drive revenue & margin through incentive & chargeback programs · drive revenue &...
TRANSCRIPT
1
DRIVE REVENUE & MARGIN THROUGH INCENTIVE & CHARGEBACK PROGRAMS
July 17, 2014
Produced by:
Featuring: Neil Mundell, Paul Pretko, Dan Scheunemann & Jenel Stelton-Holtmeier
Download handouts (PDF) : www.mdm.com/slides
Event Sponsor:
2
Speakers
Download handouts (PDF) : www.mdm.com/slides or [email protected]
Event Sponsor:
Dan Scheunemann Sales Manager Vistex
Paul Pretko Senior Principal for Wholesale Distribution SAP America, Inc.
Neil Mundell Director, Procure to Pay Solutions AmerisourceBergen
Jenel Stelton-Holtmeier Editor Modern Distribution Management Moderating
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Agenda
• Introduction – Jenel Stelton-Holtmeier
• Sponsor Presentation – Paul Pretko & Dan Scheunemann
• Presentation – Neil Mundell
• Q&A
Fuel Profitable Growth in Wholesale Distributors
Opportunity to Cash
Service Process and Operations Excellence
Collaborative Quote to Cash
E-Commerce
Supply Chain Planning and Execution
Procure to Pay
Business Network for Supplier Collaboration
Strategic Sourcing and Supplier Management
Sales, Inventory, and Operations Planning
Warehouse Management
Transportation Management
Supply Chain Monitoring
Procure to Pay
Profitability Optimization
Procurement Insight
Customer Stratification and Cost-to-Serve
Supply Chain Optimization
Agile Marketing
Finance and Trading
Accounting and Financial Close
Financial Planning and Analysis
Treasury and Financial Risk Management
Enterprise Risk and Compliance Management
General Trading
Human Resources
Core Human Resources and Payroll Talent Management Time and Attendance
Management
Technology and Platform
Big Data Enterprise Information Management
Real-Time Enterprise
Real-Time Analytics
Enterprise Mobility
Information Technology
Application Lifecycle Management
IT Infrastructure Management
IT Portfolio and Project Management
IT Service Management
IT Strategy & Governance
WHOLESALE DISTRIBUTION VALUE MAP
Cost Recovery and Rebates
Collaborative Financial Operations
Application Integration Cloud Solutions
RECOVER functionality supports all the phases of vendor cost recovery, including rebate and chargeback management capabilities from establishing contracts to reconciliation and settlement
PROFITABILITY OPTIMIZATION COST RECOVERY AND REBATES
SOLUTION CAPABILITIES KEY BENEFITS
Agreement Management
Chargeback Management
Rebate Management
Accrual Management
Reconciliation Management
Settlement Management
Cost Recovery Analytics
Identify every vendor cost recovery opportunity that is due
Connect rebate and chargeback process with procure-to-pay, order-to-cash and finance processes, eliminating costly errors, disputes and delays
Increase worker productivity and overall financial performance and profitability
Reduces open vendor AR balances
CUSTOMER EXAMPLES
Summit: Increased chargeback claims 114% Border States: Cost recovery received within 1-3 days of filing
Profitability Optimization
Procurement Insight
Customer Stratification and Cost-to-Serve
Supply Chain Optimization
Cost Recovery and Rebates
65% Lower costs when chargeback and rebate claims are electronically submitted Source: SAP Performance Benchmarking
39% Lower days chargeback outstanding for wholesale distributors with access to real-time order, delivery, and billing information Source: SAP Performance Benchmarking
60% Lower head-count costs when system automatically reconciles claimed vs. accepted amounts and applies flexible tolerance rules Source: SAP Performance Benchmarking
54% Lower head-count costs as a percentage of revenue when organizations automate the tracking and processing of charge-backs and rebates Source: SAP Performance Benchmarking
58% Lower head-count costs when companies can automatically verify the eligibility of a customer sale based on the chargeback agreement Source: SAP Performance Benchmarking
38% Fewer days chargeback outstanding for distributors with more mature order fulfillment, delivery, and shipping Source: SAP Performance Benchmarking
PROFITABILITY OPTIMIZATION COST RECOVERY AND REBATES BENEFITS
2014 VISTEX 7
Bold Vision. Brilliant Execution.
