Understanding Price Break Type Control in Blanket Purchase Agreements

 

Price Break Type Control in Blanket Purchase Agreements

In Oracle Procurement, Blanket Purchase Agreements (BPAs) are widely used to streamline purchasing and leverage negotiated pricing over a period of time. One important configuration that directly impacts pricing behavior is the Price Break Type attribute.

This attribute determines how the system applies price breaks when multiple purchase orders are released against a blanket agreement. Choosing the right option can significantly influence cost savings and pricing accuracy—especially when multiple business units buy from the same agreement.

Let’s break it down.

What Is the Price Break Type?

The Price Break Type is applicable only to Blanket Purchase Agreements and controls whether pricing discounts are calculated based on:

• Total cumulative purchases over time, or
• Each individual purchase order line

This flexibility allows organizations to align Oracle’s pricing logic with supplier contract terms.

The Price Break Type allows organizations to leverage cumulative pricing to achieve better discounts based on the total quantity purchased over time, potentially across multiple business units that use the same blanket agreement.

There are two available options:

1. Cumulative

When Cumulative is selected, the application determines the applicable price break by considering the total quantity released so far against the blanket line, including previous purchase order releases.

In simple terms:

• The system keeps track of the running total quantity purchased.
• As total consumption increases, better price breaks are automatically applied.
• This works across all business units that reference the same blanket agreement.

This option is particularly useful when suppliers offer volume-based discounts tied to overall usage rather than single orders.

 

2. Noncumulative

When Noncumulative is selected, the application determines the price break based only on the quantity of the current purchase order line, without considering past releases.

• Each PO release is priced independently.
• This option is suitable when pricing discounts apply per order rather than over time.
• No aggregation of quantities occurs.
• Previous purchases do not affect the current price.
• This option is ideal when supplier pricing is negotiated per order, not across total consumption.

Example Scenario:

Blanket Purchase Agreement – Item ABC

Quantity Range	Unit Price
1 – 100	$100
101 – 500	$90
501+	$80

Case 1: Cumulative Pricing

• PO Release 1: 80 units
• Cumulative quantity = 80
• Unit price = $100
• PO Release 2: 50 units
• Cumulative quantity = 130 (80 + 50)
• Unit price = $90 (price break achieved)
• PO Release 3: 400 units
• Cumulative quantity = 530
• Unit price = $80

In this case, the system automatically applies better pricing as cumulative purchase volumes increase.

 

Case 2: Noncumulative Pricing

• PO Release 1: 80 units
• Unit price = $100
• PO Release 2: 50 units
• Unit price = $100 (still in 1–100 range)
• PO Release 3: 400 units
• Unit price = $90

Here, each PO release is priced independently, and previous purchases do not influence the pricing.

Illustration of Business case scenario on volume discounts:

PO Schedule Quantity	% Discount
Up to 50,000	0
50,001 - 100,000	1
100,001 - 200,000	1.5
200,001 and above	2

Price Break setup in Oracle BPA:

Quantity	% Discount	Base Price	Discounted Price
50,001	1	18.84	18.6516
100,001	1.5	18.84	18.5574
200,001	2	18.84	18.4632

Cumulative	Non- Cumulative
Price break is applied by adding the current order schedule quantity to the total quantity already ordered against the blanket purchase agreement line.	Price break is applied by using the individual order line quantity.
The retroactive function with new price updates from BPA to open POs is not supported for cumulative price breaks.	The retroactive function with new price updates from BPA to open POs works only for non-cumulative price breaks.
Example: Item X with single BPA using the above-mentioned business case and setups: PO 1 Line 1 = 20, 000 Each PO 2 Line 1 = 20, 000 Each PO 3 Line 1 = 20, 000 Each PO 4 Line 1 = 20, 000 Each PO 5 Line 1 = 30, 000 Each     In this case, PO 1 and PO 2 – No discount in the price PO 3 – 1% discount on 10, 000 Qty PO 4 – 1% discount on 20, 000 Qty PO 5 – 1% discount on 20, 000 Qty & 1.5% discount on remaining 10, 000 Qty	Example: Item X with single BPA using the above-mentioned business case and setups: PO 1 Line 1 = 20, 000 Each PO 2 Line 1 = 20, 000 Each PO 3 Line 1 = 20, 000 Each PO 4 Line 1 = 20, 000 Each PO 5 Line 1 = 30, 000 Each PO 6 Line 1 = 60, 000 Each   In this case, PO 1 To PO 5 – No discount in the price PO 6 – 1% discount on 60, 000 Qty

Why This Matters for the Business

Selecting the correct Price Break Type is not just a technical choice—it’s a strategic one:

• Cumulative pricing helps organizations maximize supplier discounts and encourages consolidated buying.
• Noncumulative pricing offers simplicity and predictable per-order pricing.
• The right configuration ensures accurate pricing, contract compliance, and optimized procurement costs.

Final Thoughts

Understanding and correctly configuring the Price Break Type on Blanket Purchase Agreements ensures that Oracle Procurement behaves exactly as intended by your supplier contracts. Whether your goal is to drive cost savings through cumulative purchasing or maintain straightforward per-order pricing, this small setting plays a big role in procurement efficiency.