Configure Vendor with volume discounts for units or components

Description

This requirement mandates that, when planning by vendor, the CPM system can be configured with different contractual rules that apply discounts or penalties based on an expected volume purchases from that vendor. This is useful for businesses that acquire manufacturing components in bulk, or white-label a product.

Example Use Case

Scenario: A manufacturing company purchasing raw materials in bulk from multiple vendors is using a CPM software tool. Prices vary based on the volume of purchased units and each vendor provides different discounts.

Solution: To monitor the cost of goods, the company uses CPM software to configure each vendor with their corresponding volume discounts. For example, Vendor A provides a 5% discount for purchases exceeding 1,000 units, which is then automatically calculated and accounted for in the planning and budgeting processes in the CPM software.

Considerations

“Vendor” is most useful when added as a dimension, as this provides the most flexibility in a CPM tool for budgeting, forecasting, and applying calculations. For this to work well, the system must accommodate sufficient dimensionality and be able to store the amount of vendors you are working with plus whatever may be loaded in the future. For example, you may be working with 20 vendors today. In three years, you might have 2000. Make sure the system can scale with your growth.

Volume discounts should be accurately reflected for each vendor. As such, automated calculations will help prevent human error and reduce the amount of maintenance required as vendor contracts are re-negotiated over time. Make sure it is easy to make those changes without engaging a consultant.

Questions to Ask a Vendor

• Vendor Planning: Are we able to have a dimension for Vendor and play purchases against those vendors?
• Data Flow: Will the system support loading in information by vendor in an automated manner for each time period we require?
• Automation Capabilities: Does your CPM software support the automatic application of volume discounts from vendors?
• Flexibility: How easily can volume discount rates be changed or adjusted in the system as vendor terms change?
• Linkages: Can this be tied to our product demand forecast in order to populate purchases we need to make from vendors to fulfill our customer obligations?