PROPRIETARY AND CONFIDENTIAL
SOURCE Manage procurement efficiently to identify, realize, and sustain cost savings for all spend categories.
PLAN Better forecasting and planning optimizes inventory and increases ability to sense and respond to demand and supply variations.
SELL Superior service and reliability leads to customer loyalty and lower DSO.
STORE Standardization and automation drives higher productivity, and lower operating expenses.
ANALYZE Availability of relevant real-time information gives management insight to make prompt decisions.
RECOVER Identify and claim every cost recovery opportunity. Eliminate costly errors, disputes and delays.
Key Wholesale Distribution Objectives
2014 VISTEX 8
Bold Vision. Brilliant Execution.
PROPRIETARY AND CONFIDENTIAL
SAP Solution Extensions Enable Key Processes in Wholesale Distribution
Customer Incentives •Based upon Sales •Based upon volume, product, growth,
time-period, etc… •Tiered Incentives •Financial Accruals
Sales Incentives •Commissions, Bonuses, SPIFFs •Territory Management •Financial Accruals
Chargebacks •“Pass Through” Incentives from
Vendors •Claim Management •Recover cost from vendor •Financial accruals
Purchasing Incentives (Earned Income) • Based upon Purchase Orders • Based upon Sales Orders • Tiered Incentives • Product/Customer Exclusions • Alerts • Financial Accruals
Marketing Funds •Define and manage fund calculations •Track spending against fund •Generate Claim/Proof of Performance •Balance reporting •Financial Accruals
Pricing & Master Data •Load Vendor Pricing •Margin Analysis •Define & Maintain Master Data Attributes
2014 VISTEX 9
Bold Vision. Brilliant Execution.
PROPRIETARY AND CONFIDENTIAL
Vistex Solutions are inside SAP ERP
Utilizes same “core” as SAP ERP: Master & Transaction Data
Native Integration to SAP FI & SAP HR
Configuration & Development Tools
Integration Tools
Security & Authorizations
Workflow & Approvals
Output
Audit Trail
System Management/Monitoring
Reporting & Analysis Tools
Vistex solutions install like a delivered SAP Component:
Leverage existing SAP ERP hardware & environments
Leverage scalability and performance of SAP ERP
Vistex development done in separate “Name Space” to simplify upgrades
2014 VISTEX 10
Bold Vision. Brilliant Execution.
PROPRIETARY AND CONFIDENTIAL
Key Benefits
Seamless integration with other SAP enabled processes
One system & source for all supplier and customer incentives
Offers administrators & participants proactive visibility to performance
Improves accuracy of incentive calculations Decreases disputes Reduces multiple manual processes Provides automation & line of sight to key
reporting
OUR VISTEX IMPLEMENTATION
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AGENDA
• Who are AmerisourceBergen?
• Functional Challenges & Benefits
• What do we use Vistex for?
• Supplier Incentives
• Technical Challenges & Benefits
• Functional Challenges & Benefits
• Chargebacks
• Technical Challenges & Benefits
• Q&A and Close
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WHO ARE AMERISOURCEBERGEN
• A leading pharmaceutical services provider for the hospital systems/acute care market, alternative care facilities, and independent community pharmacies.
• Focus primarily on the distribution of pharmaceuticals and related professional services to physicians, and biotech and specialty pharmaceutical manufacturers.
• Fortune 30 Company - Our Stock Ticker Symbol is ABC
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WHAT DO AMERISOURCEBERGEN USE VISTEX FOR?
Supplier Incentives Chargebacks Customer
Rebates Contracts
Management
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IMPLEMENTATION TIMELINE
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Maintenance & Support
Maintenance & Support
Customer Facing Functions Build and Test
SAP & Vistex 6.0e Upgrade Build & Test
2014
Tool Selection & Validation
Blueprint & Reqts
GatheringBlueprint Detailed Design
Build & Test
2008 2009 2010 2011 2012 2013
Vistex Go-Live and SAP Back- Office Go-Live
Vistex 6.0c Upgrade & SAP Customer Go-Lives
Upgrade Go-Live
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WHY DID WE CHOOSE VISTEX
Include some high-level details relating to the selection of Vistex as the tool for contracts and incentives processes. Key integration partner with SAP Fully integrated solution Able to handle the transaction volumes
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SUPPLIER INCENTIVES WHAT IS SUPPLIER INCENTIVES?
