Buying Structure

Posted in Marketing and Strategy Terms, Total Reads: 231

Definition: Buying Structure

Buying Structure is the organisational structure of the buying authorities within a company. There are different tiers in the buying structure. Each level or each tier in the buying structure has its own price negotiations and discounts. When buying structure is set up, it enables a parent children relationship among the customer address-book numbers within an organisational structure.

It can be set up when we want the price of the distributor i.e. parent is same as that of the stores i.e. children. The buying structure is updated each time a new company is added or an existing company changes its position from one tier to another.


Importance of Buying Structure

Buying structure is used to set a customer’s price with the organisational structure. It is used to cater individual customer specific pricing. Buying Structure helps in maintaining a common price among different tiers.


Set Up for Buying Structure

1. Specify the parent/child relationships that the customer address-book numbers have while defining the customer’s buying structure.

2. Set up tier descriptions. Specify:

i) Address-book number of the parent for any address-book number of the child

ii) Beginning and ending effective dates should be specified for relationship between a ‘parent address-book’ number and a ‘child address-book number’.

iii) Names of the different levels of the structure.

3. Then, specify the adjustment retrieval method and structure type for sales pricing in the pricing constants.

4. Define the direct price adjustments for each address book record and each tier in the structure.

Buying Structure


Example of Buying Structure

Entity

Address Book Number

Tier level

Inheritance

Applicable Price adjustment

Global company

380

1

Yes

Global Company’s distribution centres in level 3 receives a 3% off the cost price of all items as ‘company discount’.

American Warehouse

381

2

Yes

American Warehouse gets a ‘regional rebate’ of 2.00 USD per unit when sales of Product X reach 20,000 units.

Main Distributor

384

3

Yes

Central Distributor receives a 5% as ‘promotional discount’.

Store A

387

4

Yes

Store A receives a 7% off the cost price when ordering atleast 150 units of Product X.

Let store 1 places an order of 200 units of Product X. For price adjustments and calculation of net unit price, buying structure is used by the system.


Price Adjustment

Unit Price

Other

Cost Price

10.00 USD

 

Store Discount (7%), Store A

0.7

 

Promotional discount (5%)

0.5

 

Regional rebate (tiered rebate)

 

2.00 USD

Corporate discount (3%)

0.3

 

Net Unit Price

8.50 USD

 

The above example of buying structure highlights the breaking up of the price from the company to the retail stores.

Entity

Address Book Number

Tier level

Inheritance

Applicable Price adjustment

Global company

380

1

Yes

Global Company’s distribution centres in level 3 receives a 3% off the cost price of all items as ‘company discount’.

American Warehouse

381

2

Yes

American Warehouse gets a ‘regional rebate’ of 2.00 USD per unit when sales of Product X reach 20,000 units.

Main Distributor

384

3

Yes

Central Distributor receives a 5% as ‘promotional discount’.

Store A

387

4

Yes

Store A receives a 7% off the cost price when ordering atleast 150 units of Product X.


Hence, this concludes the definition of Buying Structure along with its overview.

Browse the definition and meaning of more terms similar to Buying Structure. The Management Dictionary covers over 7000 business concepts from 6 categories.

Search & Explore : Management Dictionary



Share this Page on:
Facebook ShareTweetShare on G+Share on Linkedin