In Step 3 of the Contract Request wizard, the Pricing Terms specify any discounts that are available for volume orders, which are applied to your orders or invoices.
Configuring Pricing Terms
Objective
After completing this lesson, you will be able to configure pricing terms in the contract request wizard.
Contract Request Wizard Step 3: Pricing Terms
Discounted Price
Discounted Price: A flat amount with the markdown applied.
- Only for item-level contracts
- Can be used with both catalog and non-catalog items
- Set the price of the item
Discount Percent
Discounted Percent: A specific percentage off of the original price.
- Used with all contract types
- Can be used with both catalog and non-catalog items
Negative Discounts:
Allows for markup pricing by entering negative discount percentages, which is useful for suppliers setting base prices in customer catalogs.
Tiered Pricing
Tiered pricing enables varying discount levels based on the purchase volume (in dollar amount or quantity) invoiced against a contract.
Applying Pricing Tiers:
Pricing tiers are determined by the total purchase amount using the item's actual base price.
- Per Order: The best value tier applies to all items in an order.
An order between $100 and $200 applies a unit price of $4.00 USD to all items
- Cumulative: Prices are calculated across multiple orders or invoices, adjusting as volume thresholds are met.
For multiple orders that cross pricing thresholds, the unit price adjusts based on the cumulative quantity and corresponding tier prices.
Note
- Not applicable for service items in supplier-level and commodity-level contracts.
- Not supported in configurations only using SAP Ariba Catalog or SAP Ariba Contract Invoicing.
Based on Quantity
- Cumulative or per order
- Used with item-level contracts only
- Available for catalog and non-catalog (contract-based) items
Based on Monetary Amount
- Cumulative or per order
- Used with all contract types
- Available for catalog and non-catalog items
Tiered Pricing Examples
| Quantity Based Volume Pricing * | Quantity Based Volume Discount* | ||
|---|---|---|---|
| Min. Quantity | Price | Min. Quantity | Discount |
| 0 | $5 | 0 | 1% |
| 100 | $4.75 | 100 | 2% |
| 200 | $4.50 | 0200 | 3% |
| Amount Based Volume Pricing * | Amount Based Volume Discount* | ||
|---|---|---|---|
| Min. Amount | Price | Min. Amount | Discount |
| $0 | $5 | $0 | 0% |
| $1000 | $4.75 | $1000 | 1% |
| $2000 | $4.50 | $2000 | 2% |
* Only available for item level contracts
| Discount Type | Supplier Level | Commodity Level | Catalog Item Level | Non-Catalog Item Level |
|---|---|---|---|---|
| Discount Price | ✔ | ✔* | ||
| Discount Percentage | ✔ | ✔ | ✔ | ✔ |
| Tiered Quantity Based Volume Pricing ($) – Per Order or Cumulative | ✔ | ✔ | ||
| Tiered Quantity Based Volume Discount (%) – Per Order or Cumulative | ✔ | ✔ | ||
| Tiered Amount Based Volume Discount (%) – Per Order | ✔ | ✔ | ||
| Tiered Amount Based Volume Pricing ($) – Per Order or Cumulative | ✔ | ✔ | ||
| Tiered Amount Based Volume Discount (%) - Cumulative | ✔ | ✔ | ✔ | ✔ |
* In this case, non-catalog item refers to an item created in the contract, not an item created by the requester during the requisitioning process.
Term-Based Pricing Terms
Term-based pricing is used to configure discounts based on specified time periods within the life of the contract. SAP Ariba supports the following types of term-based pricing structures for contracts:
Term-based Discount (a percentage discount)
Term-based discount pricing is valid for customer catalog and non-catalog items (if the contract allows), commodities, and suppliers.
| Start Date | Price |
|---|---|
| 07/01/2012 | 5% |
| 10/01/2012 | 10% |
| 01/01/2013 | 12% |
| 04/01/2013 | 8% |
Term-based Pricing (a fixed price discount)
With term-based pricing, you specify different prices for an item based on specified dates. For example:
| Start Date | Price |
|---|---|
| 07/01/2012 | 500 USD |
| 10/01/2012 | 100 USD |
| 01/01/2013 | 120 USD |
| 04/01/2013 | 800 USD |
Formula Pricing
Formula pricing is used for partial items, where the price is based on a mathematical formula.
