Profit or Loss in Retail – What a difference vendor programs make
The following is a guest blog post by Tushar Shah, Executive Director of Vistex, an SAP partner.
What does it take to be successful in the retail industry today? We’ve all heard that retailers must adapt and act quickly to satisfy the needs of consumers in order to be successful. However, speed alone will not ensure profitability. For many retailers, the difference between profit and loss often comes down to how effectively they manage the negotiation, execution and collection of funds from vendor programs.
The broad variety of programs (e.g. performance rebates, marketing funds, scan-based rebates, price protection, etc.) and the complexity associated with processing massive volumes of data often places a significant strain on resources. The situation is further exacerbated by the use of offline tools (e.g. spreadsheets) and manual processes which are both time-consuming and error-prone. The bottom line is retailers need capabilities which are able to provide both the insight and tools to manage these complex programs and ensure the efficient and accurate recovery of funds.
Deploying a central, online repository for all programs enables retailers to have a comprehensive view of all incentives and promotions (planned, active, completed, etc.). This leads to increased efficiency and collaboration because associates across the enterprise by having a single “source of truth” for all programs. All groups, including purchasing, merchandising and finance, have visibility into all programs and leverage this to optimize decisions at both the departmental and enterprise level.
Automating vendor program performance tracking enables retailers to free up valuable resources to focus on value added tasks. Cost recovery and evaluation should be a natural extension of enterprise processes, not an afterthought. Linking this to enterprise transactions provides real-time visibility into which programs provide the greatest benefit. The purchasing team is able to easily analyze the impact of vendor programs and optimize purchasing decisions. The merchandising team is able to make real-time pricing decisions, react more quickly to consumer trends and ultimately leverage vendor programs more effectively. The finance team is able to more accurately forecast accruals and reduce the time required to collect vendor funds. Automation saves times, reduces errors and enables retailers to maximize their leverage of vendor programs.
Automation is important, but maximum value comes from applying the insight of past performance and future trends when defining programs. A centralized repository, with detailed visibility on program performance, provides the foundation for retailers to increase the impact of programs – a win-win for both vendors and retailers. Retailers are able to understand the profitability of programs at a granular level (store, product, etc.) and make adjustments when necessary. Utilizing simulation capabilities, retailers are able to better understand the potential impact of pricing and vendor programs and proactively engage with vendors when defining programs.
Given the impact that vendor programs have on a retailer’s bottom line, the impact of automating these programs is significant and these projects have a tangible return on investment. SAP offers unique capabilities which enable retailers to understand, in real-time, the impact vendor programs have since the programs, calculations and financial settlement are an embedded extension of enterprise processes. What makes the SAP solutions unique is that retailers are able to leverage existing investments and expertise and deliver tangible business value quickly – expectations very few enterprise initiatives can deliver on.
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