AUTO PRICING FOR DUMMIES

No, we do not consider you a dummy. You are auto pricing deficient. The first step to help is to realize your weaknesses and approach them with an open mind and love in your heart. Ok, forget the love in your heart part. We just request that you take for your consideration all aspects of auto pricing to better serve your customers and promote a consistent and healthy profit model. This overview is intended to help you accomplish that goal.

Before we get into different scenarios for auto pricing lets first break down each element within auto pricing. Each component plays an integral part in the complex matrix that makes up auto pricing. The structure in which auto pricing (from here on out referenced as APX) is derived can best be described as a reverse pyramid. It trickles up from the bottom to the top. Pricing is first calculated at the Item level, then the vendor/group level and finally at the header level. However, when setting up APX we must first create the header. This is where you will create your matrix. Remember APX is about giving a break on some things and making up for it on others, after all we are in this business to make money, but you didn’t hear that from me. So take the Red pill and enter the Matrix and let’s get started breaking this beast down. Instead of setting something up and doing this

Header level elements: first off, the name of your APX. Very important to label your APX so other users can readily understand it. Since APX is Account driven you should encompass the account name within the APX name when possible. If across multiple accounts then something derived from the matrix type. Just keep it simple.

The next four elements are very important and work in conjunction with each other, Type, Basis, Method, and Factor. This is the meat of the matrix. Let’s first consider the Method. The Method determines the level at which the Type and Basis will be applied. They are fairly self explanatory, but we will go over the options for our Lake Chuck Users just in case. The Method of ‘ALL’ is just that, all items are considered at the header pricing level. There is no item or vendor level pricing. ‘Vendor’, pricing at the IMS Vendor/Group level. This can be across multiple vendors and groups. ‘ITEM’, pricing at the Store Product Code level, commonly used for net pricing were the price is set for a specific period of time. And of course ‘BOTH’, the best of both worlds. This pricing method includes Vendor/group and item pricing.

Ok, we got a Method now what? Basis, we need a base price to consider in our calculation. What value are we going to use. This can be determined by a contract with the Customer based on Cost of the material or some other methodology. Valid options are ‘RESALE’ (Group Resale Price), ‘COST’ (Store Replacement Cost, if not available then Group Replacement Cost), ‘TRADE COST’ (Trade Service Cost), ‘TRADE RESALE’ (Trade Service Resale Price), ‘LIST PRICE’ (Group List Price, updated from Trade Service), or **‘NET COST’.

At this point Type and Factor come into play. The ‘Type’ determines how the math is applied. ‘Discount’ of course would calculate a discounted amount and subtract that amount from the base amount to derive the price. ‘Multiplier’ (not to be confused with the Keynesian Multiplier Effect), calculate an amount of increase based on a multiplier, most commonly used for arriving at a set margin of return.

Ok, back from a three martini lunch, time to re-focus.

Seemingly this should be enough, but how do you handle items that fall outside of this matrix? Enter the ‘Default’ option. This option only comes into play when the Method is either vendor, Item, or Both. Set this value to handle items not covered in the matrix. Viable selections are ‘Header, Auto Price1, Auto Price2, and Group Resale Price. Again, the Factor will apply to these options. If the Header is selected then items outside the detail matrix would calculate out as Basis/Type/Factor. Simple, simple, simple. Oh wait, caveats.

Caveats: a modifying or cautionary detail to be considered when evaluating, interpreting, or doing something. **Net Cost option at the Basis. This one is really easy; just throw out all the previous information and set the Basis to Net Cost and enter a Factor. Done. What this does is set all pricing off of Net Cost (Rebated or Replacement). All other settings are disregarded, including Default. This option is Account driven so the only other concern is setting up Account(s). Vendor and Item functions are disabled for this setting.

