Meaning
Mathematical assessment used to determine the difference between a contracted minimum volume of material and the actual quantity purchased or produced. In polymer supply contracts, the supplier runs a shortfall calculation at the end of the contract period to evaluate if the moulder met their minimum resin purchase commitments. This calculation establishes the volume deficit that triggers financial penalties or price adjustments for the buyer.
Discrepancy Assessment
This evaluation compares the cumulative orders of polymer resins against the annual volume commitments specified in the supply agreement. If the moulder failed to order the minimum tonnage of resin, the shortfall calculation determines the precise number of metric tons that went unpurchased. The supplier uses this figure to calculate the lost margin on the unpurchased resin.
Financial Obligation
The buyer must pay a penalty or a higher unit price for the resin they actually consumed if they fail to meet their minimum volume commitments. This penalty compensates the supplier for reserving production capacity and raw material stock at their compounding plant. The contract will define the specific formula used to calculate these charges based on the volume deficit.
Contract Management
Resin buyers monitor their monthly purchase volumes against the contracted minimums to avoid unexpected end-of-year penalties. Sourcing teams use this data to adjust their production plans. This proactive monitoring ensures that the moulding company avoids penalties.
