Rebates, SOX & Sanity
Mike Baiocchi CPIM
mike.baiocchi@dazsi.com Senior Consultant
Scott Curry CPA
scurry@dazsi.com
Regional Director
DAZ Systems, Inc.
www.dazsi.com
Focus on Success Through Expertise and
Experience
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Providing rapid, cost effective
solutions:
Oracle ONLY service provider (110+
Implementations)
Oracle Apps E-Business Suite
(ERP, CRM, WMS)
Trade Management
Upgrades of E-Business Suite
Data Warehouse/Data Mart
Custom Development (interfaces,
integration to disparate systems,
web front ends, new software)
Agenda
• Defining the Problem
• Case Study
• Issues / Solutions
• Benefits
• Next Steps
• Implementation Challenges
• Question & Answer
Defining the Problem
INCREASING TFM COST CONTINUES TO BE A CONCERN
 The
estimated cost of trade promotions for US consumer goods
manufacturers is $26 billion per year, or 13% of sales revenues–
second only to COGS as leading expense
 61%
of a consumer product goods company’s marketing budget is
spent on trade promotion funneled through retailers
Sources: Gartner Group, Cannondale Associates
Marginal Increase in
Trade Fund Spend
Marginal Increase
in Revenue
Trade fund spend is increasing at a faster rate than sales!
Defining the Problem
NONPRODUCTIVE SPENDING
Distributors:
- 84% do not believe they are getting a fair ROI for their
trade dollars
- There is a 50% variance between actual and planned
results
Non Productive Spend
Inefficiency
Ineffectiveness
Defining the Problem
Concerns
Deductions
Retailers are increasingly
deducting from vendor
payments.
Inefficiency
Ineffectiveness
Regulatory
The historical “looseness” in
contract negotiations between
distributors and retailers
brings the Sarbanes-Oxley act
into clear focus
–Increasing
Competition
–Compliance
Case Study: Overview
 Manufacturer & Distributor of
Identification Wrist Band Solutions
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Revenue: $150 MM
Sells to: GPO’s, Distributors and Hospitals
Operation: Global
8,000 FGI; 43,000 Customers
 Issues
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Pricing
“Pass Through” Rebates
Case Study: Pricing
 Seven Levels
 Date Effectivity
 Quantity Based
 Solution:
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Oracle Advanced Pricing
Sophisticated Modifiers & Qualifiers
Case Study: Rebates
 GPO’s are buying groups who have hospitals as members
 A hospital can belong to different GPO’s and can also
purchase from different distributors.
 GPO’s have pricing contracts with Manufacturer
 Sales Order is originally priced using the pricing structure
of the Distributor, and the shipment is received by the
Distributor.
 The Distributor sells the product to the hospital at contract
price
 Once the product is received by end customer, rebates are
issued for the difference in the price the distributor paid
for the product and the contract price of the GPO
 Distributor purchases in “box of 125”, rebates are paid on
selling unit of measure (“eaches”)
Case Study: Rebates
Case Study: Rebates
Solution
 TCA:
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Hospital = Party
Distributor = Customer
GPO = Customer
 Pricing Agreements created for GPO
 Able to use Price Lists (with modifiers &
qualifiers) versus Contracts
 Rebate Programs Created in Trade Management
 Imports: XML Gateway (EDI 844 & 867)
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Chargeback Validations
Special pricing validations
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Detailed to the Line Item of Source Transaction
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 Dispute Reconciliation
 Credits issued in AR
Case Study: Benefits
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Accommodates International Growth
Automation  Scales to Higher Volumes
Audit Trail
Customer Satisfaction
Accurate Calculations of Rebates
Fewer Pricing Errors  Fewer
Adjustments
Case Study: Next Steps
 Budgets
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Creation
Allocation
Accruals
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 Indirect Sales
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Import
Processing
DQM
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Budget Functions
 Creation
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Fixed
Fully accrued with multiple parameters
 Allocation
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Top-down allocation along a territory hierarchy
Allocation based on prior year sales
Bottom-up submission
 Validation
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Budget-offer validation
Budget Functions
 Sourcing
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Request funds
Transfer funds
 Monitoring Usage
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Threshold alerts
Recalculated committed
 Reconciliation
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Reconcile committed but not earned
Reconcile earned but not paid
Budget Functions
 Accruals Management
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Integration of all ordering channels
General Ledger integration
Account Generator workflow
Manual adjustments
Retroactive offer adjustments
Spread lump sum offer postings
Scan data offer accruals and adjustments
Volume offer accruals and AP updates
Third party accrual API with AP simulations
Indirect Sales Functions
 Import
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WebADI
XML Gateway (EDI 844, 867, 849)
Direct SQL load into interface
Indirect Sales Functions
 Processing
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Basic data completeness check
Mapping of external to internal data
DQM integration
Chargeback validations
Special pricing validations
Dispute reconciliation
Send to 3rd Party Accrual Engine for further
processing
Send to Inventory Tracking for tracking
Indirect Sales Functions
 Mapping of external to internal data:
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Price List
End Customer
UOM
Item
 DQM integration
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Party
Party Site
Party Contact
Indirect Sales Functions
 Chargeback validations
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Price List number
Effective dates
End Customer/Buying Group eligibility
Product/Category eligibility
Inventory
WAC
Indirect Sales Functions
 Special Pricing validations
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Special Pricing number
Effective dates
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Quantity
Price
Product
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Customer
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Indirect Sales Functions
 Dispute reconciliation
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Automatic assignment of dispute
code
Ability to update dispute code on
screen
Ability to update data disputed and reprocess
Re-submission of disputed lines
Indirect Sales Functions
 3rd Party Accrual:
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Indirect sales data can be sent to the
3rd party accrual engine for
processing automatically or manually.
3rd party accrual runs a pricing
simulation and applies all promotions
eligible on indirect sales data,
payment can be for distributor or end
customer. It also finds a price
difference to be accrued.
Indirect Sales Functions
 Inventory Tracking
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Distributor inventory is tracked
automatically based on a System
Parameters option.
Inventory In = OM data
Inventory Out = TM indirect sales data
Adjustments = made in TM
Indirect Sales Functions
 Settlement
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Payment by Check or Credit
Using Autopay
Option to deplete upfront accrual or
create new
IMPLEMENTATION CHALLENGES
Transformation vs. Technology– Software doesn’t solve
the problem! Software is a tool!
 Process – lack of standardization in process and trade
fund terms drives ‘ad-hoc’ approach and increases
complexity to manage
 Technology – fragmented technology cannot support
data and system integration requirements
 Organizational – individuals within your organizations
are comfortable with traditional approach – no incentive
to change
 Cultural – belief that art, experience, and ‘gut feel’
cannot be replaced by tools
Q&A