Thursday, February 19, 2009
Ship and Debit Special Pricing Programs
-->It’s happening more and more. Distributors and their Supply partners are negotiating special pricing agreements. In some segments of the Electrical Distributing business over 80% of the product sold goes out the door at a price which is below “normal distributor price”.
The process usually works like this: The distributor buys a product for full price - Puts it in his warehouse – then sells the product below full price. After the sale, the distributor submits a report to the manufacturer and is issued a rebate/credit.
We grew into this pattern little by little. We started off with a few agreements and a couple of catalog numbers. In today’s market, cash is becoming an even scarcer commodity and this practice often involves tens of millions of dollar. A study conducted by The National Association of Electrical Distributors sited that many distributors do without this cash for over 30 days. Often this comes about because the distributor has a poor process. To add insult to injury, I can think of at least a dozen incidents where the distributor’s poor process ended up with lost reports and lost cash. SAP has computer software to sell, but let me implore you to design a real process – with written checks, balances and quality control.
Read the full article here.
Click here for a brief tutorial on special pricing agreements and ship and debit programs.