In today’s competitive landscape, distributors must focus on every opportunity to maximize product margins. Much of that profit is often based on vendor cost recovery programs (for example, rebates or SPA programs). Their suppliers use SPA’s (Special Pricing Agreements) to define specific terms of a price reduction. Distributors must be able to manage multiple SPA programs efficiently and accurately to be financially successful. Program payments from vendors have become an increasingly important source of COGS reduction for distributors. But these programs can be costly, time consuming and cumbersome to manage.
Such was the case for Virtual Supply, a national wholesale distributor and fulfillment partner for a host of products spanning several industries.
About Virtual Supply
A number of manufacturers partner with Virtual Supply’s Consumer Goods Division to manage the sales and distribution of their products, leveraging Virtual Supply’s strong relationships with big-name retailers such as Amazon.com, Costco Wholesale, Walmart.com, and Home Depot.
Earl & Brown, the Business Solutions Division of Virtual Supply, distributes Motorola two-way radios and also sells a variety of products to Amazon Delivery Service Partners.
The Virtual Supply Vendor Services Division also offers à la carte value-added services.
The Special Pricing Challenge
Virtual Supply was searching for an all-encompassing ERP system that would also help them effectively manage their special pricing programs. They required functionality to track discounts being offered by their suppliers and pass those discounts on to their customers when applicable. Most importantly, they needed to be able to submit accurate chargeback claims to those suppliers and recover the cost delta to accurately reflect their COGS and margin.
Several manual processes were in place to accomplish these objectives; as you can imagine, they were fraught with difficulties. They needed to track which sales were eligible for each type of discount. They also needed to post accrual entries in the general ledger, and they were creating negative POs for the cost delta that they needed to recover from their suppliers.
Aside from home-grown solutions to core business challenges, they also suffered from a lack of visibility into the financial impact of these special pricing programs. As a result, there was no clear data on their margins or bottom line.
The Solution: Special Pricing and Chargeback Management for Dynamics 365
Virtual Supply settled on Microsoft Dynamics 365 as their ERP software of choice, and they found the solution to their discounting woes in the Special Pricing and Chargeback Management add-on for Dynamics 365.
With the entire Special Pricing Agreement (SPA) cycle integrated into one solution, Virtual Supply now has an efficient set of automated tools that reduce manual calculation and data entry, reducing both labor and errors. Best of all, the pricing carries over from Sales to AR, Inventory, AP, and the GL, maintaining pricing consistency and offering flexibility as pricing and promotions change.
As a result, Virtual Supply enjoys the following benefits:
- SPA Types, Reimbursement Methods, and Discount Calculations are set up just once and applied as needed by the system
- Streamlined Special Pricing Agreement management in a single system
- A flexible solution to manage various types of vendor programs
- SPAs are integrated with Sales Orders in real time
- All accruals, chargeback claims, and payments are automatically posted to the General Ledger
- Reduced accounting labor for vendor pricing promotions
- Visibility into profit margins
- A simple interface that feels like part of the overall Dynamics 365 solution
Just as important as a reliable software solution, the service from Vyas Consulting during implementation and beyond helped Virtual Supply to make a success of this project. Phil Bickler, Information Technology Director, states: “Vyas truly cared about providing excellent service throughout our project. Working closely with our project team allowed them to thoroughly understand our business requirements. Their project manager and development team provided us with solutions to challenges that helped deliver an excellent end product for our business.”