IAB S OLUTIONS LLC Ken Green Kathy Rotondo Co‐Chairman Senior Vice President kgreen@iabllc.com krotondo@iabllc.com www.iabllc.com T HE N EW D YNAMICS OF C USTOMER D EDUCTIONS O BJECTIVE OF P RESENTATION Help you to create value in your organization. 1
T HE N EW D YNAMICS OF C USTOMER D EDUCTIONS D EDUCTION C HALLENGES G ROWING D EDUCTION B ALANCES U PTICK IN DEDUCTIONS AS A % OF SALES I NCREASE IN COMPLEXITY OF DEDUCTIONS M ANAGING TIMELY & ACCURATE CLEARING I NABILITY TO FIND / RECOVER INVALID CLAIMS T HE N EW D YNAMICS OF C USTOMER D EDUCTIONS F IVE T OPICS FOR V ALUE C REATION 1. C LOSELY E XAMINE C USTOMER A CTIVITY 2. S UPPLIER A GREEMENTS 3. V ENDOR C OMPLIANCE 4. RPA – R OBOTIC P ROCESS A UTOMATION 5. E‐C OMMERCE N UANCES 2
T HE N EW D YNAMICS OF C USTOMER D EDUCTIONS #1 C LOSELY E XAMINE C USTOMER A CTIVITY L OOK AT DEDUCTIONS AS A % OF S ALES Include: Planned and Unplanned, use Net Deductions after any repayments • Identify Top Reasons / Categories • Coordinate with Sales on Trade Budgets • Develop Strategies to Address each Type T HE N EW D YNAMICS OF C USTOMER D EDUCTIONS #1 C LOSELY E XAMINE C USTOMER A CTIVITY The Deductions in this example are averaging 48% of Sales. 3
T HE N EW D YNAMICS OF C USTOMER D EDUCTIONS #1 C LOSELY E XAMINE C USTOMER A CTIVITY % Deductions By Type TRADE MDF 5% 2% PRICE 84% SHORTAGE 1% 16% 1% COMPLIANCE ADVERTISING 7% POST AUDIT Investigate excessive categories. T HE N EW D YNAMICS OF C USTOMER D EDUCTIONS #2 R EVIEW S UPPLIER A GREEMENTS T HESE AGREEMENTS ESTABLISH THE “ RULES OF THE GAME ” FOR THE SUPPLIER RELATIONSHIP • Learn Terms and Conditions of Current Agreements • Understand the Impact on Deductions and your Bottom‐line • Engage Sales to Negotiate Acceptable Terms • Develop a Process to Identify and Challenge Invalid Claims 4
T HE N EW D YNAMICS OF C USTOMER D EDUCTIONS #2 R EVIEW S UPPLIER A GREEMENTS Acceptance of Terms. “F ROM TIME TO TIME , C OMPANY “ B Y ACCEPTING A XXXXX “ B Y CLICKING THE ‘I MAY ALTER , AMEND , OR CREATE P URCHASE O RDER OR BY AGREE’ BUTTON LOCATED BUSINESS PROGRAMS , PROCESSES , SHIPPING P RODUCTS IN BELOW … Y OU AGREE THAT DIRECTIVES AND POLICIES . W HEN RESPONSE TO A XXXXX IT DOES , C OMPANY MAY PROVIDE YOU HAVE READ AND P URCHASE O RDER , V ENDOR UNDERSTAND AND AGREE TO NOTICE TO S UPPLIER OF SUCH AGREES THAT XXXXX IS NOT BE BOUND BY ALL TERMS AND CHANGES VIA ITS P ORTAL SYSTEM , BOUND BY ANY OTHER TERM CONDITIONS OF THIS ITS CORPORATE WEBSITE …A FTER OR CONDITION OF V ENDOR IN AGREEMENT (I NCLUDING THE RECEIVING SUCH NOTICE ( S ), ANY WRITTEN S TANDARDS ) WITHOUT S UPPLIER ' S ACCEPTANCE OF ACKNOWLEDGMENT , INVOICE CHANGE , AS THE STANDARDS O RDERS WILL SERVE AS OR OTHERWISE , THAT IS CONFIRMATION OF ITS MAY BE UPDATED FROM TIME INCONSISTENT WITH OR IN ACCEPTANCE OF C OMPANY ' S NEW TO TIME IN ACCORDANCE ADDITION TO THE TERMS AND WITH THIS AGREEMENT . ” BUSINESS PROGRAMS , PROCESSES , CONDITIONS HEREOF . ” DIRECTIVES AND POLICIES ” T HE N EW D YNAMICS OF C USTOMER D EDUCTIONS #2 R EVIEW S UPPLIER A GREEMENTS Billing Disputes. “T HE DEADLINE FOR INQUIRIES REGARDING ADVICE MESSAGES IS NINETY (90) DAYS FOLLOWING ISSUANCE . V ENDOR MUST KEEP FULL AND DETAILED ACCOUNTS FOR A PERIOD OF NOT LESS THAN FIVE (5) YEARS … XXXXX RESERVES THE RIGHT TO AUDIT UP TO FIVE (5) YEARS OF V ENDOR ’ S BOOKS AND RECORDS AT ANY TIME WITH RESPECT TO V ENDOR ’ S CHARGES , POLICIES , PROCEDURES AND TRANSACTIONS WITH XXXXX. A NY RESULTING CLAIMS WILL BE IMMEDIATELY DEDUCTED WITH OR WITHOUT PRIOR V ENDOR APPROVAL OR NOTICE .” 5
