Making profitable Decisions with SAP S/4HANA for agreement profitability and negotiation by gicom
Negotiation between retailers, wholesalers or consumer product companies and their suppliers is a very complex process. In the following we will focus on retailers. On the one hand negotiations hold an extremely large saving potential. Agreements are immensely important for achieving an expected and needed margin but also for creating customer loyalty and last, but not least a prerequisite for competitive sales prices. Furthermore, a large variety of different sources for calculation increase the negotiation complexity. Additionally, it is extremely difficult to gain an overview and estimate the impacts from very creative and complex agreements.
On the other hand, interactions with business partners inevitably involve gathering reports and spreadsheets to understand total spend, existing agreements, and the impact on margins and settling numerous agreements negotiated with suppliers.
Many retailers are still working with manual settlement processes including massive media breaks by using different programs/formats like word, excel, access, paper or pdf. Supplier dependent settlement processes are not unusual, as well as retrospective master data changes resulting from fast changing market requirements. On top there is a general change in the way retailers have to react / adapt to new Multi-/Omni-Channel formats
Only with proper planning can negotiators determine if they are meeting the intended margin for a category, article (group), supplier, or customer and then negotiate accordingly for the best possible outcome.
Challenges many retailers are facing can be summarized as:
- No real-time visibility of profitability
- Strong competitive market environment with omni-/multi-channel formats and internet-only competitors
Increasing non-transparency and demand for comparability
- Smaller profits and weak negotiation position
- Missing system-supported reproducibility of different agreement types
Massive media disruption
- No transparency regarding terms and negotiations because of different sources (e.g. Excel, legacy systems, paper etc.)
- Translation of agreements between different internal departments necessary because the use of various systems
For retailers the mainly intended benefits are:
- Improve and professionalize negotiation process
- Simplified maintenance and proper documentation of all agreements and negotiations on SKU level across the complete process
- Increase flexibility for negotiation process with flexible condition types, calculation patterns and deferred compensation
- Margin simulation for more transparency and improvement of profitability
- Increase level of automation for settlement of subsequent conditions and distribution of the earnings
Let´s have a look now on how SAP S/4HANA for agreement profitability and negotiation by gicom can help retail companies to solve these identified challenges.
This partner solution provides 2 modules, Agreement Negotiation Workbench and Agreement Documentation, to plan, run and finally document negotiations of supplier agreements. For the final automated settlement these agreements are handed over to SAP S/4 HANA Condition Contract Settlement.
End-to-End negotiation process
Plan and manage negotiations smoothly and productively
With SAP S/4HANA for agreement profitability and negotiation, module Agreement Negotiation Workbench, buyers can visualize the impact of any deal and future profitability before their negotiators create an agreement. They can get help with enhancing and protecting their profitability, while simplifying their overall purchasing and negotiation processes, through real-time simulation. The increased visibility of margins and profitability allows retailers to reduce the cost of goods sold through a streamlined, closed-loop process.
Negotiation process steps
Negotiators can analyze previous negotiations to see how well they were performed and conduct what-if simulations to prepare for future discussions. They can plan and simulate different scenarios and changed or new conditions in real time for net-net costs and margins – from category down to the lowest level of article or SKU per store per day, or on customer level.
The software lets negotiators calculate sales prices ad hoc in-store for renegotiation with business partners, owing to the competitive sales prices available through online shops, for example.
Through the SAP HANA® platform, on which the agreement and profitability capability is based, negotiators can do detailed comparisons of assortments, merchandise categories and customers. Negotiators can even do article calculations, between two or more suppliers, and negotiate for merchandise and private brands or labels.
Agreement Negotiation Workbench
By centralizing all agreements, retailers can make relevant information readily accessible to their buying and/or selling teams, whether they are in the office or off-site. No diverse information sources or manual agreement processing anymore.
With full transparency before, during, and after a negotiation, negotiators can control the status of agreements, purchase-price development, and annual negotiation and purchase revenue targets. They can also improve their flexibility to negotiate on different organizational levels and various category and article structures.
Trade negotiators gain a competitive advantage by identifying strategically important market development and using multichannel formats with various negotiation scenarios and conditions to react faster to market demands and changes. Finally, help ensure compliance with auditing and internal control requirements.
Through the user interface technology, SAP UI5, negotiators can use the capability on any device that has an Internet browser, namely, a desktop, laptop, tablet, or phone. They can therefore access exactly the same information on their mobile device as they could at their desktop, any time and any place.
Negotiators can readily transfer the negotiation results to the SAP S/4HANA Finance solution or SAP S/4HANA Retail solution for merchandise management, or to the financial accounting or trade components of SAP ERP ECC solutions (project based).
Documentation of negotiation results – get a 360-degree view of the entire negotiation process
Many companies are still struggling when it comes to digitally storing all information on agreements and conditions. The documentation is often done manually on paper or in extensive Excel sheets which is nontransparent and often in combination with massive media disruptions.
With SAP S/4HANA for agreement profitability and negotiation, module Agreement Documentation there is one single point of truth where every agreement (with business partners, i.e. suppliers and customers) is documented and can review elements such as pricing conditions, volume rebates, scale levels, funds, ad allowances, service and logistic agreements and more. It enables companies to centrally store all information related to the negotiation automatically, including e-mails, documents and certificates for easy access. Buyers can predict various negotiation scenarios and achieve the best possible deal with their suppliers due to the multiple versions of the agreements and flexible, unlimited amount of condition types that are available.
Agreement Documentation: contract overview
The user will be guided through the negotiation process step-by-step until the contract is agreed on, at which point it is possible to intuitively create the contract in PDF format, based on customer-specific templates and agreement types. Companies can integrate the agreement into their SAP® software without having to do a technical translation between different departments. They receive direct, automated and instant recordings and documentation of all agreements and they can continuously monitor all terms and agreements in order to handle returns and logistics. With full documentation of all monetary and non-monetary negotiation results, and with the help of SAP Standard Support services, companies have the option to translate all agreements into condition contracts for an automated settlement and distribution in SAP S/4HANA.