sapinsider vistex
TRANSCRIPT
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Preventing Profit Leakage inIncentives, Rebates, &Billback/Chargeback Claims
Dru Shiner, Industry Principal, SAPLarry Buchman, Director of Business Development, VistexTony Biondo, Director of Information Services, Medline IndustriesPaul Dudzik, Vice President, Sales Operations, Medline Industries
Asif Rajapkar, SD Team Leader, Medline Industries
March 25, 2008
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Agenda
Real-World Experience
Q&A
Process-Related Challenges & Problems
Solution Overview
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Process-Related Challenges & Problems
Premise: Incentives, rebates, and billback/chargeback claims are a way of life
Challenge #1: Complexity of agreements & related special pricing contracts
Challenge #2: Volume of sales and/or purchasing transactions
Challenge #3: Need to aggregate direct, indirect, and/or retail sales data
Problem for manufacturers: profit leakage, resulting from
* Overpayment of duplicate, invalid, and/or erroneous claims
* High administrative labor costs
* Decreased cash flow / Increased working capital costs
Problem for distributors/retailers: profit leakage, resulting from* Missed cost recovery claim opportunities
* High administrative labor costs
* Decreased cash flow / Increased working capital costs
Problem for all trading partners: auditability & Sarbanes-Oxley compliance
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Processes from Manufacturers Perspective:
SPA/Deviated Billing/Ship-and-Debit Claims
WholesaleDistributor
GPO orCustomer
Parent / HQ
Customer
Sells at mfr-negotiated price also performs marketing /activity(ies) for mfr
Negotiates prices &administrative fees
End User, ConsumerManufacturer
Negotiates special prices
Pricing Agreement
Purchases product / pays distributorthe manufacturer-negotiated contract price
Joins Group Purchasing Org.
Purchases product for resale / pays WAC
Submits SPA/ship-and-debit
chargeback claim(s)
Settles SPA/ship-and-debit
by issuing credit/pymnt
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Processes from Manufacturers Perspective:
Marketing Development / Event Claims
WholesaleDistributor
Sells at mfr-negotiated price also performs marketing /activity(ies) for mfr
End User, ConsumerManufacturer
Negotiates MDF rebatesMarketing/Development Cost
Reimbursement Agreement
Submits mktg event / MDF
chargeback claim request(s)
Settles mktg event / MDF
claim by issuing credit/pymnt
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Processes from Manufacturers Perspective:
Performance-Based Customer/Sales Rebates
WholesaleDistributor
GPO orCustomer
Parent / HQ
Customer
Sells at mfr-negotiated price also performs marketing /activity(ies) for mfr
Negotiates prices &administrative fees
End User, ConsumerManufacturer
Negotiates volume /growth rebates
Volume &or Growth Rebate Agreement
Issues Rebate Payment
Joins Group Purchasing Org.
Submits indirect sell-thru data
Issues Rebate Credit or Payment
Purchases product / pays distributorPurchases product for resale / pays WAC
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Processes from Manufacturers Perspective:
Sales Commissions/Bonuses &/or Broker Fees
WholesaleDistributor
Sells at mfr-negotiated price also performs marketing /activity(ies) for mfr
Manufacturer
Negotiates salesCommissions/broker fees
Sales Rep,Broker, Dealer
Secures orders for Mfr
Sales Incentive
Compensation Agreement
Pays Sales Commission
Purchases product for resale / pays WAC
Submits indirect sell-thru data
and/or Bonus
Customer
End User, Consumer
Purchases product / pays distributor
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Processes from Manufacturers Perspective
WholesaleDistributor
GPO orCustomer
Parent / HQ
Customer
Sells at mfr-negotiated price also performs marketing /activity(ies) for mfr
Negotiates prices &administrative fees
End User, ConsumerManufacturer
Negotiates special prices
Sales Rep,Broker, Dealer
Secures orders for Mfr
Pricing Agreement
Rebate Agreement
Marketing/Development Cost
Reimbursement Agreement
Sales Incentive
Compensation Agreement
Issues Rebate Payment
Pays Sales Commission
Purchases product / pays distributorthe manufacturer-negotiated contract price
Joins Group Purchasing Org.
