SAP SPECTRUM December 2009
Customer magazine
Joining Forces
One for all? Once, perhaps. But times have changed. Real innovation is no longer driven by individual companies working under their own steam. Today, collaboration is the name of the game – and pooling ideas is the key to achieving new successes.
The Customer President
As president of Adobe Japan, Garrett Ilg experienced firsthand how SAP brought his business greater margins. Convinced, he took over the top spot at SAP Japan in September 2008, a day after the Lehman Brothers collapse. One year later and undeterred by prolonged crises, Ilg is determined to do for customers what SAP has done for his previous employer.
Miners with Market Mindset
PT Timah, the world’s second largest tin producer, has been progressively implementing SAP software, from its back office to its core processes. The solutions have enabled an attitudinal shift in the company, from production selling to demand filling. The result is greater profitability.
16.02.2009
Dash for Cash in Wholesale Distribution Industry
By: Neetin Datar, SAP
In today’s global financial crisis, the forward thinking CFOs in the wholesale distribution industry are making strategic investments to improve their vendor cost recovery process. This is positively impacting their cash flow and working capital needs.
Given the importance of this process to their financial success, they are turning to SAP to enable faster and more accurate claims management while reducing costs and disputes with their trading partners.
Ad
Recouping what is Due to them is a Huge Challenge for Distributors
Wholesale distribution industry trends reveal that manufacturers are increasingly offering special pricing to customers as they try to maintain or gain market share. Typically, the special pricing offered to customers is lower than what distributors paid for the product. That is why distributors need to recoup this difference from manufacturers in form of chargeback claims (earned income in food & beverage, ship & debit in high-tech, and special pricing agreements in industrial distribution).
It is quite common to see chargebacks being managed by distributors in spreadsheets and in silos, making it a slow, error-prone and expensive process. The chargeback process is indeed a source of major headache and profit leakage for most distributors.
To manage chargebacks effectively, distributors need to track the order-to-cash cycle for each sales order, and all the line items within it, to enable accurate claims accruals, provide proof of sales documentation and overall smoother claims settlement. Lack of such automated business process capabilities results in lost opportunities, lower profitability, and significant financial under-performance.
According to a National Association of Electrical Distributors (NAED) study, an average company takes 30 days to recoup the money it is due. In comparison, the first quartile companies can do so in 3 days – thereby dramatically improving their cash position.
SAP Helps Reduce Days Chargeback Outstanding (DCO)
SAP’s integrated solution, known as SAP Paybacks and Chargebacks application by Vistex, helps distributors collect and track all their chargeback claims, from initiation to settlement.
The solution enables firms to
•record all the negotiated special pricing agreements and their specific terms and conditions;
•capture all the relevant chargeback data as part of the order-to-cash business process in ERP;
•manage claims processing and ultimately transform chargeback management into a more systematic and effective process.
This minimizes manual interventions, making the chargebacks process more accurate and efficient.
SAP Paybacks and Chargebacks works seamlessly with SAP ERP and its underlying architecture and is compatible with new releases and service pack upgrades of SAP ERP and SAP NetWeaver Business Warehouse. This dramatically reduces the total cost of the solution, enabling rapid return on investment and bringing immediate impact to a distributor’s financial success.
Four tips for better chargeback management
- Your chargeback solution must have out-of-the-box integration with your ERP based Order to Cash and Finance Processes. Why?
• This helps provide more visibility and control, close books faster, meet internal controls and regulatory compliance requirements, and eliminate high cost of integration and maintenance of custom interfaces. - Your chargeback solution must provide actionable business intelligence capabilities i.e. be able to examine data from many perspectives like product, customer, program, channel. Why?
• This allows you to gain strategic business insight and helps you make better informed decisions. - Your chargeback solution should enable “management by exceptions” i.e. employee intervention needed only when an exception is kicked out by the system based on business rules defined for your enterprise. Why?
• This dramatically increases employee productivity and helps them focus more on value-adding work for your company. - Your chargeback solution should provide easy B2B integration capabilities with trading partners. Why?
• This enables faster and more streamlined process for all in your business network e.g. elimination of disputes, and ultimately leads to a higher value for your customers.
Leading Distributors are Turning to SAP
SAP Paybacks and Chargebacks application is being successfully used by distributors of all sizes and across all the major sub-verticals of wholesale distribution i.e. healthcare, industrial, and food & beverage.
One example: The Charmer Sunbelt Group (CSG), a leading US-based distributor of alcoholic and non-alcoholic beverages with annual revenues of U.S.$4.1 billion and some 150,000 customers in 17 states in America, has successfully implemented SAP ERP and SAP Paybacks and Chargebacks.
According to Paul Fipps, vice president business services at CSG, speaking at SAPPHIRE 2008 in Orlando, “The chargeback process for us determines whether or not we are profitable. We do, on an average, U.S.$168 million a year in chargebacks.” The majority of chargebacks at CSG are so-called depletion allowances — agreements negotiated with suppliers for dollar rebate for each case sold. So it is vital for CSG to track the entire life cycle of each sales order to protect its profitability. Given the huge transaction volumes at CSG, SAP Paybacks and Chargebacks has come in very handy.
In the current global economic crisis, most distribution finance chiefs will agree cash is the best cushion. Every wholesale distributor should urgently look for trapped cash in their operations and make strategic investments to automate them.
Neetin Datar is the Senior Director of Solution Marketing for Wholesale Distribution Industry at SAP. He has enterprise business software experience in ERP, E-Commerce, GRC, Global Trade, Warehouse Management, and Distribution markets. He has been with SAP since 1994 and is a frequent speaker at industry events and has authored numerous articles in various business and technology publications globally.
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