Supply Chain
Quantity Discount (Price Break) Calculator
Whether a price break is worth the stock it makes you hold. A supplier offers a lower unit price for a bigger order, which pulls in two directions at once: the goods cost less and every unit of the extra inventory costs you money all year. The answer is not the deepest discount, and it is not the plain order quantity either — you have to price each break as its own plan and compare the totals.
Inputs
- Annual demand
- Cost to place one order — Paperwork, inspection, receiving and freight per order — whatever does not scale with the size of it.
- Annual holding cost, as a share of unit price — Storage, insurance, obsolescence and the cost of the money tied up. A share rather than a dollar figure, so a cheaper unit is correctly cheaper to hold. 15 to 30% is usual.
- Price breaks the supplier offers — Including the base price as break 1, at a minimum quantity of 0.
- Break 1 — order at least — Break 1 is the ordinary price, so its minimum is usually 0.
- Break 1 — unit price
- Break 2 — order at least
- Break 2 — unit price
- Break 3 — order at least
- Break 3 — unit price
How to use this calculator
- Enter your annual demand, what one order costs you to place, and the holding cost as a PERCENTAGE of unit price. The percentage matters: a cheaper unit is cheaper to hold, and a flat dollar figure would hide half the effect a discount has.
- Enter each break the supplier offers as a minimum quantity and the unit price it buys. Break 1 is the ordinary price, usually from a minimum of 0.
- Read the per-break rows first. Each one is a complete plan — the order size it implies, and what a year of it costs all in — and they are what the decision is actually between.
- Look at whether the winning break was RAISED to its minimum. If it was, you are buying inventory you did not want in order to reach the price, and that is a number to take back to the supplier.
- Compare the winner with the cheapest unit price. When those are different rows, the discount that looks best on the quote is not the one that costs least, which is the reason this calculation exists.
- Treat a win of under a percent as a tie, and decide it on the things this cannot see: the cash tied up on delivery day, the shelf space, and whether the product will still be current when you reach the end of the pile.
What each term means
- Price break
- A quantity at which the supplier's unit price drops. Under all-units discounting, reaching it re-prices the whole order, not only the units above the line.
- Holding rate
- Annual holding cost as a share of unit price: storage, insurance, shrink, obsolescence, and the cost of the money tied up. 15 to 30% is the usual range.
- Adjusted quantity
- When the ideal order size for a price is below what that price requires, the order is raised to the minimum. Every unit of that gap is inventory the discount obliged you to carry.
- Total annual cost
- Goods plus ordering plus holding. Only the goods appear on the quote, which is why the deepest discount so often loses on this page and wins in the meeting.
- Cash in average inventory
- Half the order size at the price you paid: money standing in the warehouse rather than in the bank, all year, every year.
Educational disclaimer: Outputs are simplified educational estimates built from the numbers you enter — they are not financial, legal, tax, or investment advice, and real decisions deserve verified figures and qualified professionals.