Estimated annual usage (EAU)
Estimated annual usage (EAU) is the yearly volume a buyer expects to purchase of a part, stated in an RFQ as the basis for pricing. Suppliers quote against EAU: it drives raw material buys, capacity allocation, lot sizing, and tooling amortization. Inflating it buys a better unit price on paper and a repricing fight later, when actual orders arrive at half the stated number.
Examples
Tiered quote: A buyer requests cable assembly pricing at 25,000, 50,000, and 100,000 EAU and receives $11.40, $9.85, and $9.10. Finance models product margin at each tier instead of betting the business case on the most optimistic number, and the supplier sees a buyer who understands how volume drives cost.
Inflation backfires: A startup states 120,000 EAU and wins a $4.05 price. First-year orders total 38,000. The supplier invokes the volume-adjustment clause and reprices to $5.20, and the costed BOM the company showed investors is suddenly off by 28% on that line.
Definition
EAU is not a forecast and not a commitment; it is the volume assumption both sides agree to price against. Suppliers translate it directly into economics: raw material purchase quantities, setup frequency, line allocation, and the per-part share of tooling via amortization. Volume price breaks exist because those costs genuinely fall with quantity, which is also why a fictitious quantity produces a fictitious price.
The honest version costs nothing. State the realistic EAU and request tiered pricing at, say, 25,000, 50,000, and 100,000 units, so the price moves transparently if demand does. A well-structured request for quote makes the EAU, the price breaks, and the commitment terms explicit, and how the RFQ frames volume tends to move the final price more than the negotiation that follows.
When volumes do diverge, contracts handle it better than goodwill: repricing bands tied to actual volume, or periodic true-ups. EAU also feeds the buyer's own order-quantity math and forecasting cycles, so it should trace to a demand plan, not a hope. When buyers run RFQs through LightSource, every supplier prices against the same EAU and tier structure, which keeps the returned quotes comparable line by line.
Frequently asked questions
What is estimated annual usage?
Estimated annual usage (EAU) is the yearly volume a buyer expects to purchase of a part, stated in an RFQ as the basis for pricing. Suppliers quote against EAU because it drives their raw material buys, capacity allocation, lot sizing, and the per-part share of tooling amortization.
Is EAU a commitment to buy that volume?
EAU is a volume assumption both sides agree to price against rather than a forecast or a binding commitment. That is exactly why contracts should handle divergence explicitly, through repricing bands tied to actual volume or periodic true-ups, so a demand shortfall triggers a defined adjustment instead of a dispute.
Why do suppliers price differently at different EAUs?
Volume price breaks exist because costs genuinely fall with quantity: larger raw material purchases, fewer setups per part, better line allocation, and tooling amortized across more units. A supplier translating EAU directly into those economics is also why a fictitious quantity produces a fictitious price.
What happens if you inflate EAU to get better pricing?
Inflating EAU buys a better unit price on paper and a repricing fight later. In one example, a startup stated 120,000 EAU and won a $4.05 price, but first-year orders totaled 38,000; the supplier invoked the volume-adjustment clause and repriced to $5.20, throwing the costed BOM the company had shown investors off by 28% on that line.
How should buyers structure EAU in an RFQ?
State the realistic EAU and request tiered pricing, for example at 25,000, 50,000, and 100,000 units, so the price moves transparently if demand does. One buyer who did this for a cable assembly received $11.40, $9.85, and $9.10 tiers, letting finance model margin at each level instead of betting the business case on the most optimistic number. How the RFQ frames volume tends to move the final price more than the negotiation that follows.