Sapinsider Vistex

7/21/2019 Sapinsider Vistex

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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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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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Marketing Development / Event Claims




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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Performance-Based Customer/Sales Rebates


GPO orCustomer

Parent / HQ

Customer




Negotiates volume /growth rebates

Volume &or Growth Rebate Agreement

Issues Rebate Payment


Submits indirect sell-thru data

Issues Rebate Credit or Payment

Purchases product / pays distributorPurchases product for resale / pays WAC


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Sales Commissions/Bonuses &/or Broker Fees



Manufacturer

Negotiates salesCommissions/broker fees

Sales Rep,Broker, Dealer

Secures orders for Mfr

Sales Incentive

Compensation Agreement

Pays Sales Commission



and/or Bonus

Customer

End User, Consumer

Purchases product / pays distributor


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Processes from Manufacturers Perspective


GPO orCustomer

Parent / HQ

Customer





Sales Rep,Broker, Dealer

Secures orders for Mfr

Pricing Agreement

Rebate Agreement

Marketing/Development Cost


Sales Incentive


Issues Rebate Payment


Purchases product / pays distributorthe manufacturer-negotiated contract price





and/or marketing event claim(s)

Issues SPA/ship-and-debit

&/or mktg event credit/pymnt


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


GPO orCustomer

Parent / HQ

Customer

Sells at mfr-negotiated price also performs marketingactivity(ies) for mfr




Sales Rep

Secure orders for WD

Pricing Agreement

Rebate Agreement

Rebate Agreement



Sales Incentive


Issues Rebate

Credit or Payment


Purchases product / pays manufacturer-negotiated contract price

Joins Group Purchasing Organization





Issues SPA/ship-and-debit

&/or mktg event credit/pymnt


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


End User, Consumer

Supplier(Mfr or Distr)

Negotiates incentive &/orAdvertises instant rebates

Sales Rep

Secure orders for WD

Trade Promotion Agreement

Rebate Agreement



Sales Incentive



Purchases product /takes instant rebate

Purchases product for resale

Submits POS scan data

Submits chargeback claim(s)


Issues claim-related

credit/pymnt


and/or Bonus

Passes through supplier SPIFF


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Agenda


Q&A


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


Q&A


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


Q&A


Solution Overview

Thank you

Larry Buchman

Director of BusinessDevelopment, Vistex

[email protected]

Tony Biondo

Director of InformationServices, Medline Industries

[email protected]

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Transcript of Sapinsider Vistex