nNothing screams INEFFICIENCY louder than an employee

flipping through a foot-high stack of papers, one piece at a

time, searching for an important document. Worse yet, imag-

ine that employee is a member of the finance organization,

sifting through a pile of month-old invoices looking for pos-

sible revenue opportunities. Operating a business this way is a

recipe for missing out on potential revenue.

Summit Electric Supply knows this fact well. Until a few

years ago, the electrical products distributor was impeded

by an inefficient business process for identifying sales that

qualified for chargebacks.

A chargeback is a unique mechanism that distributors use to

minimize their risk of buying a product for more than they sell

it for. Say a distributor contracts to sell a product to a retail cus-

tomer for less money than it agreed to pay the manufacturer

wholesale for it. A chargeback agreement allows the distributor

to then turn around and bill the manufacturer an additional

contracted amount in order to make some profit on the deal.

While a chargeback is an effective business tool, it requires a

very close comparison of sales to contracts; depending on the

customer and the manufacturer, there can be myriad different

contracted deals.

“These chargeback deals contribute to a significant amount

of our business,” says David Wascom, CIO and Vice President

of IT at Summit Electric Supply. “The challenge is not just in

identifying these deals, but also in providing the manufacturer

with sufficient documentation that clearly defines which con-

tract we’re claiming a specific chargeback against and why.”

Missing Chargeback OpportunitiesPrior to 2007, the outdated legacy system that Summit was

operating restricted the amount and complexity of chargeback

agreements that business users could load into the system.

Also, the limited reporting capabilities and lack of visibility into

system data meant employees were hampered by a significant

amount of manual processing.

“We literally would have to comb through customer invoices

for specific manufacturers to find out where we sold their prod-

ucts each month and to identify, from our understanding of

the contract, which chargebacks we could claim,” Wascom says.

“Then we would process that information through Microsoft

Excel and generate reams of paperwork behind that. Just the

copies of the invoices to give a vendor, for example, would con-

sume a case — not a ream, a case — of paper every month.”

Summit ElEctric Supply AutomAtES itS chArgEbAck procESS And rEAlizES immEdiAtE bottom-linE bEnEfitS

by David Hannon, Features Editor

Bringing More revenue to the taBle

insiderprofiles.wispubs.com reprinted with permission from the Apr mAy Jun 2011 insiderprofiles

this article appeared in the Apr mAy Jun 2011 issue of insiderPROFILES (http://insiderprofilES.wispubs.com) and appears here with permission from WiS publiShing.

In fact, Summit’s chargeback process assumed that

the business would inevitably miss some chargeback

opportunities — literally leaving money on the table.

And the chargebacks that the business did identify were

often processed sluggishly. The process of gathering and

reviewing the invoices sometimes took an entire month,

so by the time the vendor received them, they were al-

ready a month old. And by the time vendors responded,

the invoices sometimes were two or three months old.

Summit’s decision to migrate to an SAP ERP system

provided the opportunity to automate and accelerate the

chargeback process. During the ERP implementation,

Wascom began researching ways that the new environ-

ment could address this unique process.1 He narrowed

the options down to two: develop a custom solution,

or implement the SAP Paybacks and Chargebacks ap-

plication by Vistex, which was developed specifically for

the distribution industry. The business decided on the

solution extension from SAP and Vistex, and has seen

nothing but benefits since.

How Chargebacks Work TodayNow, at the end of each Summit business day, the SAP

Paybacks and Chargebacks application automatically

sweeps through all of the billing activity for that day and

compares it to all chargeback agreements loaded in the

SAP system.

“The application looks at every customer-material

combination and compares that data to every charge-

back agreement to see if there is a match where a

chargeback can be claimed,” says Wascom. “If there is

a claim, the application creates a separate chargeback

document outside of the customer invoice. This docu-

ment, which is unique to the chargebacks application,

allows us to track the life cycle of that chargeback as it

is processed.”

The application consolidates the identified charge-

backs by vendor either daily or monthly, depending

on the type of vendor, and automatically submits the

information to the vendor with the appropriate back-

up from the chargeback document. The vendor then

can approve the chargeback or make any changes,

which are reconciled against the individual chargeback

document.

