Do you discount for quantity?

[Mayo]

A lot of what I do involves identical copies of "widgets". I've always struggled with figuring out how much (if any) discount to give for quantity orders.

How do you determine the amount of discount to give for any given quantity?

Design time has to be accounted for, as well as materials, overhead, related packing and delivery costs. Larger carton size and weight and shipping costs have to be accounted for when shipping larger quantity. This must all be built in.

If my quantity orders all basically stay within the normal sheet quantity I usually buy, my cost per square foot of material remains the same regardless of quantity, so instead of a half hour design time for one piece, it may be spread over 24 pieces. I'll have additional cutting time, cleaning parts time, packing time, and I'll be generating more waste from the off cuts that can't be used.

To off set the additional labor from multiple pieces, nesting may sometimes provide cost savings by getting more pieces per square foot.

If I charge $20.00 for one widget, but $18.00 each if you buy 2 to 12 widgets, that's 10% and sounds OK. But if you buy 13 to 24 widgets, it's only $16.00 each. So 13 costs less than buying 12. This now equals a 20% discount. And if you buy 25 to 48 pieces it's $15.00 each, so 25 costs less than buying 24. That's now a 25% discount.
Do I have too many price groups and too much of a discount?

Why would someone buy 12 when they could get 13 for less money, or why would they buy 24 when they could get 25 for less money?
I don't know, but they do. Maybe they don't need or want the extras.

I'm still making money on quantity orders but how do you determine if you're giving too much of a discount? If the discount is not enough, fewer sales result and it should become obvious, but the customer is rarely going to say "I don't think you're charging me enough".

[gundog]

I charge by the hour + material $50 an hour for design and $100 an hour for the actual work. I then estimate how long it will take sometimes I miss and don't make as much because it takes longer but I usually get real close. I have never done something in half the time I thought it would take.

Tool bits machine cost maintenance, electricity and profit all have to come off the labor rate. Material I don't up charge but many people do.

Mike

[genek]

Mayo I do not give discounts until they reach 100. The best way to figure out what you should get is this formula.


cost of material x 2 +
time per hour (cnc time) divided by the number of pieces you cut. +
Labor per hour Your time + 10% for overhead.

or you can simply do 3,000% markup of material.

[feinddj]

I always give a discount for quantity. The 500th one is free. You'd be amazed at how many want quantity pricing for the order that they are placing now that isn't because they soon will.

D

[Brady Watson]

I give qty pricing as well on everything from machining to scanning of collections of parts. I have minimums, which are too expensive @ qty, hence the discount. It is win-win for everyone.

-B

[Ger21]

If quantity discounts don't seem to add up, then you may not be charging enough for single quantities.

[chiloquinruss]

In my limited experience 'they' ask for a quantity discount, then when they place the order it's for a lot less qty, stating they didn't need as many as they thought. Now I quote the unit price, and if asked for qty break, I reply 'show me the order and I'll see what I can do'. :D

I charge for design time, bot time, and materials +. Russ

[Brady Watson]

In my limited experience 'they' ask for a quantity discount, then when they place the order it's for a lot less qty, stating they didn't need as many as they thought. Now I quote the unit price, and if asked for qty break, I reply 'show me the order and I'll see what I can do'.

Exactly & an important point to make. Be sure to have minimum charges for turning on your machine. One part might cost $150, whereas 100 pieces may cost $30 each. It all boils down to you getting paid for doing all of the legwork required to do the job - machining time is only a small portion of the entire job. Once you have a job of substantial quantity, toolpath optimization and tweaks like this, reduces machining time even further, as you discover what you can get away with on that particular part, while still maintaining enough quality to put your name on it.

Many times, especially for larger companies that tend to have a large accounts payable 'machine' to deal with, I charge them standard rate reflected as a discount if paid within 15 days. Otherwise, they pay 15% more if after 15 days. Most go for the discounted rate, and the pokey puppies who don't pay the 15% more for me being their bank.

Also, it is sometimes important to do a sample part before taking on the entire order, so that you can be sure you want the job & to verify the customer is happy with what you are going to do, so that there are no surprises when it comes time to collect your money. You should be charging for samples, which may or may not be discounted from the larger order should you get it. This way you are still getting paid for your time & verifying that the customer is in fact going to make good on his end. This allows you to feel out the customer to be sure that they aren't going to jerk you around. This is of course no guarantee - but it at least gives you a taste of how they are to deal with on a sample basis. They get no product until they pay, unless they are an existing customer in good standing.

-B

[genek]

In my limited experience 'they' ask for a quantity discount, then when they place the order it's for a lot less qty, stating they didn't need as many as they thought. Now I quote the unit price, and if asked for qty break, I reply 'show me the order and I'll see what I can do'. :D

I charge for design time, bot time, and materials +. Russ


Good Point Russ Thanks, you reminded me that I had left out design time on my equation.

