Chuz, I fail to see why a supplier should want to give discounts to its largest customers based on size of order not rate of consumption. Suppose customer A orders 240,000 per month while customer B orders 8000 per day. Expressed as rate of purchase per month these customers are equally important. Yet, according to you, the supplier who gives quantity discounts will offer a lower price to customer A.
But why should this be? I would think, other things being equal, the supplier would want to offer the lower price to customer B. The supplier (Intel, Seagate, etc) will want to minimize its finished goods inventory. Customers which make infrequent, large purchases (e.g. CPQ) make it necessary for the supplier to carry a larger inventory. Customers like Dell, which make frequent, smaller purchases allow the supplier to smooth out inventory and carry less of it. Customers like CPQ impose costs on the supplier (higher capital costs), therefore I would expect them to pay a higher price.
Of course, whether CPQ in fact pays less than Dell for components is an empirical question. Have you seen recent data?
Geoff |