Supplier
Incentives
Revenue earned by AmerisourceBergen (ABC) from suppliers based on contractual agreements between ABC and suppliers Fee-for-Service (FFS) Rebate Agreements
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SUPPLIER INCENTIVES SUPPLIER INCENTIVES PROCESS OVERVIEW
Maintain Supplier Incentive Agreements
Generate Supplier Incentive Data
Track Agreement Performance
Perform Supplier Incentive Accounting
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SUPPLIER INCENTIVES MAINTAIN SUPPLIER INCENTIVE AGREEMENTS
Fee for Service Agreements (FFS)
FFS revenue is typically determined by the calculation of anywhere from 5 to 10 metrics per vendor contract, but may be determined by up to 25+ measurement factors
Each metric typically consists of a three step calculation to determine fees earned:
1. Calculate performance metric 2. Determine metric compliance to contractual standards/tiers 3. Apply compliance level to base volume metric
Typically calculated on purchases from vendors
Maintain Supplier Incentive Agreements
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SUPPLIER INCENTIVES MAINTAIN SUPPLIER INCENTIVE AGREEMENTS
Supplier Rebate Agreements
Less complexity than FFS as these rebates do not involve performance metric calculations
These rebates/fees are “straight” calculations (e.g. sales x rebate %)
Rebates/fees may consist of various components (marketing/admin fee, financial mgmt fee, distribution fee, item level rebates, etc)
Typically calculated on customer sale of vendors’ products
Calculation can occur at the agreement level or at the material level
Maintain Supplier Incentive Agreements
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SUPPLIER INCENTIVES GENERATE SUPPLIER INCENTIVE DATA
Vistex creates it own type of financial documents called Incentives & Payback (IP) documents These documents represent the data for the basis metric (i.e. sales or
purchases) on which the fees & rebates will ultimately be calculated within Vistex
Each IP document is created from a source document
Purchased-based fees and rebates use the Goods Receipt (GR) document in Purchasing as the source document for calculation
Sales-based fees and rebates use the Billing Document in Sales & Distribution as the source document for calculation
This process occurs automatically on a daily basis via batch processing
Generate Supplier Incentive Data
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SUPPLIER INCENTIVES PERFORM SUPPLIER INCENTIVE ACCOUNTING
Accruals Accruals are calculated and posted at month-end Calculation run functionality is used to estimate and assess accruals before
posting Since Vistex is fully integrated with SAP, accrual journal entries will automatically
post to the FI module Settlement
Settlement represents the process of actually transferring the funds from the vendor’s account and creating the actual receivable (contra-payable) from the vendor
Settlement can be initiated either manually or automatically according to the settlement calendar established during agreement setup
Typically settlement is manually entered when the actual payment is received from the vendor and reflects the actual amount received from the vendor
Perform Supplier Incentive Accounting
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SUPPLIER INCENTIVES TRACK AGREEMENT PERFORMANCE
Individual Tracking for Agreements At any point in time, the business user can go into the Individual Tracking
transaction to monitor the performance of an individual agreement It displays each component/condition of the agreement and associated fees
earned and the basis amount on which these were calculated (i.e. sales or purchases)
It also provides a summary view of all the metrics/conditions that comprise the fee/rebate amount
Collective Tracking for Agreements
At any point in time, the business user can also go into the Collective Tracking transaction to monitor a range of agreements at one time
This transaction can also be used to retrieve historical accruals by vendor agreement
Once the data is retrieved in this transaction it can then easily be downloaded to Excel for analytical purposes
Track Agreement Performance
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SUPPLIER INCENTIVES CHALLENGES OVERCOME
Pre-Implementation
Pain Points
Supplier Incentives process was handled in multiple home-grown systems that had limited capabilities & reliability issues Legacy systems & processes were not
integrated with other existing core ABC systems Lack of integration amongst incentive
processes for various product categories (Brand, Generic, Consumer) Data reliability & accuracy issues caused