[genek]

Exactly & an important point to make. Be sure to have minimum charges for turning on your machine. One part might cost $150, whereas 100 pieces may cost $30 each. It all boils down to you getting paid for doing all of the legwork required to do the job - machining time is only a small portion of the entire job. Once you have a job of substantial quantity, toolpath optimization and tweaks like this, reduces machining time even further, as you discover what you can get away with on that particular part, while still maintaining enough quality to put your name on it.

Many times, especially for larger companies that tend to have a large accounts payable 'machine' to deal with, I charge them standard rate reflected as a discount if paid within 15 days. Otherwise, they pay 15% more if after 15 days. Most go for the discounted rate, and the pokey puppies who don't pay the 15% more for me being their bank.

Also, it is sometimes important to do a sample part before taking on the entire order, so that you can be sure you want the job & to verify the customer is happy with what you are going to do, so that there are no surprises when it comes time to collect your money. You should be charging for samples, which may or may not be discounted from the larger order should you get it. This way you are still getting paid for your time & verifying that the customer is in fact going to make good on his end. This allows you to feel out the customer to be sure that they aren't going to jerk you around. This is of course no guarantee - but it at least gives you a taste of how they are to deal with on a sample basis. They get no product until they pay, unless they are an existing customer in good standing.

-B
Brady do you add the 15% on top of your price before you quote, or is that minus the normal price. Those that poke around paying I have a late fee. Large companies with me is net 15, small mom and pops are net 30. the reason I do this; larger companies have a bad habit of putting small companies off to the last minute. If they miss their 15 day limit there is a late fee of $50.00 after 30 days they go into 1.5% daily interest. If they get beyond 45 days Then they get a letter, and if they have not paid by 60 days, I file a small claims case with the court. In Ky there is a limit of how much I can file in small claims ($1,800.00) So No company gets any bill above that. I break their cost of product out onto separate bills to stay under that amount. That way I can take each bill to small claims court and collect.

[dlcw]

The law of manufacturing - your first part will cost $100,000. Each additional part will cost $1.99.

That is manufacturing. I have to educate all my quantity customers on this. I have some customers who want 100+ quantity pricing (wholesale) but only want to order 2 or 3. I tell them NO. Quantity pricing IS quantity pricing. There is a minimum number they must order to get quantity pricing otherwise it is full retail pricing.

I have some longer term customers who have been ordering stuff from me for 5 or more years. I give them a loyalty price break, even on smaller quantities. Good will.

[Brady Watson]

Brady do you add the 15% on top of your price before you quote, or is that minus the normal price. Those that poke around paying I have a late fee. Large companies with me is net 15, small mom and pops are net 30.

No. I quote them at the price I will charge them to pay in 15 days. The proposal and invoice match on price. However, only the invoice has the additional line with the 'after 15 days' price with 15% increase. Many customers are on a 50/50 basis, with 50% down & 50% on delivery. New and customers that are a pain to deal with pay 100% up front.

Your business model & 'product' are different than mine. Unless you are a *very* large job or existing customer of known quantity, there is no net greater than 15 days. I'm not running a bank. I don't care who you are, how big you are etc. I have enough feathers in my cap & quite frankly - feathers are over-hyped. You either agree to MY terms or we don't do business. Plain & simple. This has worked well for me because I am able to eliminate a lot of companies that I don't want as customers anyway. I can only comment on what has worked for ME - I recommend everyone find something that resonates with them. Never be sheepish about getting your money.


... I have some customers who want 100+ quantity pricing (wholesale) but only want to order 2 or 3. I tell them NO. Quantity pricing IS quantity pricing.

I have some longer term customers who have been ordering stuff from me for 5 or more years. I give them a loyalty price break, even on smaller quantities. Good will.

Exactly!!!

I don't want customers who shop solely on price. Yes it is a factor, but so is quality, integrity and serving the customer. Customers who 'get it', certainly get discounted/better pricing than average customers. If you give customers what they want, even though you may not be the cheapest, they pretty much always come back & sometimes mention they tried another shop only to wind up disappointed. Always do your best. It pays in the long run.

-B

[genek]

Brad I see you do not allow Burger King customers Either. lol... I have a sign in my shop, that reads (This is not Burger King (you can not have it your way.) It is either my way or not at all.) lol.

[chiloquinruss]

"it is sometimes important to do a sample part before taking on the entire order" Boy that is true, I thought I had a job pretty well thought out and the customer and I talked it over and he thought so too. Over the weekend I thought about it a little more and decided to do a 'one-off'! WELL what a shocker, it was a giant pain! When I got back with the customer and I showed him the issues he agreed, thanked me for taking the time to do the 'one-off' and we adjusted the price and parts of the project to make it possible to actually do the job. A good lesson learned. Russ