The Trade Price Specification Contract ES bundle integrates a wholesaler's SAP ERP system and the third-party systems of his suppliers to enable efficient management of condition contracts.
In condition contracts, there are three important players: the supplier, the customer (who has a pricing contract with the supplier), and the wholesaler, from whom the customer purchases products. Because the customer's contracted price may be below the wholesaler's cost, the wholesaler can charge the difference back to the supplier and receive a payment.
Ordinarily, a wholesaler purchases a product from a supplier and then sells that product to an end-customer for a profit. The chargeback process changes the dynamics of the relationship between the wholesaler and the end customer. A powerful customer (or group of customers) negotiates a special price from the supplier. The result of these negotiations is a contract that stipulates conditions (hence the term "condition contract") under which the customer or group of customers will receive discounted prices for a given product or group of products. The condition contract includes eligible customers, the validity period, the price of the respective product or products or a discount to be applied to the products, and the terms of payment, among others.
Trade Price Specification Contract (click to enlarge)
Although a customer or a customer group may negotiate contracts directly with the supplier, they still receive the product itself from the wholesaler, to which the condition contract data was transmitted upon conclusion of negotiations. Regardless of his own price policy, the wholesaler is bound to sell it to the customer at the price negotiated in the condition contract. However, the wholesaler is entitled to ask the manufacturer to refund the difference or parts of the difference between the regular price and the price for which he sold it to the customer. This is known as a chargeback request.
For example, if a wholesaler sells a product to its regular customers for $10, but there is a condition contract between the product's manufacturer and a special customer stipulating that the product be sold to them for $8, with every sale the wholesaler may submit a chargeback request to the manufacturer for $2.30 – the two-dollar difference between the standard price and the sales price, plus a three percent surcharge. To facilitate recordkeeping, the chargeback request is presented to the supplier in the form of a credit memo request. Figure 1 illustrates this scenario.
Figure 1. Condition contracts allow manufacturers to compensate wholesalers who must sell below the regular price because of a contract pricing agreement (click to enlarge)
The Trade Price Specification Contract ES bundle provides enterprise services to exchange data for condition contracts between the Compensation Management application in SAP ERP 6.0 and an external (non-SAP) third-party system. By enabling the connection of external applications and user interfaces to SAP ERP 6.0, the bundle's services simplify the setup and further update of condition contracts in the wholesaler's SAP ERP system. By synchronizing condition contract data between the supplier's third-party system and the wholesaler's SAP ERP system, the chargeback request settlement process can be accelerated. This efficient synchronization of condition contract data is the foundation for a speedy chargeback settlement process. It is important to note, however, that this bundle does not handle the submission or settlement of chargeback requests themselves.
The bundle's services also support the chargeback request dispute process. The services provide visibility for the supplier to view condition contracts in the wholesaler's SAP ERP system. This visibility allows suppliers to quickly clear up discrepancies, again accelerating the chargeback settlement process.
The Trade Price Specification Contract ES bundle leverages enterprise SOA by service-enabling the SAP ERP transaction Edit Condition Contract, transaction WCOCO (Wholesale Condition Contract), which is part of SAP Compensation Management. In addition, the bundle supports EDI 845 data mapping for systems, including SAP CRM, that use that standard format.
Any industry, small or large, that participates in wholesale commercial trade and uses condition contracts will benefit from the services in the Trade Price Specification Contract ES bundle. Suppliers and wholesalers in the pharmaceutical, high-tech, construction material, and food industries will find these enterprise services especially useful.
Roles that will use the services in this bundle include:
- Sales representatives at the supplier who will use the services to transfer condition contract data to the wholesaler's SAP ERP system
- Accounts payable clerks at the supplier, who will use the services in the chargeback request settlement process to view condition contracts in the SAP ERP system of the wholesaler
- Buyers at the wholesale who can use the services to check details of condition contracts in the context of a Supplier Fact Sheet
For details on Service Operations, Business Objects and Process Components, please check the ES Workplace.
How To Use This ES Bundle
Until now, the management of condition contracts entailed an inefficient and error-prone exchange of data between suppliers and wholesalers using paper-based processes such as fax and the postal system, as well as email and, at times, expensive EDI-based messages. Once a supplier had conducted negotiations with a customer, for instance, the attendant sales representative had to create a condition contract in the company's third-party backend system and then transfer it to the wholesaler's buyer, who, upon receipt of the data, himself had to repeat the process of entering the data into his own SAP ERP system.
The Trade Price Specification Contract ES Bundle provides suppliers with a means to create, maintain, update, and cancel condition contracts in the wholesaler's SAP ERP system that include all of the agreements arrived upon during the negotiation process with a customer such that the terms of those agreements are automatically met with every future transaction.
Moreover, after the sales representative has created the condition contract in her own third-party system, she can instantly transfer it to the SAP ERP backend of the wholesaler from whom the customers take delivery of the product specified in the contract. At any time, too, the supplier can apprise the wholesaler of modifications to the contract by sending appropriate notifications. The bundle's functionality ensures that all modifications to the contract on the supplier side are mirrored in the backend system on the wholesaler side.