variances between actual vendor incentive payments and ABC’s anticipated payments Lack of visibility to contract performance prior
to month-end accounting activities resulted in reactive processes
Post-Implementation Vistex Solution
Vistex is a fully integrated and embedded
solution One comprehensive system to calculate
contractual fees & rebates for all categories with minimal manual intervention Systematic maintenance of contracts for all
categories controlled within one organization Seamless integration with other SAP-
enabled processes at the transactional level significantly reduces data reliability & accuracy issues Ability to track contract performance on a
continual basis allowing for proactive performance monitoring
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SUPPLIER INCENTIVES VISTEX 6.0C TO 6.0E UPGRADE
Vistex 6.0C Pain Points
Lack of flexibility to add new types of
fee/rebates along with other technical constraints (i.e. LIS subtotals concept) Month-end IP “sweeps” required manual
tracking of agreement changes and multiple executions of long-running jobs Claims functionality not oriented toward
manufacturer incentive process – required manipulation of customer facing functionality Unnecessary financial postings due to
period-to-date accounting methodology
Vistex 6.0E Solution
Implementation of “Buckets” functionality to
eliminate reliance on LIS/subtotals and allow new rebates/fees to more easily be added to configuration Implementation of “ADM” (Automated Data
Maintenance) to eliminate manual tracking of agreement changes for month-end sweeps Claims process is still customer facing but
has improved functionality related to supplier incentive process Implementation of Delta Accrual functionality
to eliminate unnecessary accrual reversal postings during month-end close process
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SUPPLIER INCENTIVES TECHNICAL CHALLENGES & SOLUTIONS
Standard Vistex Features
Parallel Processing for Reprice and Create jobs is not possible in standard Mass Processing No standard Vistex Transaction/Screen
within Standard that Shows Actual Month-End Accruals Posted
ABC/Vistex Proposed Solution
Developed Custom programs to handle
voluminous data using parallel processing technique. Developed custom transaction for Month-
End Accruals posted
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SUPPLIER INCENTIVES CONTINUED CHALLENGES TO OVERCOME
Lack of standards will continue to exist in contract development process
Lack of consistency amongst contracts & associated performance metrics will continue to result in significant variation from one contract to the next
Significant system customizations required for future state to handle lack of consistency & standards across contracts
Customizations based on existing agreement base create the potential for more complex enhancements in future if new contracts are signed and/or existing contracts change
Performance of month-end IP jobs and detailed reporting transactions
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SUPPLIER INCENTIVES UPGRADE CHALLENGES TO OVERCOME
Implementation of ADM functionality has been postponed until after
upgrade go-live due to many issues encountered throughout multiple testing phases ABC currently has a custom-built program that exceeds ADM standard delivered
capabilities Most issues were technical in nature for which many OSS notes were provided and
custom enhancements implemented Vistex will be making advance corrections to the functionality as a result of ABC’s issues
and releasing with SP2 Issues when using Calculation run functionality and Collective Tracker for
delta accrual postings Vistex no longer supporting Collective Tracker but functionality still available for use –
creates conflicts with Calc Run functionality Buckets functionality – need to implement “hybrid” using LIS and Buckets
simultaneously due to existing incentives structure and BOBJ reporting constraints
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SUPPLIER INCENTIVES KEY BENEFITS
One system/source for all Supplier & Customer Incentives Identifies, calculates and settles all types of incentives and paybacks related to business
processes
Seamless integration with other SAP processes & transaction A fully-integrated, embedded SAP add-on that aims towards elimination of spreadsheets
and manual estimation of incentives and paybacks
Proactive contract performance monitoring
Improved accuracy & consistent application of incentive calculations Streamlines the incentive processes, reduces errors, validates claims, and
reduces disputes
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CHARGEBACKS WHAT ARE CHARGEBACKS?