T HE N EW D YNAMICS OF C USTOMER D EDUCTIONS #2 R EVIEW S UPPLIER A GREEMENTS Price and Products. “A NY PRICE CHANGE MUST BE ACCEPTED BY XXXXX IN WRITING WITHIN THIRTY (30) DAYS OF RECEIPT OF A PRICE CHANGE NOTICE . I N THE EVENT THE PARTIES AGREE ON NEW PRICING TERMS , SUCH NEW PRICING WILL BE IMPLEMENTED ON THE 1 ST OF THE MONTH WHICH IS AT LEAST SIXTY (60) DAYS FOLLOWING THE DATE OF THE NOTICE OF SUCH NEW PRICING . I N THE EVENT XXXXX DOES NOT ACCEPT SUCH PRICE CHANGE , S UPPLIER HAS SEVEN (7) DAYS TO PROVIDE WRITTEN NOTICE TO XXXXX THAT IT IS ELECTING TO TERMINATE THIS A GREEMENT , WHICH TERMINATION WILL BE EFFECTIVE THIRTY (30) DAYS FROM SUCH TERMINATION NOTICE , OTHERWISE EXISTING PRICING WILL CONTINUE .” “V ENDOR MUST COMMUNICATE TO ITS XXXXX R EPRESENTATIVE , IN WRITING , ALL CHANGES TO CURRENT UPC NUMBERS , AS WELL AS THE ADDITION OF NEW NUMBERS , NO LESS THAN NINETY (90) DAYS PRIOR TO SHIPMENT OF P RODUCTS TO XXXXX.” T HE N EW D YNAMICS OF C USTOMER D EDUCTIONS #2 R EVIEW S UPPLIER A GREEMENTS Allowances. “S UPPLIER HAS GIVEN A S WELL I NVOICE A LLOWANCE SHOWN IN "S TANDARD P URCHASE O RDER A LLOWANCES " WHICH WILL BE DEDUCTED FROM EACH INVOICE BEFORE PAYMENT IS MADE FOR M ERCHANDISE . S UPPLIER WILL GIVE THE S WELL A LLOWANCE IN LIEU OF ACTUAL U NSALABLE M ERCHANDISE DEDUCTIONS BEING PROCESSED AT STORE LEVEL . T HE S WELL A LLOWANCE PERCENTAGE MUST BE ADEQUATE TO COVER ALL U NSALABLE M ERCHANDISE . I F THE ACTUAL VALUE OF U NSALABLE M ERCHANDISE AT COST EXCEEDS THE S WELL A LLOWANCE , C OMPANY RESERVES THE RIGHT TO CHARGE S UPPLIER THE DIFFERENCE .” 6
T HE N EW D YNAMICS OF C USTOMER D EDUCTIONS #3 B E P RO ‐A CTIVE WITH V ENDOR C OMPLIANCE E XPECTATIONS FOR SUPPLIERS MAY BE UNREASONABLE AND EXORBITANT Learn requirements and associated fines Determine what is reasonable for your company Engage concerned departments to collaborate Request waivers when requirements can’t be met Verify circumstances and challenge inaccurate claims T HE N EW D YNAMICS OF C USTOMER D EDUCTIONS #3 B E P RO ‐A CTIVE WITH V ENDOR C OMPLIANCE 7
T HE N EW D YNAMICS OF C USTOMER D EDUCTIONS #4 I MPLEMENT RPA – R OBOTIC P ROCESS A UTOMATION W HERE DO WE SEE RPA WORKING IN A/R? Apply Cash –Clear invoices, create and code deductions, AWO Gather Data –Portals, Emails, Claims, PODs, Invoices, Trade Validate & Clear –TPM Match, Approvals Dispute –Portal Submission RPA will keep transactional costs down. T HE N EW D YNAMICS OF C USTOMER D EDUCTIONS #5 U NDERSTAND E‐C OMMERCE N UANCES O N ‐ LINE SHOPPING CREATES NEW CHALLENGES FOR SUPPLIERS Managing Relationship –E‐Comm Teams, Catalog management Packaging Expectations –Labeling, Packaging, Case Pack Shipping Requirements –Tighter Ship Windows, ASN issues Trade Spend –Accrual Based vs POS, Sourcing Concerns 8
IAB S OLUTIONS LLC Please contact us for a complimentary deduction analysis: Kathy Rotondo Senior Vice President krotondo@iabllc.com 203‐887‐8034 IAB S OLUTIONS LLC 233 N ORTHERN B LVD C LARKS S UMMIT PA 18411 www.iabllc.com 9
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