It’s the warehouse store mentality: Buy it in bulk, save a bundle. Not so fast. Right about now you may be looking for every discount you can snag. Buying as many as you can carry of a particular supplier’s goods may seem like a good place to look.
Hold on! That strategy could cost you an additional 15% of the base price of those items, according to estimates in the Journal of Accountancy. The culprit? Carrying charges.
When you factor in storage, shipping, handling and spoilage, you may have just said “Sayonara” to those savings.
Figuring out whether it’s worth it
That doesn’t mean you should impose a ban on all large-volume buying. You just need those with purchasing power to put a little extra thought into deciding whether to jump at that volume discount or not.
Encourage them to break negotiations into the following three parts:
- What’s the basic price of the goods?
- How do the discounts correlate to order size?
- Are there any other discounts or fees based on the timing of the shipments?
When you scrutinize each part on its own, it’ll be a lot easier to see whether your organization’s actually getting a bargain by filling your warehouse to the brim.
If you can hammer out the shipment timing issue, so you’re closest to a just-in-time system, you’re probably better off.