On occasion, new negotiations can alter existing condition contracts to the extent that they must be replaced. In such cases, the supplier's sales representative can cancel the condition contract in both his own third-party system and in the affected wholesaler's SAP ERP system. The bundle's confirmation notification services ensure that all parties are informed of the change.
Once condition contracts have been negotiated between a supplier and customer and subsequently created in the backend systems of the supplier and relevant wholesaler, the wholesaler can present the supplier with chargeback requests any time a customer purchases the product specified in the contract. Personnel from the supplier's accounting department must validate these requests, especially if the payment has failed to process automatically because of a discrepancy between the request and information in the condition contract.
At this point, the clerk from the supplier's accounts payable department will need to investigate the condition contracts in his own system. But to be thorough, he must also examine the contracts in the wholesaler's system. The Trade Price Specification Contract ES bundle provides the flexibility and visibility to enable the clerk to execute such an examination without first having to contact the wholesaler for permission or access codes. Once the discrepancy has been resolved, the clerk can authorize the disputed chargeback request.
Wholesalers, too, require on-demand access to all of the data contained in the condition contracts negotiated between customers and suppliers, regardless of the application or database in which they are stored. To meet this need, the wholesaler can create a supplier fact sheet that is service enabled via the Trade Price Specification Contract ES bundle's functionality. Using such a fact sheet, authorized personnel can have an unobstructed, comprehensive view of all condition data from a single vantage point.
Each of the following use cases will show how different outcomes can be achieved by using the enterprise services in different combinations. Note that these examples may refer to users directly invoking enterprise services. This illustrates the flow of the service operations; in fact, service operations are invoked by an application, by an application's user interface, or by another service operation.
While these use cases illustrate a few of the ways that this ES bundle could be used, the intention is to show the flexibility and reusability of these business objects and enterprise service operations so that you will have a clearer understanding of how to best deploy them in your own environment. This wiki is also a space for you to share knowledge and collaborate with others who are implementing the Trade Price Specification Contract ES bundle.
Use Case 1: Processing a Condition Contract at the Supplier
The sales representative at a manufacturer of computer hardware has just concluded negotiations with a consortium of buyers of high-tech hardware. As long as the motherboards are purchased during the validity period stipulated in the contract, the price at which members of the consortium can obtain the motherboards will remain fixed below the wholesaler's retail price. The condition contract lists the respective motherboards and members of the consortium as eligible customers along with other information such as the validity period.
It only remains for the sales representative to create the condition contract in her third-party backend system and then transfer the resulting data to the wholesaler from whom the consortium's members will take delivery of the motherboards. Once she has entered all of the data in the third-party application, she can transfer contract data and maintain the similar condition contract in the wholesaler's SAP ERP system by invoking the Maintain Trade Price Specification Contract service operation, which uses the Trade Price Contract business object.
As soon as the contract is created in the wholesaler's system, the bundle's A2A functionality automatically triggers the Confirm Trade Price Specification Contract service operation to send a confirmation notification to the supplier.
Should the contract undergo any future alterations, the sales representative can inform the wholesaler by triggering the Maintain Trade Price Specification Contract service operation. As before, the Confirm Trade Price Specification Contract service operation will automatically be invoked to send a notification that the updated contract has been received.
When new negotiations alter existing condition contracts to the extent that they must be replaced, the supplier's sales representative can cancel the condition contract first in her third-party system and then in the affected wholesaler's SAP ERP systems by invoking the Cancel Trade Price Specification Contract service operation. Again, the bundle's confirmation notification service ensures that the supplier is informed of the successful change in the wholesaler's system.
Use Case 2: Processing a Chargeback Request at the Supplier
One of the customers in a consortium of buyers has just taken delivery of a large order of motherboards from its main wholesaler. Since the price of the motherboards has been fixed in a previously negotiated condition contract between the consortium and the supplier of the boards, the wholesaler sold them to the customer for $8 each.
However, the wholesaler purchased the boards for $10 each, so now, as agreed in the condition contract, the wholesaler wishes to be reimbursed for the difference in price, plus a three percent commission fee. To receive the difference, the wholesaler can present the supplier with a chargeback request for $2.30 per motherboard.
In this instance, a discrepancy between the request and information in the supplier's condition contract caused a disruption in the payment process. As a result, the clerk from the supplier's accounts payable now needs to investigate the condition contract in the wholesaler's system.
To do so, he can trigger the Read Trade Price Specification Contract service operation, which uses the Trade Price Specification Contract business object. Once the discrepancy has been resolved, the clerk can authorize the disputed chargeback request.
Use Case 3: Examining a Supplier Fact Sheet at the Wholesaler
A buyer at the wholesaler wants to have instant access to all supplier-related data regardless of which business application or database this data is stored in. To fulfill this requirement the wholesaler's IT organization has built a custom-tailored Supplier Fact Sheet composite application to see this data in one place. Within such an application, the buyer can invoke the Read Trade Price Specification Contract service operation, which uses the Trade Price Specification Contract business object, to view condition contract data related with a specific supplier.
The services in the Trade Price Specification Contract ES bundle represent the first step towards integrating wholesalers and suppliers using SAP Compensation Management. Future directions may include enterprise services that enable the wholesaler to send chargeback requests to the supplier as well as services to enable the supplier to settle those requests.