With this automated process, the chargebacks not

only are processed more quickly, but they also are

reviewed more frequently, streamlining the cash flow

for Summit. The turnaround time from vendors var-

ies based on their chosen method of response — for

example, whether or not they are using electronic data

interchange (EDI) systems.

“In our best cases where vendors are using EDI, we’re

now making our chargeback claim and getting our

approval from the vendor the same day we execute the

sale,” Wascom says. “Today, even our worst-case scenario

is better than our best-case scenario from the legacy

system days.”

The chargeback process is streamlined even fur-

ther for vendors that also are running SAP software,

according to Wascom, because everyone is speaking

the same language. Some vendors choose to respond

to the claims each night, no matter how minimal they

are, while others choose to wait until a certain dollar

amount is reached before responding.

1 To learn more about Summit Electric Supply’s SAP ERP implementation, see “Finding the Right ERP Fit” in the January-March 2011 issue of insiderPROFILES (insiderPROFILES.wispubs.com).

“Today, even our worst-case scenario is better than our best-case scenario from the legacy system days.”

— David Wascom, CIO and Vice President of IT, Summit Electric Supply

insiderprofiles.wispubs.com reprinted with permission from the Apr mAy Jun 2011 insiderprofiles

One of the chargeback application’s configuration set-

tings lets Summit hold claims to a certain vendor until the

chargebacks reach a target dollar threshold.

“Essentially, the application pools the claims up to that

threshold, and then it kicks off a summary document that

details the claim information,” Wascom says. “But even a

chargeback from a vendor that’s a mere $10 is still a huge

win for us because now we’re getting the money the day of

or the day after the sale, instead of three months later.”

The SAP Paybacks and Chargebacks application also

allows Summit to search for chargebacks retroactively. For

example, a business user might not load a chargeback agree-

ment into the system immediately, and sales could hap-

pen against that contract before the user loads the agree-

ment. For those cases, the application allows users to input

validity dates and then search for chargebacks retroactively

based on those dates.

Measuring Success — and Enjoying Automation PerksThe increase in chargeback revenue as a percent of sales

has jumped off the balance sheet, winning praise from

Summit’s IT and finance departments. It certainly helped

in proving the benefits of an integrated ERP system as well.

“That’s net revenue to us that drops right to the bottom

line,” Wascom says.

By integrating with SAP ERP, the SAP Paybacks and

Chargebacks application brings a new level of chargeback

reporting capability that was not available previously. For

example, Summit can now see which vendors, customers,

and products are producing the most chargeback revenue,

which is valuable information for Summit’s sales team.

As an unexpected perk, Summit also uses SAP Paybacks

and Chargebacks for its commission-based sales force, capi-

talizing on the application’s process and reporting capabili-

ties. “The same sort of insight that we have on chargebacks

now applies to commissions as well,” says Wascom. “And the

functionality was there. We just had to turn it on.”

The automation is also providing huge productivity

improvements in the finance department. Instead of sifting

through reams of paper, Summit’s finance employees can

now focus on identifying where potential chargebacks may

come into new customer accounts based on the visibility

into past accounts.

Instead of letting potential earnings go unclaimed, today

Summit is bringing more revenue to the table.

Summit Electric SupplyHeadquarters: Albuquerque, New MexicoIndustry: Wholesale distributor of electrical equipment and supplies Employees: 500Revenue: $309 million in sales (2009)Company details:• Founded in 1977• Operates 19 service centers across four US states,

plus two sales offices • Manages a marine division in New Orleans, Louisiana• Has a global export division in Houston, Texas• Operates a service center in Dubai• Has a dedicated sales team in Latin America• Provides a list of value-added services • Is an ASUG member and, in 2010, won the ASUG

Impact Award for SME SAP solutions:• SAP ERP 6.0 • SAP Paybacks and Chargebacks by Vistex• SAP NetWeaver MDM• SAP NetWeaver BW

At a

Gla

nce

With the SAP Paybacks and Chargebacks application, the chargebacks not only are processed more quickly, but they also are reviewed more frequently, streamlining the cash flow for Summit Electric Supply.

insiderprofiles.wispubs.com reprinted with permission from the Apr mAy Jun 2011 insiderprofiles