“Leveraging the power of a BOM with volume discount and optimizing procurement costs through volume-based pricing arrangements”.
A renowned global leader in motion control and robotics, understood the significance of utilizing Gainfront’s Bill of Materials (BOM) with volume discount considerations. Through our digitized tool, they enhanced their supply chain management, improved cost control, and enhanced profitability.
Client Profile
This client is the world’s largest manufacturer of AC Inverter Drives, Servo and Motion Control, and Robotics Automation Systems. Their products are marketed through a network of subsidiaries and distributors in over 100 countries.
- They have shipped nearly 500,000 units of industrial robots all over the world.
- They provide advanced solutions that enhance productivity, efficiency, and safety in industrial operations.
Requirements/ Challenges
The client procures a variety of items in bulk amounts, including iron and steel, wire and cable, insulators, electronic components, and more. Additionally, they have a procurement policy that aims to ensure optimal procurement and good supplier relations.
Despite maintaining such high standards, this client faced some serious challenges as they did not adopt a digitized tool to optimize procurement and cost:
- They missed out on cost-saving opportunities as they failed to capitalize on volume discounts. As a result, they were unable to determine the optimal order quantity to maximize their cost efficiency.
- Often, the client ended up ordering smaller quantities at higher prices, leading to increased procurement expenses and reduced profitability.
- The client could not optimize their supply chain operations and struggled with inventory levels and frequently experienced stockouts.
- This client could not offer more competitive pricing due to their higher production costs.
Solutions
Gainfront’s Bill of Material (BOM) brought significant value to the client’s procurement processes in terms of volume discount negotiations.
By providing a detailed breakdown of the components and quantities required for a product or project, our digitized BOM enabled the client’s procurement teams to leverage volume discounts from suppliers.
Our BOMs enabled the client to compare quotes on both unit price and quantity based on volume pricing. Thereby, the client’s procurement teams could analyze total costs to identify the most cost-effective option.
By leveraging volume discount, the client could order larger quantities at reduced prices. As a result, procurement expenses were reduced, and profitability was improved.
The BOM with volume discount optimized the client’s supply chain operations, ensuring optimal inventory levels, mitigating stockouts, and enhancing overall performance.
With the cost savings achieved through our BOM volume discount, the client could offer more competitive pricing to their customers.
Benefits
Volume discounts reduced the cost per unit of a product, leading to significant cost savings.
At the same time, by purchasing in bulk, the client improved inventory management and supply chain efficiency.
Additionally, by working with suppliers to negotiate volume discounts, the client, built trust and collaboration with them, leading to better pricing and service.
Our BOM with volume discount allowed the client to purchase more products with the same budget, increasing their purchasing power.
Above all, our solution helped the client gain a competitive edge in the market and attract more business opportunities.
Rahul Asthana has a PhD in Operations Management from the Anderson School at UCLA. He has 25 years of experience in supply chain management, starting his career in IBM working in supply chain operations. He then moved into product management and product marketing of supply chain software while at SAP and Oracle. He manages product strategy and product management at Gainfront. In terms of hobbies outside of work, he really enjoys tennis. Follow Rahul Asthana on Linkedin!
