Computer Market Research (CMR) sat down with former Cisco Global Sales Operations Manager, current expert channel sales financial consultant and coach, Bob Meinhard, for a quick Q & A discussion regarding the current infrastructure of the modern day “Ship and Debit” process.
But before we jump into the ‘nuts and bolts’ of the interview, let’s take a brief look at what exactly “Ship and Debit” entails…
Why do price adjustment programs exist?
The ultracompetitive, multifaceted and unpredictable landscape of today’s marketplace presents manufacturers, distributors and resellers all with a unique conundrum: revenue instability.
As competition grows, opportunities lessen and consumer demand exceeds production—pricing has to be modified in order to appease (and maintain) the interest of end-users. Without implementing price adjustment programs, such as “Ship and Debit,” the B2B channel infrastructure will enviably ignite into corporate-anarchy—as a capitalist society without transparent, two-way communication between its channel partners assures more problems than one would care to imagine.
What is a “Ship and Debit” agreement?
A “Ship and Debit” agreement is a process that addresses the guidelines (established by a manufacturer) regarding certain regulations channel distributor(s) must follow to in order to retain “debited” compensation via rebated claims.
A “Ship and Debit” program exists because, in many situations, a channel distributor is required to sell the manufacturer’s product to resellers at a much lower price than its original cost—a result usually due to changing market conditions such as increased market competition or modification in customer demand.
What does a ‘general’ ship and debit process look like?
Below is the actual Q & A interview/discussion between CMR and Bob Meinhard:
1.) CMR: “Almost every B2B transaction comes with some sort of pricing adjustment attached with it—but hardly any companies seem to be tracking sales data via automation software.”
“What sorts of issues have internal auditors run into as a result of managing their “Ship and Debit” program thru more traditional methods?”
Meinhard: “Proper analysis of backend discounts is complex. Using traditional methods, like Excel spreadsheets, to determine an accurate calculation of what’s to be credited to channel distributors is usually a recipe for disaster.”
“Many auditors are simply naïve to the infrastructure and function of the marketplace; for example, an auditor might ask, ‘why don’t we sell products so that they’re sold at net end price?’ And for various reasons, companies simply don’t want to do that; they want the flexibility to change, modify or eliminate a program at any given time.”
2.) CMR: “What risks do companies face when estimating accruals without a robust system in place?”
Meinhard: “Companies have an obligation to their channel distributors. Without a comprehensive system to analyze the state of a business’ finances, there is little to no validity into accrual estimation.”
“In past experiences, I’ve learned that deploying a ‘best-guess’ strategy into accrual estimation could be potentially 100% wrong. Implementing a robust system allows you seamlessly [and properly] state your revenue and liability with channel partners.”
3.) CMR: “Do you believe managing relationships with indirect sales personnel is more complex when compared to managing price adjustments with direct channel distributors?”
Meinhard: “Definitely. The indirect model certainly doesn’t seem to alleviate any ambiguity commonly associated with today’s “Ship and Debit” module. But even though indirect channel management requires additional flexibility for price adjustment and program modification, direct channel relationships are no less immune to experiencing some of the same types of complications.”
“Even on a direct basis, channel distributors still mandate rebate incentives in order to maximize the relationship they share with your company. Managing indirect rebate programs simply make these adjustments just a bit more complex.”
4.) CMR: “How about documentation? It seems many companies have difficulty designing programs relevant to a specific channel relationship. Is this something businesses commonly struggle with?”
Meinhard: “Absolutely. Marketing [in-house] teams are many times at fault when implementing claims programs because instead of thinking logically, they think creatively, losing focus of what makes each channel partnership unique.”
“Parameters [or guidelines] have to be quantifiable; in other words, structuring a program without tangible restrictions assures unnecessary complications.”
“[In regards to a “Ship and “Debit program] you have to have specific SKUs in place; you have to have a specific start and end date; you have to include whether a program is stackable or not; you have to determine whether or not certain partners are included or excluded; etc.”
“Any time a program is subject to interpretation, you will run into problems. By forcing some discipline in terms of ‘how you set up your program,’ you will avoid major issues. Remember, price adjustment guidelines should be objective, not subjective.”
5.) CMR: “Would you agree the less structured programs hurt the business that is paying the claim more than the business submitting the claim?”
Meinhard: “I would. In fact, during my experience, I’ve seen deliberate attempts made by the personnel submitting the claim to take advantage of the ‘gray areas,’ in hope that the business paying the claim doesn’t have the resources to identify any misconduct.”
“For some companies, it’s a tactic to approach unstructured claims as a monetary opportunity for possible exploitation.”
“Ultimately, there should be a very high level of definition so that there aren’t any questions about whether a claim is valid or not—defined so well that there is zero room to question or potential to manipulate a claim.”
About Bob Meinhard
Bob Meinhard maintains a revered reputation within the sales analysis community. With over 19 years in global sales operations management, international business, sales reporting, and channel sales consulting, Meinhard continues to serve as an instrumental resource to corporate professionals and executives looking to broaden their expertise.
Meinhard has provided guidance, management, leadership and support with several of the world’s most prominent computer networking enterprises and software development firms including Cisco (Linksys), Conexant Systems, Inc. and Skyworks Solutions, Inc.
Meinhard received his master’s degree (MBA) from the University of Dallas, with a focus on International Business and Management Information Systems.
Outside the channel sales universe, Meinhard regularly enjoys practicing photography, something he has being doing since the ‘70s. He produces portrait, event, sport, fine art and landscape imagery.
About Computer Market Research, Ltd.
Computer Market Research (CMR) delivers cost-effective, SaaS applications to channel organizations across the globe. CMR aims to assist these organizations in managing channel data, optimizing trade promotions, and building effective distribution channels. With over 32 years of industry experience, CMR’s innovative solutions convert data into intelligence. CMR is headquartered in San Diego, California. Learn more by visiting www.computermarketresearch.com.