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Taking Vendor Rebate Settlement to the Next Level with PMR and CC

In a nutshell

Vendor rebate is an important tool for retailer to promote product and increase sales while still retaining or even increasing the profit margin. The cost of lowering the price or effort in promoting the product is shared with vendor and settled subsequently after the deal rebate period ends.

So what does it take to enhance vendor rebate settlement process in one of the largest retailers in the region/world? Two SAP new modules, one pristine interface, and a healthy dose of ingenuity and perseverance from customer and SAP team.

Initial Situation and Issues

Customer has complex settlement process across many banners (business unit). There are different vendor deal types involving point of sales, promotion, purchase order, good receipt, warehouse transfer, and other data. Customer employs different logics for settlement calculation. Valid changes always happen and these need to be reflected accurately in the calculation and distribution of settlement amount.  Data volume is huge so performance has always been a big concern and becoming more critical with the inclusion of their big banner.

SAP has classic subsequent settlement modules to manage vendor rebate on the purchasing or sales side. Customer had used settlement function on the purchasing side. However it was not adequate for supporting the whole business process. While customer needs to have settlement as early and as accurate as possible, in many cases settlement took long time and involving manual adjustment with the help of BI reports and Finance module.

There are also additional complications. Customer has big number of stores and distribution centers and they own complex system landscape consisting of many different systems. Customer was also implementing multiple projects at the same time that influenced one another.

Proposed Solution

Customer was in the process of implementing new SAP module called Promotion Management for Retail (PMR). PMR main function is for planning, creation, simulation and forecasting the offer and vendor rebate. PMR can help to manage vendor rebate process however the team recognised the pain point of not having the key engine to perform settlement. Further analyses and workshops were conducted to gather information. Few alternatives were presented and discussed. SAP team saw that Condition Contract (CC) module, together with PMR, is the best solution for the customer to manage end-to-end vendor rebate settlement process.

Condition Contract is the superset of subsequent settlement function. It can handle both purchasing and sales side. It can take different input form for settlement by way of business volume. It is flexible and designed to handle big volume of transaction with ease.

As there was no link between PMR and CC, a brand new interface was built to enable seamless communication between those modules. Key enhancements were added in both PMR and CC to address customer specific requirements. Flexible way of managing different type of vendor deals requiring different input and special calculation logic were the few examples of these enhancements. Portal was used as a front-end to make it easier for the vendor and customer to communicate, negotiate, and confirm the agreement.

How We Do It

As PMR and CC were quite new and only a handful of consultant worldwide knew each module (none understood both!), the core team from PMR Development (USA), CC Global Expert and Project Management (Germany) were engaged from the very beginning. On-site SAP consulting team brought in the knowledge of PMR implementation and detail customer business process for designing the new interface together with global PMR and CC team.

Many workshops involving SAP and customer team were conducted in different countries to brainstorm the design. Experts were flown in for design discussion and unit testing. Design iteration was carried out to find out the optimum solution. Customer created detail test script for the multiple iteration of end-to-end integration test. Global support and hotline were engaged 24/7 during the go-live. Go-live was done in stages to mitigate the risks. It was really a very concerted and hardworking effort from both customer and SAP side.

In the End

Since first Go-Live customer has used this new integrated solution for managing different type of promotion-based and non-promotion-based vendor rebates based on PMR and CC. The solution provides streamlined, flexible, and integrated process of managing the vendor rebate settlement process. Customer has the ability to perform partial and final rebate settlement accurately in a timely manner.

The next most rewarding thing from this project is that the standard part (non-customer specific) of the interface linking PMR and CC becomes standard deliverable and can be offered as part of PMR implementation. This helps SAP to help other customer with vendor rebate management.

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