# Production Improvements

The margin scalability is achieved through two primary levers: **strategic supplier partnerships** and **volume-driven economies of scale**. These initiatives are expected to reduce per-unit production costs by 30-40% over the next 3 years, directly improving gross margins and funding reinvestment into growth initiatives.

### **1. Strategic Supplier Diversification & Renegotiation**

Securing the best cost-competitive, flexible supplier terms while aliging with quality standards.

* **Competitive Bidding Process:** Engage new manufacturers in Eastern Europe and Asia to benchmark pricing, leveraging Backdoor Market’s growing order volumes as negotiation leverage.
* **Term Optimization**: Transition to 30 days of account payable terms (from pre-payment) to improve cash flow.
* **Sustainability Alignment**: Prioritize suppliers with certified ethical labor practices and carbon-neutral production to reinforce brand equity.

Expected Impact:

* Year 1: 8–12% reduction in material costs.
* Year 2: 5–7% decrease in lead times via regional supplier diversification.

### **2. Volume-Based Pricing Incentives**

Unlock tiered bulk discounts by achieving predefined production milestones.

* **Threshold Discounts**: Negotiate 15-20% price reductions upon reaching order thresholds of 500 units per item.
* **Long-Term Commitments**: Secure additional 3–5% discounts by signing 12–24-month purchase agreements with key suppliers.
* **Inventory Financing**: Explore vendor-managed inventory (VMI) arrangements post-milestones to reduce working capital strain.

Projected Volume Milestones:

| Units per item | Discount | Year to be achieved |
| -------------- | -------- | ------------------- |
| 100 - 499      | 0%       | 2025                |
| 500 - 999      | 15-20%   | 2028                |
| 1000           | 30-40%   | 2030                |