***Net Cost at the Item Level. This is a new enhancement to APX. Setting this value to ‘Yes’ with a IRC Factor will calculate all Rebated Items out and handle all non rebated items through the matrix. I know, sweet justice. Let’s go over this option one more time. You can price just the rebated items by the calculated rebate cost against the IRC Factor. All other items will be priced by the APX including the Default setting. This gives you the flexibility to truly custom fit your APX. One thing to remember about Net Cost at the Basis level. The Net Cost represents the lesser value between the calculated Rebate Cost and the item Replacement Cost. So the IRC Factor will be used against the lower value to calculate the Price.

Now let’s turn our attention to APX Item level functions, Item, Vendor, and Account.

The APX is Customer specific in most cases. Entering an Account number at this level serves as a connecting link to the APX. Multiple accounts can be tied to a single APX or multiple APX’s can be tied to a single account (in this case the lowest rebated cost will be used). If need be create another account to handle any other situation. Once the Account is submitted here

it will be priced per the APX so make sure your matrix is setup properly. And whatever you do never shoot pool against this guy.

Okay, we have had our fun and games, now let’s get serious. Have a few more drinks, you can take him. Just keep doubling the bet; you’re bound to get even. And if not I’m sure he has a payment plan.

APX at the Vendor/Group level:

This function needs to be submitted with the associated IMS Vendors when the APX Basis is set to Vendor or Both. Product Codes tied to the vendor(s) will be priced out based on the Vendor level matrix. Just like the header level set the Basis and Factor. This will override the header Basis and Factor for selected Vendors. The Price Group option allows you to customize a matrix per a specific *Price Group. Setting the Price Group to ‘ZZZZZZ’ will handle all Price Groups not listed for the Vendor.

APX at the Item Level:

This oddly enough is the first level considered when the APX Method is set to Item or Both. Items contained here will override all other settings even the Net Cost options. Enter a valid Product Code from the Group catalog. If a Net Item with a set price enter that value in the Net column. This value will not change unless edited by the User. This is the most common use. However, if you must, you can set a Basis and Multiplier for this one item. Just be aware that when the value of the Basis changes so will the Price. This is true throughout APX. The only non volatile pricing is at the Item Net level. If you have a considerable amount of Nets maybe you should look into setting up a Customer Catalog. Customer Catalogs can work in conjunction with APX. When an Account is tied to both an APX and a Customer Catalog the Customer Catalog price will override the APX price. If the item is not in the Customer Catalog it will flow through the APX. If you don’t believe me confer with our state of the art IT department

Seriously, that’s a younger version of Gerald.

Still confused? Let’s look at some Scenarios:

All items at Net Cost plus 15%: set Basis to Net Cost and Factor to 1.1764

All items at Replacement Cost plus 12%: set Basis to Cost and Factor to 1.1364, Type to Multiplier and Method to All.

Specific Items at a confirmed price, specific Vendors at Resale plus 10%, and all other Items at Auto Price1. At the Header level set the Method to Both, Type and Basis are not required in this scenario since we are defaulting to AutoP1. Set the Factor to 1.0000 and the Default to Auto Price1. The Item rebate Cost should be set to No. This will take care of all items not included at the Vendor or Product Code level. Create your Vendor level items with a ZZZZZZ Price Group, enter a Basis of Resale and a Factor of 1.1111. Now you can enter your specific Net Items, enter the Product Code and a Net Price. No other values are necessary, these items will be Priced at the value entered in the Net column.

Specific Vendor/Group at Resale plus 5% all other groups for this Vendor at Resale plus 7% Net Cost Items at 15% all other items at Resale Price. At the Header level set Basis to Resale, Factor to 1.000, Method to Vendor, Type to Multiplier and Default to Header. This will take care of Items not rebated and not of specific Vendor. Also at the Header level set Item Rebate Cost to Yes and IRC Factor to 1.1764. This will handle all Rebated Items at Net Cost. Don’t forget this will override any other item level pricing, including the group we are about to setup. Now for the Vendor Group level: enter your IMS Vendor Number and specific Price Group. Enter a Basis of Resale and a Factor of 1.0526. This specific Vendor Group is now priced. To set all other Groups for this Vendor at 7% create another Vendor Level entry but this time put ZZZZZZ in the Group column and a Basis of Resale with a Factor of 1.0753.

