Summit Electric Supply is a privately-held wholesale distributor of electrical products founded in 1977. It is a standout in the hyper-competitive, U.S. $72 billion electrical wholesale distribution market. Summit had outgrown its legacy systems in the middle of 2006, when it selected SAP as its ERP partner.
A perfect fit
Initially, Summit was thinking of developing the chargeback process in-house. However, when the management learned about the application SAP Paybacks and Chargebacks by Vistex, it was quickly convinced that SAP could meet the company’s needs for the following reasons:
- Automated chargeback process would significantly reduce manual processing compared to what was required in Summit’s legacy system;
- EDI (Electronic Data Interchange)-enabled chargeback process would speed up claims’ turnaround time, help the company go paperless and positively impact its working capital requirements;
- Standard reporting would be configured to drive better visibility, control and decision-making.
Summit’s chargeback process
Summit went live with SAP Paybacks and Chargebacks in January 2007. The chargeback process at Summit really begins with the billing document – when Summit has actually sold a product and billed a customer. See the following figure for the company’s overall chargeback process.
Summit runs a nightly report to create chargeback documents for all the line items in billing documents that qualify for claims per vendor. For example, if a sales order has 10 line items and there are two line items with products that qualify for two different vendors, then the system will create two chargeback documents for that sales order. As soon as these documents are generated, the accrued chargeback amounts become visible to the finance department.
Today, Summit has 35 chargeback vendors and more than 6,600 agreements loaded into the system, which generates about 1,700 chargeback documents per day.
A big payoff
By streamlining its chargeback management process, Summit has experienced some impressive results. The company increased its chargeback claims by 118 percent over its legacy systems; its investment in SAP Paybacks and Chargebacks was returned in less than 6 months.
“This has been a huge win for us,” says David Wascom, vice president IT at Summit. “Our chargeback process is now much easier to manage and is extremely efficient across our company.”
A recent electrical distribution industry survey looked at SPAs in the US. According to the survey by Allen Ray Associates and Channel Marketing Group, about two thirds expected the number of SPAs they negotiate to increase. Additionally, electrical distributors in the survey ranked SPAs as high as 7.64 on a scale of 1-10 in importance to their current and future profitability.
“It behooves distributors to claim chargebacks accurately and efficiently to ensure their profitability,” says Paul Pretko, wholesale industry principal at SAP America.
After all, SPAs are growing in importance and numbers – a trend experts say is here to stay.
is the Senior Director of Solution Marketing for Wholesale Distribution Industry at SAP. He has enterprise business-software experience in ERP, E-Commerce, GRC, Global Trade, Warehouse Management and Distribution markets. He has been with SAP since 1994 and is a frequent speaker at industry events and has authored numerous articles in various business and technology publications globally.