I do agree with your points I recently burnt my fingers in using the old techniques of sourcing. Many LCD vendors refused to agree on the costing based on volumes.
If the price is an ART FORM where no formula fits then it is difficult to quantify the gain or loss for a buyer enetring into the negotiations with a supplier. Because each party will be applying its own criterion onto what price is the best.
Ultimately as long as you recover that price from the products you make with a healthy profit margin , that price should be good.
So in my opinion the buyer should decide the best purchasing price first and lead his/her negotiations with the supplier in that direction.
It is difficult to let go of the perceptions we have on pricing--that it is a fixed price determined by cost to manufacture plus markup. Like Ken, I don't have the math background to go much deeper than that, but the factors he mentions, such the supplier's desire to do business with you, is very much a part of the equation. The data seems to illustrate the point more drastically than I would normally imagine, but for folks that require data to illustrate a point, the chart above is pretty compelling.
There are always prejudices, with volume pricing there can be the prejudice towards an agency, but these days, agencies get short shrift, - unless they provide other significant value adding items there is no respect as such, and really no reason for it, and with all companies doing business over the internet, almost nobody holding significant stock any more, why should a manufacturer do anything but sell according to their product manufacturing cost, the cost of packing, and the freight.
Rather than saying that there is no relation between volume and price, i would assert that the price spead decreases with the volume. The high price spread at low volume depends on many factors, as also stated in the article but with high volume purchase the buyers can put more chips on the table and negotiate harder.
Until one look at the data closely, it is difficult to say with certainity what is happening. I do not think that it is crystal clear from the above graph about the assertion that there is no relationship.
Ken, but normally we experienced that pricing are inversely proportional to the quantity. I mean for lesser order, pricing may be little bit higher per piece and for bulk order; the individual pricings are kept in lower side. Again, the pricing is based on demand and availability.
We seem to have lost the ability to control our destiny. You work hard but fall farther behind. You can’t count on much to be "as expected" in the future.
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Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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