As you can see it is very simple once you have defined your goal. If you come across a scenario where you are not getting your desired results please let us know and we will respond accordingly.

I have not covered how items are rebated even though they can play a big part in your results. We will assume they have been setup properly but it can be a source of undesired results. As far as the Default value of Auto Price1 and Auto Price 2, these values are setup and calculated at the Group Catalog Vendor/Price Group level.

Accounts assigned an Auto Pricing ID are homogenous throughout all applications (MMS, WEStore, Ariba, HubWoo, etc), and all Order Entry routines (Price Query, Quotes, Delivery Tickets, Counter Sales).

How to check margin:

In MMS under the Reports/Miscellaneous menu there is an Auto Price Audit report. Run this report against a low and high margin to view possible problems within the matrix. This Report can be run by Vendor/Group or at a detailed item level. There is also an Auto Price Catalog report. This will show the net price based on the APX based on catalog selected. Price ID, for just items setup in the APX, Store Inventory, for all items in the store inventory, or Inventory Catalog for all items in group inventory. For Customer convenience this report is indexed by inventory drill down code.

REVIEW:

Pricing ID Add - Create a New Auto Pricing ID and build pricing scheme. Formulate a plan and enter APX Header information accordingly. Unlike the Constitution APX is a living, breathing document it will change whenever the Basis you chose is updated. Only Nets at the Product Code level are constant.

Price ID: enter an associative APX name.

Type: Discount or Multiplier. Simple mathematical technique to arrive at a solution.

Basis: Resale – Group Catalog Resale Price. Cost – Store Catalog Replacement Cost, if not available then Group Catalog Replacement Cost. Trade Cost – Trade Service Catalog Cost. Trade Resale – Trade Service Catalog Price. Net Cost – DT Item Cost (could be rebated, replacement, user inputted), whatever is displayed after Refresh of Quote or Ticket. List – Group Catalog List Price. All values are dynamic, whatever value exist at time of creating your quote, ticket, or price query.

Method: All – all pricing done at the Header Level no Vendor or Netted Items. Vendor – Specific pricing at the Vendor/Group everything else defaults to the Header default setting. Items – Specific Net Priced Items everything else defaults to the Header default setting. Both – combination of Vendor/Group and Net Priced Items, everything else defaults to the Header default setting.

Default: selection for all Items outside the matrix. Header – based on Type, Basis, Method, and Factor at the Header level. Auto Price 1 – Group Catalog Auto Price 1 column, calculated at the Group Vendor level. Auto Price 2 – Group Catalog Auto Price 2 column, calculated at the Group Vendor level. Resale - Group Catalog Resale Price.

Factor: numerical value assigned to calculate desired margin of return.

Item Rebate Cost: Yes or No. If Yes calculate all rebated items by the rebated cost. If No, do not.

IRC Factor: numerical value assigned to calculate desired margin of return for rebated items. Not valid if Item Rebate Cost = N or space.

Adding Customer Price Vendor – Create Vendor Groups within the matrix. If entered overrides header setup, except for Item Rebate Cost of ‘Y’.

Vendor – valid Group Vendor number (use the search).

Price Group – valid Group Catalog Price group associated with a specific Product Code. Entering a ZZZZZZ in this column will set it as the default for all Price Groups not entered for the Vendor.

Basis – overrides the Basis setting at the Header level for this specific Vendor/Group.

Factor - overrides the Factor setting at the Header level for this specific Vendor/Group.

Adding Customer Price Item – Create Net Priced Items by specific Product Code. When entered at this level it will override any conflicting Vendor/Group or Header settings, even for Item Rebate Cost of ‘Y’.

Product Code - valid Group Product Code (use the search).

Net – The Price at which you want to sell the item.

Cost – Not being used at this time.

Basis – Overriding Basis, not used if Net Price entered.

Factor - Overriding Factor, not used if Net Price entered.

The End

Thank You.