Purchases product for resale / pays WAC
Submits indirect sell-thru data
Submits SPA/ship-and-debit
and/or marketing event claim(s)
Issues SPA/ship-and-debit
&/or mktg event credit/pymnt
Issues Rebate Credit or Payment
and/or Bonus
Special Price Authorization,Deviated Billing, Ship-and-Debit Claims
Marketing / Development
Event Claims
Performance-Based (Volumeand/or Growth) Rebate-TypeIncentives
Sales Commissions andBonuses
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Processes from Distributors Perspective
WholesaleDistributor
GPO orCustomer
Parent / HQ
Customer
Sells at mfr-negotiated price also performs marketingactivity(ies) for mfr
Negotiates prices &administrative fees
End User, ConsumerManufacturer
Negotiates special prices
Sales Rep
Secure orders for WD
Pricing Agreement
Rebate Agreement
Rebate Agreement
Marketing/Development Cost
Reimbursement Agreement
Sales Incentive
Compensation Agreement
Issues Rebate
Credit or Payment
Pays Sales Commission
Purchases product / pays manufacturer-negotiated contract price
Joins Group Purchasing Organization
Purchases product for resale / pays WAC
Submits indirect sell-thru data
Submits SPA/ship-and-debit
and/or marketing event claim(s)
Issues SPA/ship-and-debit
&/or mktg event credit/pymnt
Issues Rebate Credit or Payment
and/or Bonus
Special Price Authorization, DeviatedBilling, Ship-and-Debit Claims
Marketing / Development Event Claims
Performance-Based (Volume and/orGrowth) Rebate-Type Incentives
Sales Commissions and Bonuses
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Processes from Retailers Perspective
Retailer
GPO orRetailer
Parent / HQ
Customer
Sells at mfr-advertised price also performs marketingactivity(ies) for mfr
Negotiates prices &administrative fees
End User, Consumer
Supplier(Mfr or Distr)
Negotiates incentive &/orAdvertises instant rebates
Sales Rep
Secure orders for WD
Trade Promotion Agreement
Rebate Agreement
Marketing/Development Cost
Reimbursement Agreement
Sales Incentive
Compensation Agreement
Pays Sales Commission
Purchases product /takes instant rebate
Purchases product for resale
Submits POS scan data
Submits chargeback claim(s)
and/or marketing event claim(s)
Issues claim-related
credit/pymnt
Issues Rebate Credit or Payment
and/or Bonus
Passes through supplier SPIFF
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Agenda
Real-World Experience
Q&A
Process-Related Challenges & Problems
Solution Overview
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Core & Value-Add Processes Addressed by ERP+
Inquiryto
Cash
Financial, Operations & Human CapitalManagement
SourceTo
Pay
CustomerRelationshipManagement
BusinessIntelligence,
Planning
&
Analytics
Revenue Proc esses
Spend Processes
Adm inistrat ive ProcessesMaster
DataManagement
SupplierRelationshipManagement
SupplyChain
Management
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Enterprise Commerce Framework Enabled byVistex B P ddOns within SAP Solutions
Inquiryto
Cash
Financial, Operations & Human CapitalManagement
SourceTo
Pay
IndirectSales
Reporting&
Claims
Performance-Based
Incentives&
Rebates
SalesAgreements,
Contracts&
Promotions
FoundationData
Materials
Customers
Vendors
PricingRecords
PurchasingAgreements,
Contracts&
Promotions
Claims
Performance-Based
Incentives&
Rebates
CustomerRelationshipManagement
BusinessIntelligence,
Planning
&
Analytics
Revenue Proc esses
Spend Processes
Adm inistrat ive ProcessesMasterData
Management
SupplierRelationship
Management
SupplyChain
Management
SAP Business Suite
SAP ERP
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SAP Solutions Provided by Vistex
SAP Incentives Administration by Vistex
Sales Commissions, Broker Fees, Royalty Payments and Other Incentive CompensationPrograms/Plans (paid out to employees and/or trading/channel partners)
Performance-Based (Volume and/or Growth) Sales Rebates (paid out to customers, GPOs, partners)
Performance-Based (Volume and/or Growth) Purchasing Rebates (earned/received from suppliers)
SAP Paybacks and Chargebacks by Vistex
Complex Pricing/Rebate Contract and Trading Organization Member Eligibility Management
Payback (aka Billback) Claims Management (manufacturers)