SAP Ariba supports different types of formula pricing, including Matrix and Multiplier pricing.
The following example shows one-dimensional matrix formula pricing for a printing job where the price is calculated as follows:
| For an 8-1/2 Inch X 11 Inch Sheet of Paper: | |
|---|---|
| The initial setup cost (including two colors) | $600.00 |
| Additional colors | $300.00 each |
| Price/1000 sheets of paper | $50.00 |
| Additional colors/1000 sheets of paper | $40.00 |
In this example, the pricing can be calculated by the following formula:
600 + Max(0,NumColors - 2) * 300.00 + 50.00 * (NumSheets/1000) + Max(0,NumColors - 2) * 40.00 * (NumSheets/1000)
Two-Dimensional Matrix
SAP Ariba also supports a two-dimensional matrix in formula pricing, in which one variable can change value in response to a second variable’s value.
In the example below, the pricing formula for T-shirts uses a base price of $20 plus a two-dimensional matrix (size_color_matrix) that accounts for additional price markup required by the combination of size and color of the shirt.
The formula would be:
20 + size_color_matrix
The variable size_color_matrix is a two-dimensional matrix that can be represented by a table:
| Green | Blue | White | |
|---|---|---|---|
| Small | 0 | 1 | 0 |
| Medium | 2 | 1 | 1 |
| Large | 2 | 3 | 2 |
Multiplier Pricing
Multiplier pricing is used to specify a base price and types which contain a multiplier to be used against the base price.
The following example shows multiplier pricing for a pipe item that considers material, weld type, and the shift of the person making the pipe:
| Material | Weld Type | Shift | |||
|---|---|---|---|---|---|
| Copper | 1.10 | Intersect | 1.20 | 5 8 | 1.00 |
| Stainless Steel | 1.20 | Butt | 1.30 | 5 10 | 1.10 |
| Carbon Steel | 1.30 | Joint | 1.40 | 6 10 | 1.20 |
Assuming the pipe has a base price of $5.00, if you select stainless steel pipe with an intersect weld type from shift 5 8, the price would be as follows:
$5.00 * 1.20 * 1.20 * 1.00 = $7.20
Notice that the different types are not related in any way. For example, the multiplier for the intersect weld type is always 1.20, regardless of which material or shift you select.
Matrix Pricing
Matrix pricing is used to specify a price based on different related factors. The following example shows matrix pricing for temporary labor where one factor is the location and the other factor is the job class:
| Job Class | Location | ||
|---|---|---|---|
| San Francisco | Los Angeles | New York | |
| Accountant | $40.00/hour | $35.00/hour | $50.00/hour |
| Admin Assistant | $35.00/hour | $30.00/hour | $45.00/hour |
| HR Representative | $30.00/hour | $25.00/hour | $40.00/hour |
In this example, if an administrative assistant were hired in New York, the amount would be $45.00 per hour.
Tier Boundaries
For discounts done per order:
- If an item order quantity crosses tiered pricing boundaries, the lower price will be applied to all items
- No splitting of quantity in two tier prices
- Assumes the more beneficial price for the buyer
Compound Pricing
Compound pricing allows subagreements to take advantage of applicable discounts in parent agreements.
Compound pricing is only available if the parent agreement uses a percentage discount.
The subagreement price discount is calculated first. The result is then used to calculate parent agreement price discount.
Override Pricing
Override pricing allows a subagreement price to override the parent agreement price.
This occurs automatically when:
- Both agreements have item level price discount
- The parent agreement is a no-release order contract
Otherwise contract with lowest price is automatically selected.
When an item’s price is determined by a combination of a subagreement and its parent agreement terms, spend will be accumulated against both of the contracts and tracked using item level accumulators.
For example, if the Master Agreement in is an Item Level contract with a discount that provided a lower price for an item than the subagreement. The system would automatically attach the Master agreement to the order created instead of using the higher price on the subagreement.