Controlling the consumer juggernaut

18 April 2011

Mark Chalfen

Mark Chalfen

Former SAP S/4HANA Global Lead

In today's market the key customers of consumer product organisations are the major supermarkets and large retailers. These organisations sell a large number of different products to supermarkets so the volume of invoicing is exceptionally high. This is a scenario specific to this industry sector and is managed by a unique business process that supports both the client and the customer.

Due to the high volume of invoicing the client sends to the customer, the volume of disputes can be very high as well. The standard process for other industries is that the customer will not pay an invoice if there is even a small issue, will wait for a credit note, then pay the invoice in full and take the credit note. This can create a significant pressure on the cash flow of the client.

Due to the high value and volume of invoices, the process for Consumer Product organisations is slightly different. The customer raises a deduction against the client to cover the dispute. This could be for a price issue, or a short measure of product or for damaged goods. After raising the deduction, the customer will pay the invoice in full and will also take the deduction. This means the invoice the customer receives has been settled in full and the deduction is an open item awaiting resolution. Therefore if a customer has say £100,000 worth of invoices with say £750 worth of deductions there is no impact on cash flow for both the client and the customer. The client can then review the deductions and issue credit notes to settle the deductions the customer has raised.

The deduction process enables the customer to provide detailed information about the issue. The client can then implement the best process to deal with the deduction. It could be that some deduction types may need to be investigated to ensure a customer claim is valid. Some clients may look to implement a business rule to automatically approve a deduction if the value is less than a given tolerance to remove the manual processing and approval of the deduction.

The whole process can now be managed within SAP. The Dispute Management solution (part of SAP FSCM) provides a simple solution to control this process within. A customer deduction can be recorded in SAP as an accounting document. The accounting document can then be disputed. Business rules can be defined to link different types of deductions to different types of dispute cases or dispute reason codes. The dispute can then be approved within Dispute Management via workflow or reporting. There is also the ability to write off deductions based on a number of rules which may include low value deductions. Lastly there is the ability to issue credit notes based on the information from the customer deduction to close the process.

Consumer Product organisations need to control the deduction process. I have worked with some organisation that receive in excess of a thousand deductions per month and have to invest heavily in manpower to resource the process. Being able to automate the process and provide accurate data to business approvers reduces the manpower and provides extra control. Further to this (and as is the case with all good dispute management processes) analysis of the cause of the deductions should provide insight into why deductions are being raised. It could be that vans are being overstocked with products, leading to high volumes of damaged goods, or certain delivery drivers do not get signed proof of delivery documentation leading to large volumes of product being credited. Detailed analysis around the cause of the deductions can also lead to linked business processes being improved to reduce future deductions.

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About the author

Mark Chalfen

Former SAP S/4HANA Global Lead

Mark tells it straight - as an ex-boxer, what else would you expect?  Both his knowledge and experience of SAP products allow him to cut to the chase dispelling myths and hearsay.

As a result of working closely with various SAP Finance Product Management teams on product development, Mark understands these products inside out. This depth of understanding has led to him become a ‘thought leader’ in his field; after all, it is not often SAP consultants have helped shape and develop the very product they are selling.

Having such a strong relationship with SAP alongside being an SAP Mentor and Moderator means that Mark has an extensive network within SAP. For clients, this relationship proves to be a huge advantage and leads to configuration issues being resolved rapidly.

Mark has worked on short proof of concepts through to year-long multi-million pound global roll-outs. However, no matter how large or small the project, the true value Mark brings to his work is in the guidance he provides to senior stakeholders. In essence, he assists them to implement more effective processes and drive better behaviours within their finance teams.

Helping organisations transform their business with SAP S/4HANA is Mark’s current focus. The benefits of S/4HANA are numerous, including the simplification of tasks, embedded analytics and improved user engagement. Whilst the eventual move from SAP Business Suite into S/4HANA is inevitable, the journey to it is not always clear. Mark’s ability to understand an organisation’s needs coupled with his deep understanding of S/4HANA provides clarity and eases their transition.

Bluefin and SAP S/4HANA - welcome to the one horse race

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