting margins to a fine margin, so much so, that even .005 c is worth them asking.
• The volume discount amounts to 32%, but that deduction is closely related to their actual costs. If a supplier can't themselves obtain volume discounts for materials, and if they can't make real efficiency gains for increasing volume, they can't pass them on to you.

You will rarely find Chinese suppliers offering incentive volume discounts in the way we see in western countries. They really do work on a cost + basis. Initial quotes might be on a "what the market will bear" basis, but once you have succeeded in negotiating a price at or close to their real cost + basis, there is not a lot of room for them to move.

Bear in mind that they have to factor in exchange rate fluctuations, and the rises and falls in commodity prices. For this reason, don't condemn them if for your next order they quote a higher price. It might be due to those factors, or it could be due to them believing they have you as a captive customer. This is why you should always find backup suppliers.

Walter
EDIT. Sorry the list didn't format properly. If readers can't make sense of it I'll try again.

 

[G-Man]

@Walter Hay You are a very helpful guy. I saw this question when OP posted and kind of decided it seemed like the sort of question someone asks when they haven't taken the time to google.