Chargebacks
Sales are made to Customers at pricing below Acquisition cost under Wholesale Agreements. Chargebacks are the requests to the Vendors for the differences. Calculate and Submit claims for the differences Manage and Reconcile discrepancies Interface with AP for deductions and payments Manage collections and Vendor interactions
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CHARGEBACKS AMERISOURCEBERGEN CHARGEBACK STATISTICS
Over $1.5B in Chargebacks
generated daily
Approximately 85% of
Chargeback lines submitted within 8
hours of sale
Over 15M Chargeback lines created monthly
Average 100 K Discrepancy lines monthly • Approximately 35% Coded by Chargeback
Analysts • Remaining Auto-Coded by Vistex
Approximately 95% (300 Vendors) receiving
Chargeback submissions daily (EDI 844)
Chargebacks generated 6 days
per week Approximately 94% Chargeback lines received
via electronic response (849) from Suppliers
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CHARGEBACKS THE IMPLEMENTATION JOURNEY
Legacy Chargebacks Process Challenges
Vistex Chargebacks Solution
Vistex Chargebacks Implementation Challenges
Chargebacks Solution Benefits
Current and Future Implementation Plans
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CHARGEBACKS LEGACY CHARGEBACKS PROCESS CHALLENGES
Multi-platform corporate system (decentralized and centralized areas on different systems and databases) with some based on east coast time and others on west coast time Chargeback creation in one system and reconciliation in another Reconciliation processes varied based on Vendor response type /
format Order data not visible to the Chargebacks department and a day’s
delay to receive invoices to create claims and details of transactions not visible to users No ability to perform ad-hoc reports Chargeback Claim Creation process handled only ordinary
transactions Many manual processes which were difficult to control/improve
Legacy Chargebacks Process Challenges
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CHARGEBACKS VISTEX CHARGEBACKS SOLUTION
Transactional Chargebacks Contract Pricing established at Billing
Daily batch processing for Creation
Reconciliation with SAP workflow
844 and 849 functionality
Combination of ECC and BI reporting
Vistex Chargebacks Solution
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CHARGEBACKS VISTEX CHARGEBACKS IMPLEMENTATION CHALLENGES
Initially two billing document streams due to overall conversion plan Overlapping Build activities
Implementing Chargebacks along with other processes - not all
details of predecessor processes known Steep learning curve for Super Users
Vistex Chargebacks Implementation Challenges
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CHARGEBACKS TECHNICAL CHALLENGES & SOLUTIONS
Implementation Pain Points
Automated approval process CB Vendor
response Large volume of:
Vendor Response everyday Work flow triggers for approval
process (at times in small intervals)
Post-Implementation ABC-Vistex Solution
Complex workflows built over custom BOR
object To handle large volumes:
Rationed WF triggers by enabling event queue technique Fine tuned the rate of release of
events from queue to optimally consume system resources
Vistex Chargebacks Implementation Challenges
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CHARGEBACKS WORKFLOW – 2012 STATISTICS
April May June July AugPer Day Avg 6366 5138 21920 12161 4690Per Day Peak 22934 17694 96272 68230 8693
0
20000
40000
60000
80000
100000
120000
Monthly Peak & Average Workflow Triggers
April May June July AugTotal 190965 154164 657604 376998 145388
190965 154164
657604
376998
145388
0
100000
200000
300000
400000
500000
600000
700000
Monthly CB Workflow Triggers
Chargebacks Workflow
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CHARGEBACKS WORKFLOW – 2012 VS 214 COMPARISON
2012 - Monthly
2014 - Monthly
2012 Daily Avg
2012 Dailly Peak
2014 Daily Avg 2014 Dailly Peak
April 190,965 176,852 6,366 22,934 5,895 19,458
May 154,164 134,955 5,138 17,694 4,353 16,628
June 657,604 114,353 21,920 96,272 3,811 18,950
Chargebacks: Workflow Comparison
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CHARGEBACKS WORKFLOW – 2012 VS 2014 – Q2 COMPARISON
