Supplier Rebate on Sales
Rebates are changes to the supplier's cost on specified products that are paid to the seller upon proof of sale. They help both the distributor and the manufacturer to be more competitive in the marketplace.
When a distributor's standard cost for a line of products is above the market level in the local trade area, the distributor may choose to lower the prices or else face a loss of sales in that market. The supplier then offers to return a set percentage of the original purchase cost of the product to the distributor. This allows the distributor to be competitive and allows the supplier access to the local market without lowering the cost in other trade areas where competition is not as keen.
Solution overview
The concept of supplier rebate on sales agreements addresses the scenario that a discounted sales price is granted by the supplier to meet a competitive situation. The solution is recommended to be used for the parts sales process.
This diagram shows an outline of the supplier rebate on sales process:
By supporting the concept of pricing with supplier rebates the end customer can receive a discounted price for goods from a distributor. This discount is either completely or partially funded by a separate agreement with the supplier of those goods, thus protecting the margin on the orders for the distributor. A price is negotiated with the customer which considers the anticipated rebate amount that could be claimed against the supplier. Supplier rebate on sales agreements is used to define, control, and manage the claim of this rebate from the supplier.
The supplier rebate on sales agreement for customer order (CO) and maintenance customer order (MCO) defines the rebates that are automatically assigned to each CO line and the MCO material invoice specification line.
The agreement enables a company to keep track of the supplier rebate amount to be reimbursed by the supplier, per sales transaction line, to enable a correct, more proactive margin at the time of transaction line entry. An adjusted sales cost is therefore calculated due to the supplier rebate. This gives a better predictability on the transaction's profit margin.
The company has purchased a product from a supplier at a given price and the product is in the company’s inventory. The company identifies the sales of the product covered by the agreement, calculates the rebate due (pending claim) from the supplier, and requests the rebate (claim request) from the supplier. The rebate retroactively lowers the company’s purchase cost for that product and thereby protects the sales margin.
When invoicing the final rebate, the amount is retrieved from the agreement and booked on a specific pending rebate claim account to support accurate accounting. Supplier rebate invoice transactions are created as a basis for the rebate claim against the supplier.
A rebate claim is then automatically or manually sent to the supplier. An automated claim settlement process enables a more frequent settlement and faster reimbursement of outstanding claims, resulting in better cash flow management.
Workflow overview
The basic setup of supplier rebates is either performed through promotional supplier rebates in 'Promotion. Open' (OIS840), pure supplier rebate on sale agreement in 'Supplier Rebate on Sales. Open Agreement' (OIS860), or one-time manually entered rebate agreements per order line in 'Order Line. Connect Supplier Rebate' (OIS118).
The promotion driven supplier rebate on sales for CO defines the rebates that are automatically assigned to each CO line. The supplier rebate on sales agreement for CO and MCO defines the rebates that are automatically assigned to each CO line or MCO material invoice specification line. The one-time agreement for supplier rebate on sales for CO defines the rebate that is manually assigned to a specific CO line.
Supplier rebate invoice transactions are, at the time of customer invoicing, created as the basis for the rebate claim against the supplier in 'Supplier Rebate Inv Transaction. Display' (PPS127).
A rebate claim is then automatically or manually sent to the supplier from 'Supplier Invoice Batch. Open' (APS450). An automated claim settlement process facilitates regular settlement and faster reimbursement of outstanding claims, resulting in improved cash flow management.
Limitations
- The supplier rebate on sales concept is not valid for rental agreements.
- The supplier rebate on sales concept is not valid for point of sale transactions.
- The supplier rebate on sales concept does not support rebates due to purchase order volumes.
- The supplier rebate on sales concept does not support service-related rebates.
- Only one rebate type can be used per customer order line, and the promotion type takes highest priority.
- For MCO material line entry, only those supplier rebates on sales agreements defined in 'Supplier Rebate on Sales. Open Agreement' (OIS860) are valid.
- Multiple supplier rebates on sales agreements per order line is not supported for MCO and CO.
- You cannot manually add, change, or remove a supplier rebate agreement on a CO line or an MCO material invoice specification line.
- Retrospective creation of supplier rebate invoice transaction is only supported for customer orders with rebate type defined in (OIS860).
- Retrospective agreement validation is not supported for MCOs and Rental.
- Supplier rebate cannot be claimed through a purchase order with a discounted purchase price.
- The agreed rebate amount transaction table OSRAST does not have a corresponding display program. Instead, you can create an information category for OSRAST in 'Information Browser Category. Open' (CMS010) and use related option 24='Simulate list'.