Modeling Bracket Pricing

Many commercial Supply Chain packages (like Llamasoft) don’t  allow you to define different price for the same product. If you are developing a model to capture bracket pricing, you can use the Transportation policies table to define the bracket prices.

Let us take a simplified example where you have a supplier and a customer (You). The supplier has the following Bracket price structure:

bracket

You can create each Bracket as a separate Transportation Mode in your Transportation policies table and assign the Unit price indicated in the table above as per unit Transportation cost .

b2

It is obvious from the Tables above that the Model will always choose Trans Mode Bracket 1, irrespective of what your order quantities are, since this mode gives the least cost advantage. However, our bracket prices are based on quantity ranges. So what we need to do now is to use constraints tables, like flow constraints, to put quantity restrictions for using each mode. An example is shown below:

b3

This is enforcing a constraint that each Transportation mode can be used only when a certain minimum quantity is shipped. So if you are ordering 2000 Units, model can choose from Bracket 1 and 2, and it will use 1 since 1 is more cost efficient.

Note that ordering higher quantities has inventory impact as well so in your overall analysis, you should incorporate that Impact.

 

 

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