April May June2012 - Monthly 190,965 154,164 657,6042014 - Monthly 176,852 134,955 114,353
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
Monthly CB WF Trigger Comparison (2012 Vs 2014)
2012 - Monthly 2014 - Monthly
Chargebacks: Workflow Comparison
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CHARGEBACKS WORKFLOW – 2012 VS 2014 COMPARISON
0
5,000
10,000
15,000
20,000
25,000
April May June2012 Daily Avg 6,366 5,138 21,9202014 Daily Avg 5,895 4,353 3,811
Daily Average - CB WF Trigger (2012 vs 2014)
2012 Daily Avg 2014 Daily Avg
Chargebacks: Workflow Comparison
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CHARGEBACKS WORKFLOW – 2012 VS 2014 COMPARISON
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
April May June2012 Dailly Peak 22,934 17,694 96,2722014 Dailly Peak 19,458 16,628 18,950
Daily Peak - CB WF Trigger (2012 vs 2014)
2012 Dailly Peak 2014 Dailly Peak
Chargebacks: Workflow Comparison
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VISTEX – TABLE VOLUMES
Table Name Table Description 2012 2013 2,014
/IRM/IPCBPTR CB Partner Data 1,752,644,000 2,741,763,000 2,584,603,144
/IRM/IPBKPFINDX Accounting Document Items – Addl. Data 1,620,902,000 2,734,029,000 922,331,543
/IRM/IPCRITM Sales Rebate Item Data 1,129,411,000 1,930,218,000 771,610,531
/IRM/IPCRPTR Sales Rebate Partner Data 1,059,764,000 1,712,887,000 1,593,805,198
/IRM/IPCBDFL CB Document Flow 1,046,219,000 1,840,290,000 1,990,824,341
/IRM/IPCBITM CB Item Data 504,604,333 794,295,667 771,610.531 /IRM/IPBKPF Accounting Documents 372,480,667 601,105,000 569,434,162
/IRM/IPCBHDR CB Header 322,101,000 491,144,148 478,704,898 /IRM/IPPCCON Partner Comm. Conditions 148,771,667 319,338,667 457,786,612 /IRM/IPPCITM CB Item 111,659,333 215,414,333 298,859,680 /IRM/IPCRHDR Sales Rebate Header Data 180,165,850 176,947,039
Vistex: Table Volumes
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VISTEX ARCHIVING APPROACH
The eligibility criteria for the document to be archived is Posting date and Change date (if, applicable) both should be 2 years earlier to the date of archiving.
Only the below two areas are being archived, as they together make up the largest chunk of data. The two Archive Objects in VISTEX area are /IRM/IPCB---- Archiving Object for Charge Backs Module /IRM/IPCR --- Archiving Object for Customer Rebates Module. Since Vistex is fully integrated with SAP,
accrual journal entries will automatically post to the FI module If a document is archived then its corresponding entries from the tables also get archived. Corresponding Records from the following Tables get archived under Chargeback’s
/IRM/IPBKPF --- Accounting Documents /IRM/IPCBDFL --- Chargeback Document Flow /IRM/IPCBHDR --- Chargeback Header /IRM/IPCBITM --- Chargeback Item Data /IRM/IPCBPTR --- Chargeback Partner Data KONV --- Conditions (Transaction Data)
Corresponding Records from the following Tables get archived under Sales rebates /IRM/IPBKPF --- Accounting Documents /IRM/IPCRDFL --- Sales Rebate Document Flow /IRM/IPCRHDR --- Sales Rebate Header Data /IRM/IPCRITM --- Sales Rebate Item Data /IRM/IPCRPSC --- Sales Rebate Payment Schedule /IRM/IPCRPTR --- Sales Rebate Partner Data KONV --- Conditions (Transaction Data)
Vistex: Archiving Approach
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VISTEX ARCHIVING
Chargeback
Tables No of Records Archived
/IRM/IPBKPF 171,354,723
/IRM/IPCBDFL 477,120,104
/IRM/IPCBHDR 174,594,902
/IRM/IPCBITM 267,525,597
/IRM/IPCBPTR 934,518,224
CDHDR 625,432,934
CDKEYTAB 173,726,417
CDPOS 4,182,518,918
KONV 2,008,511,795
Grand Total 9,015,303,614
Sales Rebates
Tables No of Records Archived
/IRM/IPCRHDR 47,310,481
/IRM/IPCRITM 571,630,983
/IRM/IPCRPTR 556,685,850
/IRM/IPCRDFL 32,170,078
KONV 5,498,494,092 CDHDR 117,356,871 CDPOS 1,199,761,812
Grand Total 8,023,410,167
Vistex: Archiving Stats
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Q&A AND CLOSE
Thank You!
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DRIVE REVENUE & MARGIN THROUGH INCENTIVE & CHARGEBACK PROGRAMS
Produced by:
Questions?
Download handouts (PDF) : www.mdm.com/slides or [email protected]
Event Sponsor: