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WHAT IS AN OVERRUN ALLOWANCE OR AN UNDERRUN ALLOWANCE?

April 26, 2017allowance overrun underrun

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WHAT IS AN OVERRUN ALLOWANCE OR AN UNDERRUN ALLOWANCE?

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Each supplier specifies an allowance % that they consider a reasonable quantity that they can guarantee as a deliverable, chargeable quantity for the item ordered. For example, if they specify 5% as the Overrun/Underrun Allowance and you order 1,000 of an item, the supplier will ship anywhere from 950 qty to 1,050 qty and they will charge for the exact quantity shipped within those quantities. Some suppliers ship EXACT quantity as their standard policy. If you cannot accept an overrun allowance %, many suppliers will agree to shipping up to the underrun allowance % so that you will not exceed your budget.