Aspirited discussion in a packed conference room about the inefficiencies of Special Pricing Authorizations (SPAs) and rebates recently won a battle over the lure of the golf course on a near-perfect Arizona day at the new JW Marriott Desert Ridge Resort and Spa in Phoenix.
The National Association of Electrical Distributors (NAED), St. Louis, explored the topic in a “town hall meeting” entitled “SPAs — Blessing or Curse?” at its recent Region 3 meeting, held Nov. 20-23.
In the session, moderated by Bethany Sullivan, president, Profitability Analytic Unlimited, Johnstown, Pa., attendees agreed that distributors and manufacturers spend too many unnecessary hours tracking, reconciling and managing the paperwork associated with SPAs.
“What we have to do is take the administrative load out of this thing,” said Fran Piscatelli, vice president of marketing and sales for the General Lighting unit, Osram Sylvania Inc., Danvers, Mass., and one of the panelists at the meeting.
According to an article by Neil Gillespie, principal, Channel Marketing Group, Pittsburgh, on NAED's Technology Informer at www.naed.org, electrical manufacturers use SPAs to offer electrical distributors authorization to sell to a group of customers or a specific customer at a lower price than normal distributor cost. When an electrical distributor buys items for stock at normal distributor cost and sells some of these to accounts with SPAs, they need to claim rebates, a form of SPAs, from the manufacturer for the items invoiced to the customer.
It's a time-intensive practice that first took root in the lamp industry many years ago, but has spread to other product markets in the electrical wholesaling industry over the past decade. In a presentation at this year's NAED Annual meeting, Mike Rioux, president, IDEA, Rosslyn, Va., and Margie Frett, channel operations manager, Square D/Schneider Electric, Palatine, Ill., said handling rebates is a process requiring 23 “touches” from an electrical distributor to an electrical manufacturer.
Some distributors have back-office personnel who focus entirely on submitting and tracking SPAs, said Michael Lessans, Atlantic Electric Supply Corp., Washington, D.C.
Adding to the confusion, agreed attendees and panelists, are the differences in how manufacturers handle SPAs. This forces distributor personnel to learn and manage a variety of different SPA processes. Several meeting attendees said distributors and manufacturers should start working through NAED to develop a standard SPA format.
By using existing EDI transaction sets, electrical distributors and electrical manufacturers can already standardize much of the process, said IDEA's Rioux. In the presentation at the NAED Annual, Frett and Rioux described how Square D/Schneider Electric's Pro Rebate Process used EDI 845, Customer Pricing Level; EDI 844, Request for Rebate Credit; and EDI 849, Response for Rebate Credit Work, to cut unnecessary paperwork out of the process, eliminate keyboarding errors and resolve rebate issues much faster than with conventional methods.
Some of the benefits that Square D/Schneider Electric unearthed for itself and its electrical distributors by using its Pro Rebate Process included transitioning about one-third of rebate dollars, line items and requests from a manual to an electronic process; saving several hundred thousand dollars per year in productivity; reducing rebate claim evaluation from 50 to 60 days to 24 hours; and redeploying people to address other value-added services.
The IDEA Standards Committee met Dec. 2-3 to discuss the new request-for-credit “flat-file” standard.
“We plan to complete review and approval of the standard by early 2004,” said Rioux. “This should help alleviate the use of priority formats.”