Chargeback Claims Management (wholesale distributors)
Foundation Data for SAP
Pricing Records -- Condition Master Data
Materials -- Product Master Data
Customers -- Customer Mater Data
Vendors Vendor Master Data
Payment Resolution for SAP
Cash Application and Reconciliation
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Integration Points
SAP NetWeaver PortalSAPBW
InfoCube
Info
Cube
SAPCRM
CRMTransaction
MarketingPlanner
SAP ERPMaster Data
FI
IP
SD
CustomerCustomer
Info RecordsMaterial
VendorInfo Records
Vendor
Pricing Rules (Condition Records)
SalesOrder
Agreement (Rules/Condition Records)
ClaimRequest
IndirectSales Data
IP Document
Deviated PricingMarketing FundsEvent AllowancesRegl/Natl Programs
ValidationCalculation
AccrualParkingSettlement
ReconciliationDispute
ResolutionPost-SettlementAdjustment
DataExtraction
Expense/LiabilityRecognition
CR Memo/Pymtto Customer
Debit Memoto Vendor
Vendor CRMemo/PymtDispute
Case
MM
DataExtraction
DataExtraction PurchaseOrder VendorInvoiceCustomerInvoice
Automatic Clearing of Deduction
Customer Pymt&/or Deduction
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Chargeback Lifecycle
Agreement Rulesand Attributes
Parked Claim
SalesOrder
OutboundDelivery
BillingDocument
ChargebackDocument
OutgoingClaim
PartnerResponse
CreditMemo/
Receivable
RecordAgreement
Create Accrual
Claim Settlement
Await Vendor Approval
Claim Reconciliation
Record Vendor Response
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Key Features: SAP Incentive Administration
and SAP Paybacks and Chargebacks
Common Features
Full contract/agreement lifecycle support
What-if simulation/modeling capabilities
Web Portal access
Integration w/ SAP master & trans data
Integration with SAP Workflow
Real-time financial postings to FI/CO forexpected accruals, actual accruals, settlements,
and adjustments IP documents have their own lifecycle,
independent of the sales/billing documents fromwhich they were created
Leverages SAP role-based securityauthorizations, full forward/backward documentflow audit trails, etc.
Can push or pull reporting in email, .PDF,
and/or .HTML output formats
Ad Hoc Report Tool
Data extractors to SAP BW/ SAP NetWeaver BI
User/Administrator Workbench
SAP Incentives Administration Features
Incentives/rebates can be transactional and/or
performance-oriented (percent of goal achievement),based upon revenue, margin, growth, etc.
Integration with SAP CRM territory management andHR organizational structures
Integration with SAP BW/ SAP SEM and/or SAPNetWeaver BI/BPS
SAP Paybacks & Chargebacks Features
Support of EDI (844, 845, and 849), flat files, and/ormanual entry for claims
Automatic adjustment within user-defined tolerancelimits
Complex pricing contract management IPagreements condition records can be used by SDpricing procedures as well
Trading organization member eligibility mgmt
Integration w/ CRM trade promotion planning
Trade spend funds management
Retroactive chargeback cost recovery
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Buying Group Program with Members
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Deviated Billing Contract (Web Interface)
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Deviated Billing Claim Request
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Sample of SAP and Vistex Customers
http://rds.yahoo.com/_ylt=A0geu6Yd7s5HfTABmt9XNyoA;_ylu=X3oDMTB0cHUxODdlBHNlYwNzYwRjb2xvA2FjMgR2dGlkA1FSVzFfMTE3/SIG=1g8o3658a/EXP=1204830109/**http%3a//images.search.yahoo.com/images/view%3fback=http%253A%252F%252Fsearch.yahoo.com%252Fsearch%253Fei%253DUTF-8%2526p%253Dpilgrims%252Bpride%252Blogo%26w=200%26h=120%26imgurl=media.graytvinc.com%252Fimages%252FPilgrims_Pride_logo.png%26size=21.4%26name=Pilgrims_Pride_logo.png%26rcurl=http%253A%252F%252Fwww.kwtx.com%252Fnews%252Ffeatures%252F6%252F5143872.html%26rurl=http%253A%252F%252Fwww.kwtx.com%252Fnews%252Ffeatures%252F6%252F5143872.html%26p=pilgrims%2bpride%2blogo%26type=png%26no=1%26tt=1http://www.steelcase.com/na/office_furniture_steelcase_index.aspxhttp://rds.yahoo.com/_ylt=A0geu_O17c5HjjkBRxZXNyoA;_ylu=X3oDMTB0cHUxODdlBHNlYwNzYwRjb2xvA2FjMgR2dGlkA1FSVzFfMTE3/SIG=1h1tom5pu/EXP=1204830005/**http%3a//images.search.yahoo.com/images/view%3fback=http%253A%252F%252Fsearch.yahoo.com%252Fsearch%253Fei%253DUTF-8%2526p%253Dkimberly%252Bclark%252Blogo%26w=300%26h=39%26imgurl=content.answers.com%252Fmain%252Fcontent%252Fwp%252Fen%252F9%252F97%252FKimberly-ClarkLogo.png%26size=3.3%26name=Kimberly-ClarkLogo.png%26rcurl=http%253A%252F%252Fwww.answers.com%252Ftopic%252Fkimberly-clarklogo-png%26rurl=http%253A%252F%252Fwww.answers.com%252Ftopic%252Fkimberly-clarklogo-png%26p=kimberly%2bclark%2blogo%26type=png%26no=1%26tt=117 -
