A volume commitment obligates or signals that a buyer will purchase a stated quantity or value during an agreed period. The contract should distinguish firm commitment from forecast.
How the control works
Define products, period, measurement, permitted substitutions, shortfall remedy and treatment of supplier capacity or price concessions.
| Area | What the record should show |
|---|---|
| Control | Define products, period, measurement, permitted substitutions, shortfall remedy and treatment of supplier capacity or price concessions. |
| Evidence | Track committed, ordered, received, cancelled and remaining volume with approved amendments. |
| Tradeoff | Committing more volume may improve price but increases inventory and demand risk. Model that exposure before accepting the discount. |
Evidence buyers should retain
Track committed, ordered, received, cancelled and remaining volume with approved amendments.
Where the term is misused
Committing more volume may improve price but increases inventory and demand risk. Model that exposure before accepting the discount.
Related definitions: supplier qualification, strategic sourcing, landed cost.
