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.

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