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Benefits: SAP Incentive Administration and
SAP Paybacks and Chargebacks
Tangible Benefits Enabler
Increased revenue
Increase in promotional sales (3% 5%)*
Increase in purchasing rebates earned/received
Better modeling, planning, design & execution ofincentive/rebate plans and agreements
Reduction in missed/unclaimed cost recoveryopportunities (1% - 5%)*
Every transaction evaluated for eligibility againstall agreements, even retroactively
Reduced costs Reduction in overpayment errors on invalid rebate
claims (1% - 12%)*Rules-based engine with user-defined validationand calculation formulas
Reduced manual administrative work and disputehandling costs (30% - 50%)*
Automated system integrated with SAP WorkFlow user-defined tolerances
Lower working capital requirement
Reduction Days Chargebacks Outstanding (DCO)improved cash flow (10% - 20%)*
Chargeback claims aging, interim settlement,improved accuracy and fewer rejected claims
Reduction in unauthorized invoice deductions (3% -12%)*
Timely adjudication and settlement of rebate claimrequests before invoices are due
More effective utilization of marketing / trade spendprogram funds
Agreement Checkbook Register and Ad Hoc
Report tool for improved analytics to understandplan/agreement effectiveness
* Benchmark study results per SAP Value Engineering
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Costs Avoided with Embedded Solution(s)
Comprehensive enterprise-wide solution will require thefollowing With Vistex solution
With a non-integratedcompetitor solution
Number of interfaces to SAP components None 8
Estimated cost ($75-100k per interface)* $ 0 $600K - $800K
Estimated on going support costs($15-20k per interface per year)*
$ 0 $120K - $160K
Estimated First Year Interface Costs $ 0 $720K - $960K
5 years Cumulative integration costs $ 0 $1,200K - $1,600K
* Source: AMR Research
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Agenda
Real-World Experience
Q&A
Process-Related Challenges & Problems
Solution Overview
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Introduction
America's largest privately-held national manufacturer and distributor of
health care supplies and services
Manufactures and distributes more than 100,000 medical products,encompassing medical-surgical items and one of the largest textile lines in theindustry
7 North American & 25+ joint-venture worldwide manufacturing plants 29distribution centers
Sells in every state and 20+ countries
Provides products and services to the entire continuum of care, includinghospitals, extended care facilities, surgery centers, commercial laundries,home care dealers, home care agencies, physician offices and other alternatecare sites
700+ dedicated sales representatives
ISO 9000, EN 46000 and FDA QSR compliant supplier
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SAP & Vistex Solution Experience & Plans
Implemented SAP R/3 Release 2.2 in 1996; upgraded to Release 4.0 in 1999
Implemented SAP Paybacks & Chargebacks for billback agreements/claimsprocessing in late 2004
Upgraded to SAP ECC 5.0 in mid-2006
Roadmap to implement Incentives Administration for sales commissions Roadmap to implement chargeback agreements/claims processing withinPaybacks & Chargebacks
Roadmap to implement performance-based rebates within IncentivesAdministration
Realized and/or expected process improvements and benefits
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Agenda
Real-World Experience
Q&A
Process-Related Challenges & Problems
Solution Overview
Thank you
Larry Buchman
Director of BusinessDevelopment, Vistex
Tony Biondo
Director of InformationServices, Medline Industries