Help Home/Creating Negotiations

Price Tiers allow you to negotiate line prices with your supplier based on characteristics of your order. For example, you may expect to receive a discount from your supplier if you buy a large quantity of units, and you may specify several quantity levels and the prices you are willing to pay at each. Or you may be willing to pay more per unit if your supplier can ship the order to a special location, or by a certain deadline.

For each (goods or rate-based temp labor) line in your negotiation, you can define as many price tiers as are appropriate. Your suppliers respond to your negotiation specifying their responses to your requested discounts. You can then enter different assumptions into the system and have it calculate which response is the best.

There are two types of price tiering options available to you, based on the negotiation outcome:

• Quantity-Based Price Tiers

  Quantity-based price tiers apply only to the quantity of units for your negotiation line. You can add quantity-based price tiers in negotiations with outcomes of tandard purchase orders, blanket, or contract purchase agreements. However, you can only used quantity-based price tiers if the negotiation style you are using, as defined by the Sourcing Administrator, allows them.

• Price Breaks

  Price breaks can apply to the ship-to location, the quantity and/or the effective dates for your negotiation line. Price breaks can only be used with blanket and contract purchase agreements. They cannot be used with standard purchase orders.

Example: Assume you are purchasing PC keyboards. You specify $20 as your start or base price. You then set up two price breaks. The first offers a price of $19 per unit if buying more than 100. The second offers a price of $18 a unit if purchasing over 500. For these price breaks, you receive the responses shown in the table below.

Once you have entered your price break values and your suppliers have responded to them, you can enter assumptions into the system and it will calculate which response is the best. For example, given the price break structure defined in the table above, if you buy 120 PC keyboards, the system will identify Supplier 2 as the best response. However, if you buy 550 PC keyboards, Supplier 1 is the best response.

To enable price tiers

1. On the Lines Summary page, specify which type of price tiers (if any) you will allow by selecting one of the following from the Price Tiers menu:

   • None - indicates that you will not use any price tiers for negotiation lines.

   • Price Breaks - allows you to define price breaks on the Quantity, Ship-To, and Effective date fields for blanket or contract purchase agreements. The Price Breaks option will not appear if the negotiation outcome is standard purchase agreement.

   • Quantity-Based - allows you to define price tiers only on the Quantity field. You can define quantity-based price tiers for all negotiation outcomes.

     Note: (for BPA and CPA outcomes) If price breaks are not allowed on BPA and CPA documents in Oracle Purchasing, the price breaks options does not appear. Additionally, if the negotiation style (as defined by the Sourcing Administrator) you are using does not allow quantity-based price tiers, the Price Tiers menu does not appear.

     Note: (SPO outcome)

     If the negotiation style (as defined by the Sourcing Administrator) you are using does not allow quantity-based price tiers, the Price Tiers menu does not appear.

   All lines in a negotiation must use the same type of price tiers. If you enter values for a line and then attempt to change the type of price tiers for an additional line, you receive an error message. If you continue, the allowable price tiers for the lines is changed, but any existing price tier values are deleted.

2. If using price breaks, you can also specify the default price break behavior by selecting a value from the Price Breaks menu

   • None - by default, lines are not expected to have price breaks. This allows you to define certain lines with price breaks by changing the price break setting to Optional or Required on the specific lines.

   • Optional - supplier responses to your price breaks are required, but suppliers can modify the breaks you define and/or add additional breaks themselves.

   • Required - supplier responses to your price breaks are required. Suppliers cannot modify the breaks you define nor can they offer different ones.

3. Click Add line, Add Lot, or Add Group and continue entering your line information.

To define price breaks for a negotiation line (BPA and CPA outcomes only):

When defining price breaks for a negotiation line, you must first specify how the supplier should interact with the price break and how the price break is tracked and calculated.

1. On the Lines: Create Lines page, click Select Price Break settings.

2. On the Create Line: Select Price Break Settings page, specify the type of response you want from the supplier and how any price breaks should be calculated.

   • Response (note that the choice show is the default you set on the previous page in the Price Breaks menu, but you can override it for a particular line).

     • None - no price breaks for this line.

     • Optional - suppliers must respond to your price breaks, but they can modify them and/or add their own.

     • Required - suppliers must respond to your price breaks and cannot modify them or add new breaks.

   • Agreement Release Quantity

     • Non-cumulative - only the release quantity for that particular response qualifies for that break discount.

     • Cumulative - the released quantity for the agreements increases with each new release, so that the release amount for this response is added to the previous cumulative amount and the new cumulative amount is applied against the price break.

       Note that if cumulative price breaks are defined for a line, no Effective date fields can be used.

3. Click Apply.

   Once you have specified your price break settings, you can define each price break value. Enter as many price breaks as are necessary to defind you pricing structure. Price breaks based on quantity can be tied to a specific Ship-To location or can be applies company wide. Any values entered in the Quantity field represents the top number for which this break applies. For example, a price break with a Ship-To value of San Francisco, a Quantity of 1000 and a Target Price of $10, means that the buyer wants to pay no more than $10 a unit when buying 1000 units or less that are being shipped to the San Francisco office. Price break target prices entered on Effective Date price breaks are independent of price breaks on ship-To or Quantity.

4. Click Add Another Row in the Price Breaks section of the page to display a row of input fields.

   • To define price breaks on the Ship-To location:

     1. Select the appropriate Ship-To organization from the drop down menu.

     2. Select the appropriate Ship-To location.

     3. Enter the target price.

   • To define price breaks on the Quantity field

     1. Enter the quantity.

     2. Enter the target price for that quantity range.

   • To define price breaks on Effective Date fields (only if price break is non-cumulative).

     1. Enter the target price for this date range.

     2. Use the pop-up calendar to specify teh beginning date of the range in the Effective-From field..

     3. Use the pop-up calendar to specify the ending date of the range in the Effective-To field.

5. Click Apply

6. to add another price break, click Add Another Row and enter the appropriate values.

To define Quantity-based price tiering:

You can define quantity-based price tiering for any negotiation, regardless of outcome, although you cannot mix quantity-based tiering with price breaks in the same negotiation. For each tier, you specify a minimum quantity, maximum quantity, and the target price you are willing to pay. If you quantity ranges overlap, you receive an error message. Any gaps between ranges are not flagged.

1. Click Add Another Row to display a row of input fields.

2. Enter your minimum, maximum and the target price you are willing to pay.

3. To add an additional price tier, click Add Another Row and enter your values.

4. When finished defining the price tiers for this line, click Apply.

Note: Analyzing quantity-based price tiers is done on using the Award Optimization feature by specifying quantity/amount constraints.