Volume Discounts are price reductions offered by suppliers when buyers purchase goods in large quantities. These discounts incentivize bulk buying, which can reduce unit costs but may lead to increased inventory holding if not managed carefully.Balancing the benefits of volume discounts with the risks of excess inventory is a key challenge in inventory optimization. Companies must analyze demand patterns, storage capacity, and cash flow implications to determine optimal order quantities that leverage discounts without incurring unnecessary carrying costs.
