Article 3

Article # 3 - Bulk Purchase Discounts
(in a series of 9)

This is the third in a series of Facebook articles which will explore this complex issue. If you would like to follow this series, simply "like" us on Facebook and you will receive these articles as they are published.

Bulk Purchase Discounts

The potential savings available to volume builders on our typical sample projects due to various forms of bulk purchase discounts is shown in the chart below.

These discounts can be from various sources:

• Bulk discounts from local suppliers.
• Bulk discounts from subcontractors
• Access to overseas markets
• Discounts on insurances, finance costs, etc

Bulk Discounts from Local Suppliers

All builders can access normal trade discounts, however additional discounts are available for larger orders or annual supply contracts. These additional discounts are not usually available to the same extent to builders of architect designed houses as they are usually ordering and/or purchasing materials in single house lots.

Bulk Discounts from Subcontractors

The large volumes and repetitive work available with volume builders allows subcontractors to offer discounted prices, particularly in the labour intensive trades such as concrete, brickwork, carpentry, plastering and painting. Also, the repetitive and (usually) less complex designs allow them to reduce their supervision requirements and provide less experienced teams.

Access to Overseas Markets

The building market in Australia continues to be flooded with cheap imported products. Many of these can be seen on the shelves of the large building and hardware stores, alongside their better-known, usually better quality and often more expensive recognised name brand products.

However, not all cheaper imported products are of inferior quality. Some volume builders have explored overseas markets directly to access quality discounted materials and fittings, many of which are, at least to some extent, comparable to the name brands in many aspects except price. By dealing directly with overseas manufacturers, this has enabled them to obtain high quality products at heavily discounted prices, either by directly importing them, or by placing large orders through a local distributor.

These types of opportunities are not available to the same extent to builders of architect designed houses, as they are rarely able to place orders large enough to warrant these types of discounts.

Discounts on insurance, finance costs, etc

The large turnovers enjoyed by volume builders allow them to negotiate lower insurance premiums, better finance rates, and even better payment terms than most builders who specialise in architect designed houses.

In Article # 4 we will discuss the differences in structural costs between volume builder's houses and architect designed houses.